2019 (7) TMI 304 - HC - Income Tax

Bombay High Court rules on Income Tax Act jurisdiction challenge

The Bombay High Court declined to entertain the petition challenging the notice issued under Section 148 of the Income Tax Act, 1961, as it found that the ... Notice of re-assessment u/s 148 - territorial jurisdiction of High Court - writ filed in Bombay whereas notice issued by AO in Hyderabad - assessee earlier assessed in Hyderabad - petitioner is a company under the laws of United Kingdom having its registered office in India is situated at Mumbai - mere place of filing of the return would also therefore not be decisive - HELD THAT:- The assessee is being assessed to tax consistently at Hyderabad. The assessee has a PAN card at such place. The assessee has never applied for transfer of PAN card. Admittedly, therefore against the assessments that may be made by the Deputy Commissioner of Income Tax, Hyderabad, appeals would lie before the Appellate Commissioner stationed there. Further appeal at the hands of the aggrieved party would lie before the Income Tax Appellate Tribunal, Telangana. Section 269 of the Act defines the High Court as to mean in relation to any State the High court for that State. Any challenge to the orders of Assessing Officer, Appellate Commissioner or the Tribunal in the present case would lie before the High Court of Telangana (previously High Court of Andhra Pradesh). The Assessing Officer and the Appellate Authorities therefore would be bound by the law propounded by the said High Court. If we entertain this petition merely because a small part of the cause of action may have arisen within the jurisdiction of this Court, we would be giving rise to possibility of different legal principles being applied in case of the same assessee on the same issue and possibly in relation to the same assessment year. Any appeal against the original assessment (if at all done) for the assessment year 2011-12 would be governed by the law laid down by Telangana High Court. In the context of challenge to the notice of reassessment, this Court would apply the decisions of Bombay High Court. This would be wholly undesirable. In case of Serious Fraud Investigation Office Vs. Rahul Modi and another [2019 (3) TMI 1411 - SUPREME COURT] the Supreme Court observed that in case of an offence which is triable by the Special Court established or designated for an area in which registered office of the company in relation to which the offence is committed, proper jurisdiction High Court would be the Court which has territorial jurisdiction over such Special Court. Under the circumstances, this petition is not entertained. It would be open for the petitioner to move the appropriate High Court for the same reliefs. Issues Involved:1. Territorial jurisdiction of the Bombay High Court to entertain the petition challenging the notice issued under Section 148 of the Income Tax Act, 1961.2. Validity and service of the notice under Section 148 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Territorial Jurisdiction of the Bombay High Court:The petitioner challenged a notice dated 27th March 2018 issued by the Deputy Commissioner of Income Tax, Hyderabad, under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2011-12. The respondents opposed the petition on the ground that the Bombay High Court lacks territorial jurisdiction.The petitioner argued that since its registered office, bank accounts, and the place of filing the return of income for the concerned assessment year are in Mumbai, and the impugned notice was served to the petitioner at Mumbai, a part of the cause of action has arisen within the limits of the Bombay High Court. The petitioner relied on Article 226(2) of the Constitution, which provides that the High Court can exercise jurisdiction if the cause of action, wholly or in part, arises within its territory.The respondents contended that no part of the cause of action has arisen within the jurisdiction of the Bombay High Court. They argued that the location of the petitioner is not determinative of jurisdiction, and the notice was issued by the Assessing Officer in Hyderabad, where the petitioner has been consistently assessed. The respondents highlighted that the notice was electronically generated and served via email and speed post, and the petitioner’s PAN and assessment jurisdiction lie with the Deputy Commissioner of Income Tax, Hyderabad.The court noted that the petitioner has been assessed by the Hyderabad authority consistently, and the mere fact that the petitioner has a registered office in Mumbai does not confer jurisdiction to the Bombay High Court. The court referred to several precedents, including decisions from the Calcutta High Court and the Madras High Court, which held that mere service of notice does not constitute an integral part of the cause of action sufficient to confer jurisdiction.The court concluded that even if a part of the cause of action may have arisen within the jurisdiction of the Bombay High Court, it would not exercise such jurisdiction. The court emphasized the principle of convenience and the potential for conflicting legal principles if different High Courts entertained the same issue. The court suggested that the petitioner should file the petition before the High Court with jurisdiction over the Assessing Officer in Hyderabad.2. Validity and Service of the Notice under Section 148:The petitioner claimed that a second notice under Section 148 was served via email to its authorized representatives in Mumbai, presenting this as a significant part of the cause of action arising within the jurisdiction of the Bombay High Court. The respondents clarified that the notice was generated on the Income Tax Business Application (ITBA) and served to multiple email addresses to ensure definite service, which is a common practice to avoid any failure in delivery.The court examined the respondents' affidavit, which detailed the process of generating and serving the notice via ITBA and speed post. The court found that the petitioner’s claim of a second notice was misleading and that the same notice was sent to multiple email addresses, including those of authorized representatives based in Hyderabad and Mumbai.The court observed that the petitioner’s PAN and assessment jurisdiction have been with the Hyderabad authority for several years, and the petitioner has not objected to this jurisdiction in previous proceedings. The court noted that the petitioner had the option to request a transfer of jurisdiction but did not do so.The court concluded that the service of the notice via email and speed post to multiple addresses, including Mumbai, does not constitute a sufficient cause of action to confer jurisdiction to the Bombay High Court. The court reiterated that the appropriate High Court to entertain the petition would be the one with jurisdiction over the Assessing Officer in Hyderabad.Conclusion:The petition was not entertained by the Bombay High Court, and the petitioner was directed to move the appropriate High Court for the same reliefs. The court extended the interim relief against proceeding with the assessment for a period of two weeks to allow the petitioner to seek appropriate relief from the relevant High Court.