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Issues: (i) whether the High Court had territorial jurisdiction under Article 226(2) despite the impugned demand notice having originated from an officer outside its territory, and (ii) whether recovery could be sustained when the Department failed to produce the assessment or rectification orders giving rise to the demand.
Issue (i): whether the High Court had territorial jurisdiction under Article 226(2) despite the impugned demand notice having originated from an officer outside its territory
Analysis: Article 226(2) permits exercise of writ jurisdiction where the cause of action, wholly or in part, arises within the territorial limits of the High Court, even if the authority is located elsewhere. The transfer of jurisdiction under Section 127 of the Income-tax Act, 1961 to the Pune officer meant that the current jurisdictional officer was within the Court's territory, and the petitioner received and had to the recovery action in Pune. The effect of the impugned notice and consequential recovery therefore constituted part of the cause of action within the territorial jurisdiction of the Court. The objection founded on the location of the original Delhi officer and on pre-amendment authority was rejected.
Conclusion: The High Court had territorial jurisdiction and the objection was rejected in favour of the assessee.
Issue (ii): whether recovery could be sustained when the Department failed to produce the assessment or rectification orders giving rise to the demand
Analysis: The petitioner had repeatedly sought the orders creating the demand, but the respondents did not produce any valid assessment or rectification order, and the records were not forthcoming even after judicial directions. The material placed before the Court consisted only of incomplete or illegible system screenshots. In the absence of the foundational orders and service records, and in view of the failure of the Department to substantiate the demand despite opportunity, an adverse inference was warranted. A recovery action cannot stand on an unproved and unsupported demand.
Conclusion: The impugned demands and recovery notice were unsustainable and were quashed in favour of the assessee.
Final Conclusion: The petition succeeded on both jurisdiction and merits, and the recovery action based on the alleged outstanding tax demands was set aside.
Ratio Decidendi: After the 1963 amendment to Article 226, a writ petition is maintainable where a material part of the cause of action arises within the Court's territory, including where the transferee jurisdictional officer and the practical consequences of the impugned tax action are situated there; a tax recovery demand cannot be sustained unless the foundational order creating the demand is produced and proved to exist.
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