TMI Blog2003 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... 001, passed by the learned single judge in W. P. No. 598 of 2001 (CESC Ltd. v. Deputy CIT (No. 1) [2003] 263 ITR 382 (Cal)), dismissing the writ petition on the ground of alternative remedy. In the writ petition the petitioners have challenged two notices. One dated March 8,2001, passed by the Deputy Commissioner of Income-tax. Circle-2(6), (DCIT) Mumbai, treating CESC Limited as "representative assessee"/"agent" of the non-resident assessee, Linklaters and Paines, U.K. (L P), under section 163 of the Income-tax Act, 1961. The other notice is dated March 20, 2001, passed by the same officer under section 148 seeking to reopen the assessment I of the non-resident for the assessment year 1998-99 at the hands of the CESC requiring to submit 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 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. Until the assessment is over in the hands of the non-resident and until there is a finding that the non-resident is not available, section 163 cannot be resorted to. Therefore, the Deputy CIT could not have assumed jurisdiction under section 163 to treat the CESC as "representative assessee". Thus, the order passed under section 163(2) sought to be communicated by the notice dated March 8, 2001, is wholly without jurisdiction, amenable to a writ proceeding despite existence of alternative remedy. According to him, if there is a lack of jurisdiction, then alternative remedy will not stand in the way compelling the petitioner/appellant to undergo the whole odds of the lengthy process provided in the statute and wait till the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e non-resident, the transactions whereof were subjected to deduction of tax within the jurisdiction of the Assessing Officer at Calcutta. Therefore, this court's territorial jurisdiction is attracted. Inasmuch as the deduction of tax in respect of the transaction between the CESC and the non-resident is also a part of the cause of action in respect of which section 163(2) has been invoked. Dealing with the question relating to the jurisdiction of this court, he contended that cause of action is a bundle of facts relevant for the purpose of deciding a question at issue in order to grant the relief. Therefore, this court has jurisdiction to entertain the writ petition. Dr. Pal relied on CIT v. Ranchhoddas Karsondas [1959] 36 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice 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 issued is shown to be invalid the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. The same view was taken in CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147, 150 (SC); Gopiram Agarwalla v. First Addl. ITO [1959] 37 ITR 493, 494, 498 (Cal); AIR 1959 Cal 420; L.V. Veeri Chettiar v. STO [1970] 26 SIC 579; AIR 1971 Mad 155 (para. 8). He had also referred to the decisions in S. Narayanappa v. CIT [1967] 63 ITR 219 (SC) AIR 1967 SC 523; Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 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); M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an integral part of the cause of action. Section 148: He then contends that the service of notice under section 148 is not an integral part of the cause of action having regard to the facts and circumstances of the present case. In support of his contention he relied on the decisions in State of Rajasthan v. Swaika Properties, AIR 1985 SC 1289; Oil and Natural Gas Commission v. Utpal Kumar Basu [1994] 4 SCC 711; East India. TPT Agency India Ltd. v. Union of India [2001] 1 CLJ 605; Rabindra Nath Mukherjee v. Union of India [1997] 1 CLJ 561; Union of India v. Adani Exports Ltd. [2002] AIR 2002 SC 126; Jeypore Sugar Co. Ltd. v. ITO [1980] 124 ITR 518 (Mad). He then contended that assuming that part of the cause of action 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. State of Orissa [1983] 142 ITR 663 (SC). He lastly contended that the petitioner having participated in the proceedings is estopped from challenging the same, which are pending and on this ground alone, this court should refuse to exercise its jurisdiction. The area: It is an admitted proposition that the jurisdiction for assessment of non-residents has been conferred only upon the authorities at Mumbai. All non-residents are assessed at Mumbai. The jurisdiction relating to such assessment by the Deputy CIT, Mumbai, cannot be questioned. The said proceeding cannot be taken up anywhere else in India. In connection with such proceedings, the Deputy CIT, Mumbai, had authority to summon or ask for information from 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 prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, it does not appear that there are any preconditions for treating a person falling within the definition of agent under section 163. Therefore, it does not appear that the notice under section 163, sub-section (2) could be said to be without jurisdiction when issued to CESC on the satisfaction of the ingredients contained in clauses (b) and (c) of section 163(1). Admittedly, the assessment of the non-resident was being made at the hands of the non-resident before the Deputy CIT, Mumbai, who had jurisdiction to deal with the assessment. Therefore, it cannot be said that the Deputy CIT, Mumbai, could not assume jurisdiction under section 163 for issuing the notice. Upon receipt of the notice, the CESC 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 que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the purpose of assessment of certain categories of persons. In respect of assessment of income of a non-resident, the person having transactions with the non-resident is treated as representative assessee or agent of the non-resident. Section 161 creates a fiction for assessment of the income of the non-resident principal in the hands of the agent or representative assessee in the capacity of a representative in the like manner and to the same extent as it would have been made against the principal non-resident. There being no precondition for treating a person as a representative assessee under section 160 read with section 163 and assessing him for the principal in the capacity of representative under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an integral part of the cause of action to afford a right to the CESC to invoke writ jurisdiction in this High Court only on the ground that the order was communicated within the territorial limits of this court, when this High Court otherwise lacks jurisdiction. Taxing jurisdiction of the agent: Irrelevant: Admittedly, the Deputy CIT, Mumbai, had the jurisdiction to undertake the assessment of a non-resident. A representative assessee can be assessed only by the Deputy CIT, Mumbai, and none else. In its individual capacity the representative may be subject to assessment of the authorities under the statute at Calcutta. But when it is not being assessed in its individual capacity but in the capacity 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 jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case may be, and if such application is made, it is expected that the authorities concerned would condone the delay, if there be any. Our finding is confined to the question of maintainability of the writ petition. With regard to the merits, our finding is tentative. Notice under section 148: Integral part of the cause of action: Section 147 postulates the reopening of assessment but only upon a notice, under section 148. Thus, a notice under section 148 is a precondition for assuming jurisdiction under section 147. Therefore, issue of a notice under section 148 is an integral part of the cause of action in relation to a grievance for assumption of jurisdiction under section 147, seeking to 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessed in the like manner and to the same extent as the principal under section 161. Therefore, escapement of assessment is related to the principal assessee and by fiction, the agent or representative assessee is treated as principal assessee for the purpose of Chapter XV. Section 147 can be initiated only when the authority has reason to believe that income has escaped assessment. Assessment cannot be reopened on the basis of mere suspicion (Indian Oil Corporation v. ITO [1986] 159 ITR 956 (SC)). Therefore, before the assessment is complete, it is not possible to ascertain whether that income has escaped assessment. Until the assessment is complete, there is no scope for finding any reason 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or illegal, then the assessee cannot be made to wait till a decision in the proceeding itself debarring him from challenging the notice, excluding the jurisdiction of the writ court. Therefore, it would be necessary to examine the facts of this case in a little detail as to whether the notice is without jurisdiction or ex facie bad or illegal. If it is so found, then the writ petition can be maintained despite alternative remedy. In T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50, 53 (SC), the apex court had held that a debatable point of law is not a mistake apparent from the record correctable under section 154. In such a case, the writ petition could be maintained, challenging the 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, the question of not allowing the relief on account of existence of alternative remedy is not sustainable in law. Lack of jurisdiction would invite the court to invoke its discretion to interfere with such notice in writ jurisdiction. The existence of alternative remedy is not, however, always a sufficient reason for refusing a party quick relief by a writ and order prohibiting an authority acting without jurisdiction from continuing such action. This decision of the five judge Bench was followed in 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. 15), holding that three contingencies may 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 hel ..... 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