TMI Blog2001 (9) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned officer of the Income-tax Department for remittance of professional fees payable to the said firm under section 195 of the said Act. The said no objection certificate was obtained by the petitioner for making remittance of the professional fees of the said foreign firm in London in terms of the provisions of the Double Taxation Avoidance Agreement between the Government of India and the United Kingdom. On or about November 18,1997, a Circular bearing No. 759 was issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, whereby the provisions for making application to obtain no objection certificate from the Income-tax Department was withdrawn. Subsequent thereto, the petitioner made two remittances to the said foreign firm. The petitioner-company received a notice dated March 1, 2001, from respondent No. 1 addressed to the principal officer of the petitioner at Mumbai. The said notice has been issued under section 163 of the said Act asking the petitioner-company to show cause as to why it should not be treated as an agent of the said foreign firm for the assessment year 1998-99. The petitioner-company was directed to show cause by Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Act as well as the order passed pursuant thereto and the notice under section 148 of the said Act, inter alia, on the ground that the same are illegal, mala fide, without jurisdiction, unreasonable and void. Affidavits have been filed by respondents Nos.1 and 3. According to the respondents, writ application is not maintainable since the order under section 163 of the said Act and subsequent proceedings which is the subject-matter of challenge in the present writ proceedings is an order under section 163 of the Income-tax Act, 1961. Further, the subject-matter of the writ petition are limited to and in connection with Linklaters and Paines, London, and the writ petitioner No. 1 is the agent of the said foreign firm and the said foreign firm is an assessee within the jurisdiction of the Assessing Officer at Mumbai and assessed at Mumbai. Furthermore, an alternative remedy is available to the writ petitioner by way of an appeal against the order passed under section 163 of the said Act. The said firm has filed its return of income for the assessment year 1998-99 at Mumbai on October 27, 1998. It is further stated by the respondents in their affidavit that during the said asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice of the notice is a substantial part of the cause of action. Since such service has been made at Calcutta, a part of the cause of action arises within the jurisdiction of this court. In support of his contention, he relied upon the judgments reported in Anandilal Goenka v. TRO [1994] 208 ITR 46 (Cal); Krishan Prasad Singhi v. TRO [1996] 221 ITR 720 (Cal); Everest Coal Co. Pvt. Ltd. v. Coal Controller [1986] 90 CWN 438 (Cal); Dowsyl Polymers Pvt. Ltd. v. Abrol (M. G.), Special Secretary, Ministry of Finance [1987] 31 ELT 895 (Bom) and Modi Charitable Fund Society v. ITO [1983] 142 ITR 818 (All), in support of such submissions. He further contended that there is no alternative remedy available at the stage of the issue of the notice. Accordingly, a writ petition is maintainable challenging such notice. According to him, when the jurisdiction to initiate the proceedings is challenged on the ground that the conditions precedent for assumption of such jurisdiction do not exist or have not been complied with the writ court would interfere. In support of such contention, he relied upon the judgments reported in Mohindra Mohan Sirkar v. ITO [1978] 112 ITR 47 (Cal); Sova Sarkar (Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn duly filed is pending for such assessment. The question of any income escaping assessment can only arise after the assessment is made and not during the pendency of the assessment proceedings. In the instant case the notice under section 148 of the Act has been issued on March 8, 2001, when the assessment proceedings were pending against the said firm. In support of such submission, he relied upon the judgments reported in Trustees of H. E. H. the Nizam's Supplemental Family Trust v. CIT [2000] 242 ITR 381 (SC) and CIT v. Muthukaruppan Chettiar (M. K. K. R.) [1970] 78 ITR 69 (SC). He further submitted that the proceedings against an agent are not in addition to and/or twice over in respect of the assessment to be made on the principal. The agent is brought in when for any reason like the principal being outside the country or for any other cause it is not possible to assess the principal. However, when the principal itself is available and has filed the return and on such return assessment proceedings are being conducted then there cannot be another parallel simultaneous proceedings for the self-same income to be assessed on the same principal through an agent. He also cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident or from or through whom the non-resident is in receipt of income, whether directly or indirectly can be treated as an agent of the said foreign firm. He further relied upon a judgment reported in Transmission Corporation of A. P. Ltd. v. CIT [1999] 239 ITR 587 (SC), where the Supreme Court has held that certificates under section 195 of the said Act are only tentative and provisional, subject to modification in the final assessment to be made under section 143 of the Income-tax Act. He further contended that the notice has been served upon the petitioner-company not in its own right but in its capacity as an agent of the said foreign firm within the ambit of section 163(1) of the Income-tax Act. He also submitted that it was against this backdrop that the petitioner-company is treated as agent of Linklaters and Paines, London, and an order under section 163 of the said Act was passed on March 8, 2001. He further contended that the said order is a reasoned order and wholly dealt with the contention made by Ispat Industries Limited before the said authorities. He further submitted that on these facts Ispat Industries Limited was treated as a representative asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that from the said section it appears that the assessment of the principal may be done through the representative assessee. Therefore, the Assessing Officer, Mumbai, has jurisdiction to assess the petitioner-company as a representative assessee of the said foreign firm. He further contended that the show-cause notice under section 163 of the said Act was issued on March 1, 2001, requiring a reply by March 5, 2001. Pursuant to receipt of the reply from Ispat Industries Limited on March 5, 2001, an order under section 163 of the said Act was passed on March 8, 2001. He further contended that on the same date notice under section 148 of the said Act was also issued giving the petitioner seven days' time to file the requisite return. The petitioner sought for extension of time and extension was granted. He further submitted that the reasons for issuance of such notice under section 148 of the said Act have been recorded and in fact he produced such reasons recorded before issuing notice under section 148 of the said Act which may be reproduced hereunder: "It is a matter of record that certain payments have been made by Ispat Industries Limited to Linklaters and Paines, U.K., in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a thing to be gone into by the court. In support of such contention, he relied upon the judgments in Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) and Phool Chand Bajrang Lai v. ITO [1993] 203 ITR 456 (SC). After considering the facts and circumstances of this case it appears that the points to be decided are (i) whether this court has jurisdiction to entertain this application? and (ii) whether this application is maintainable since there is an alternative remedy? It is an admitted fact that respondent No. 2 issued the notices and passed the order under sections 163 and 148 of the said Act from Mumbai. But it further appears that the said notice and orders were served upon the petitioner at its registered office at Calcutta. It further appears that such notice has been served only on the basis that treating the petitioner as an agent of the principal of a foreign firm it is also to be taken into account for the purpose of the jurisdiction that the said foreign firm is being assessed at Mumbai. From the pleadings and the submissions made before me there is no dispute that excepting the service of the notice at Calcutta no steps have been taken by the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sad Singhi v. TRO-II [1996] 221 ITR 720 (Cal), is also a judgment of the Calcutta High Court where also the attachment of shares was made by the Tax Recovery Officer and has been held that the High Court has jurisdiction on the facts pleaded in the said case that the attached shares in question were and are still lying at Calcutta and the order of attachment was served at Calcutta and furthermore, such order of attachment cannot be effective unless served and, therefore, the court came to the conclusion that part of the cause of action arose within the jurisdiction. The next judgment cited by Mr. Bajoria is reported in Dowsyl Polymers Pvt. Ltd. v. M. G. Abrol, Special Secretary, Ministry of Finance [1987] 31 ELT 895 (Bom), where the court came to the conclusion that no order confiscating any goods or imposing any penalty on any person shall be made unless a notice as contemplated under section 124 of the Customs Act is served on the owner of the goods or such person who is made liable for the same. Therefore, if a notice under section 124(1) of the Customs Act is served on the petitioners in Bombay, such service of the notice can be said to be part of the cause of action. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the order to the petitioner in U. P. gave rise to a part of the cause of action for setting aside that order no cause of action in relation to the order passed in favour of R could arise in U. P. Even if the order superseding the earlier one is set aside the other order in favour of R would remain operative. By itself that would constitute modification of the earlier order passed on December 30, 1966. Without setting aside the order, passed in favour of R, no effective relief could be granted to the petitioner. Now I deal with the cases cited by the respondents contending that this High Court has no jurisdiction. In a decision reported in State of Rajasthan v. Swaika Properties, AIR 1985 SC 1289, the Supreme Court has held that mere service in the State of West Bengal or notice under section 52(2) of the Rajasthan Urban Improvement Act (35 of 1959), on the owner of a land situated in the State of Rajasthan intimating of the State Govenment's proposal to acquire that land for public purpose does not constitute an integral part of the cause of action sufficient to invest the Calcutta High Court with jurisdiction to entertain a petition under article 226 of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rejection of the tender was not communicated at Calcutta. On the said facts, the Supreme Court held that the Calcutta High Court has no jurisdiction to entertain the said application. Section 148 of the Income-tax Act, 1961, has specifically stated that before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other-person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed ; and the provisions of t his Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. In the instant case, first, notice was served upon the petitioner at Mumbai under section 163 of the said Act whereby the petitioner has been held as an agent of the foreign firm and furthermore, the respondent authorities came to the conclusion and passed an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round this application must be dismissed. The other question whether there is an alternative remedy and this court shall entertain this application? On that ground also in my opinion the petitioner has a remedy under the said Act. In view of such remedy available to the petitioner in my opinion I do not intend to interfere in the matter and the petitioner shall be at liberty to apply before the appropriate authority and to take necessary steps by way of an appeal before the appropriate forum. In this connection, I also do not have any hesitation to hold that there is an alternative remedy and this court will not interfere in the matter. Although I have dismissed this application holding that this court has no territorial jurisdiction, as no part of the cause of action arose within the jurisdiction of this High Court, but nevertheless I must express my opinion that the Department has also issued the said notice under section 148 after recording the reasons there for and further I am of the view that at this stage the court will not probe into the matter. I fully agree with the views of the apex court as expressed in Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 and Phool Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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