TaxTMI 
TaxTMI 
2003 (6) TMI 20
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....bmit return as "representative assessee" of L&P. The challenge: The petitioners/appellants have challenged the said two notices on the ground that each of these two notices are integral parts of the cause of action against which relief is being sought for in the writ petition. The issuing of these notices are preconditions for assuming jurisdiction under the respective provisions of law under which the liability of the non-resident assessee was sought to be foisted upon the CESC. These notices having been served on the CESC at Calcutta where it carries on business and has its principal office, the service of the notice at Calcutta gives rise to the cause of action to the CESC within the jurisdiction of this court. Therefore, the writ petition could be maintained in this High Court. The view contrary thereto taken by the learned single judge, therefore, is unsustainable. The second ground urged is that the absence of jurisdiction to issue these notices on the CESC makes those notices liable to be quashed as being without jurisdiction. The conditions precedent for assuming jurisdiction under section 163 and section 147, respectively, have not been fulfilled. Therefore, there wa....
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....finality, under the machinery provided in the statute, is achieved. In support of his contention, he relied on various decisions to which we will be referring at appropriate stages. Section 147: With regard to the notice, dated March 20, 2001, under section 148, Dr. Pal contended that the service of notice under section 148 is a condition precedent for assuming jurisdiction under section 147. Therefore, the notice under section 148 is an integral part of the cause of action arising out of initiation of a proceeding under section 147 with the service of the notice under section 148. According to the scheme of the Act without a notice under section 148, jurisdiction under section 147 could not be assumed by the Deputy CIT, Mumbai. Such being the position, the service of notice at Calcutta upon the CESC has given rise to the cause of action against which relief was being sought in the writ petition arising within the territorial jurisdiction of this court. He then contends that jurisdiction under section 147 could be assumed only if there is a reason to believe that income of an assessee has escaped assessment and that such escapement of assessment was caused due to any actio....
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.... ITR 569, 576 (SC); AIR 1959 SC 1154 (para. 17), to support his contention that unless the condition precedent for assumption of jurisdiction under section 147 exists, the notice under section 148 is without jurisdiction. He relied on CIT v. M.K.K.R. Muthukaruppan Chettiar [1970] 78 ITR 69, 73 (SC); Estate of the late A.M.K.M. Karuppan Chettiar v. CIT [1969] 72 ITR 403, 407 (SC); Bidhu Bhusan Sarcar v. CIT [1966] 59 ITR 531, 546-547 (Cal) in which the same view was taken. He then relied on CIT v. Murlidhar Jhawar and Puma Ginning and Pressing Factory [1966] 60 ITR 95, 97 (SC); AIR 1966 SC 1536 (para. 3) and Jyotendrasinhji v. S.I. Tripathi [1993] 201 ITR 611, 632 (SC); AIR 1993 SC 1991 (para. 36), in order to support his contention that the same income cannot be assessed in the hands of the agent of the non-resident (representative assessee) and the non-resident hitting at the mischief of double assessment rendering the notice under section 148 invalid and without jurisdiction. He relied on Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191, 207 (SC); AIR 1961 SC 372 (para. 27), to contend that if the notice under section 148 is patently without jurisdiction and the Income-tax Off....
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....TR 603 (SC); AIR 1971 SC 730; CIT v. Burlop Dealers Ltd. [1971] 79 ITR 609 (SC); AIR 1971 SC 1635; CIT v. Bhanji Lavji [1971] 79 ITR 582 (SC); Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC); AIR 1977 SC 429; CIT v. Hemchandra Kar [1970] 77 ITR 1 (SC); ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, 447 (SC); ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR 1 (SC); AIR 1979 SC 1450; Madhya Pradesh Industries Ltd. v. ITO [1965] 57 ITR 637 (SC); Madhya Pradesh Industries Ltd. v. ITO [1970] 77 ITR 268 (SC); AIR 1970 SC 1011 (para. 13); Phool Chand Bajrang Lal v. ITO [1993J 203 ITR 456 (SC); Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC); AIR 1981 SC 1363; Indian Oil Corporation v. ITO [1986] 159 ITR 956 (SC); Sri Krishna Pvt. Ltd. v. ITO [1996] 221 ITR 538 (SC); AIR 1996 SC 3409; Assam Forest Products (P.) Ltd. v. CIT [1995] 211 ITR 447 (SC); Coca Cola Export Corporation v. ITO [1998] 231 ITR 200, 214 (SC); AIR 1998 SC 1864; CIT v. Tarajan Tea Co. (P.) Ltd. [1999] 236 ITR 477 (SC); AIR 1999 SC 1034; Whirlpool Corporation v. Registrar of Trade Marks AIR 1999 SC 22 (paras. 14 and 15) and Comunidado of Chicalim v. ITO [2001] 247 ITR 271 (SC). Submission on ....
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....n arose within the jurisdiction of this court even then this court should dismiss the writ petition on the ground that the territorial nexus and grievances of the petitioners are entirely related to Mumbai. On the totality of the facts, it is the High Court at Bombay, which has the jurisdiction and not this court. He then contends that pursuant to the notice under section 148, the CESC had furnished the return as representative assessee of the non-resident and that the CESC had already been declared agent/representative assessee of the non-resident. At the same time, the assessment is limited to the non-resident, which is undertaken by the Deputy CIT, Mumbai, and, therefore, the territorial jurisdiction of the income-tax authority is at Mumbai. The jurisdiction of the income-tax authority at Calcutta in respect of the assessment of CESC is wholly immaterial for the present purpose. Jurisdiction: He next contended that admittedly the notice under section 148 recorded some reasons. At this stage, the court cannot go into the question of sufficiency or adequacy of the materials on which the reasons have been recorded. The court cannot at this stage examine the sufficiency or cor....
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.... any person throughout India in connection with such proceedings. Now it is to be considered whether issue of a notice in connection with a proceeding pending before the Deputy CIT, Mumbai, would give rise to a cause of action to such an extent enabling the High Court having territorial jurisdiction where such notices were served to exercise its discretion to assume jurisdiction even if such service of notice is an integral part of the cause of action or even if it prima facie appears to be without jurisdiction. The question seems not so easy to answer. A question of law is always dependent on the given facts. Without the facts, no proposition of law can be founded. The proposition may be an abstract one but when it comes to application, it has to be applied on the facts and the facts are the factors on which the application of the abstract law would depend. To what extent it would apply and to what extent it would not, is a question determinable by courts. When it is a question of discretion, the court has every liberty to exercise or not to exercise the discretion. Normally a court would be slow to exercise its discretion, in a given fact, unless it appears that it is necessar....
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....had submitted to the jurisdiction and had contested the case. Section 163(2) requires giving an opportunity to an agent of being heard as to his liability to be treated as such agent. Pursuant to such notice, the CESC had submitted its reply and had participated in the proceedings. After such process in the said proceedings under section 163, the CESC was treated as agent. The extent of its liability is a finding dependent on determination of certain facts and not a pure question of law. Therefore, the notice containing the information relating to the order passed under section 163(1) could not be said to be without jurisdiction. Therefore, when such notice is served upon a representative assessee by an officer having jurisdiction over the non-resident it cannot be said to be without jurisdiction. Double assessment: Liability of the agent: The liability of the representative assessee is envisaged in section 161. It provides that the representative assessee is liable for the income in relation to the non-resident to the extent the representative assessee is related to such income. In respect of such income, the representative assessee is liable. His liability is confined only ....
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....er section 161, the question of issuing notice or holding a person as representative assessee liable to assessment for the principal cannot be said to be lacking jurisdiction. It may be a case of erroneous decision, but it cannot be a case of absence of jurisdiction. It is an erroneous decision within the jurisdiction, not without the jurisdiction. Therefore, even if the communication of the order passed under section 163(2) is treated as an integral part of the cause of action in respect of an order treating the CESC as a representative assessee and making him liable to assessment, the same would not confer jurisdiction upon this court to decide the question of validity of the order. In our view, the Deputy CIT, Mumbai, was well within his jurisdiction to pass an order in the matter right or wrong. An order within the jurisdiction even if erroneous may invalidate the order subject to appeal. But it cannot be said to be without jurisdiction to an extent without relevance to facts, which can best be decided by the Tribunal or authority created under the statute. The High Court cannot assume jurisdiction for exercising its discretion in relation to such an order. The notice of com....
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.... of representative of the non-resident, who is being assessed by the Deputy CIT, Mumbai, the jurisdiction of the taxing authority is within the territorial limits of the High Court at Bombay. In such circumstances, the communication of the order, which does not entail any further opportunity but a point for calculation of limitation for exercising its right of appeal provided under section 246(1)(d) cannot form such an integral part of the cause of action so as to confer jurisdiction upon this court to exercise its discretion in a case where there is adequate alternative efficacious remedy. Where the party had participated in the proceedings on the outcome of which it feels aggrieved, the High Court is not supposed to interfere and must be very slow to invoke its discretion. Non-availability of non-resident: Completion of assessment: Escapement of assessment not a pre-condition: There is nothing in the scheme of Chapter XV to indicate that a person can be treated as a representative assessee only when the principal is not available or only when the assessment against the principal is complete or when there is an escapement of income. In the absence of any restrictions provide....
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....reopen assessment. Therefore, such a notice is so integral a part of the cause of action that it would give jurisdiction to this court to deal with such notice in an appropriate case. Is the notice under section 148 without jurisdiction?: But the question is that this court would exercise its discretion only if it appears to this court that the notice is wholly without jurisdiction and otherwise invalid. In order to assume jurisdiction under section 147, the authority has to record its reason leading to its belief that income had escaped assessment. Admittedly, the Deputy CIT, Mumbai, had recorded some reasons. At the notice stage, this court is not supposed to consider the question of sufficiency or adequacy or correctness of the reasons or the sufficiency or the adequacy of the materials on which the authority had reason to believe. We are not supposed to look into those questions at this stage. Admittedly, the Deputy CIT, Mumbai, dealing with assessment of the non-resident has jurisdiction to deal with the same and issue a notice under section 147 in an appropriate case. We are now to examine whether the jurisdiction could be assumed in the given facts. Application of t....
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....eason to believe that income had escaped assessment yet to be made. If a valid return of income is submitted by an assessee within the period fixed under section 139(4) for submission of returns, section 147 will not apply during the pendency of the return (State of Assam v. Deva Prasad Barua [1970] 75 ITR 18 (SC); CIT v. S. Raman Chettiar [1965] 55 ITR 630 (SC)). During the pendency of the return, there is no question of escapement of income. The Assessing Officer cannot ignore a valid return and any notice under section 148 ignoring such return is invalid (CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569 (SC)). Even if the return is incomplete or partial or defective, even then the same is liable to deal with by the Income-tax Officer. Therefore, during the pendency of such return, notice under section 148 for reopening assessment under section 147 cannot be validly issued. No notice under section 148 can be issued against an assessee so long as a return validly filed remains pending and undisposed of (Estate of the Late A.M.K.M. Karuppan Chettiar v. CIT [1969] 72 ITR 403 (SC)). Until and unless the return filed is held to be invalid, no action under section 147 can be taken until ....
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....e notice. The decision in Volkart Bros.' case [1971] 82 ITR 50 (SC) was followed by this court in Harbans Lal Malhotra and Sons Pvt. Ltd. v. ITO [1972] 83 ITR 848 (Cal). In ITO v. India Foils Ltd. [1973] 91 ITR 72 (Cal), this court had taken a view that if the notice was not, in fact, justified, the notice itself was bad and there was no reason why the assessee should wait till the assessment was made pursuant to the notice before going to court for a writ and after having held the notice to be bad initially. It had held that the proceeding was also bad and entertained the writ petition. This view was reiterated by this court in Coates of India Ltd. v. Deputy CIT (No. 1) [1995] 214 ITR 498 and Bata India Ltd. v. IAC of IT [2001] 249 ITR 491. Having regard to the facts and circumstances of the case, we hold that the notice having been issued during pendency of the return submitted by the principal, issuance of the notice under section 148 for reopening of the assessment against the principal under section 147 upon the agent is wholly without jurisdiction. This service of notice upon the agent is an integral part of the cause of action as against the agent. Therefore, the said notice....
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....ay invite the court to exercise its discretion for invoking the writ jurisdiction, viz., (1) for the enforcement of any of the fundamental rights, (2) where there has been a violation of the principle of natural justice, (3) where the order of proceedings are wholly without jurisdiction or vires of an Act is challenged. The same view was taken in Shivram Poddar v. ITO [1964] 51 ITR 823, 839 (SC) in a matter relating to tax. In Mohindra Mohan Sirkar v. ITO [1978] 112 ITR 47, 53-57 (Cal), it was held that at the stage of notice under section 148, there is no alternative remedy. In Y. Narayana Chetty v. ITO [1959] 35 ITR 388, 392 (SC); AIR 1959 SC 213 (para. 5) the apex court had held that the notice prescribed by section 34 (now 148) cannot be regarded as a mere procedural requirement, it is only if the said notice is served upon the assessee, as required, then the Income-tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice is issued, is shown to be invalid then the validity of the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice then the proceedings would be illegal and void. The sa....