Calcutta High Court (Appellete Side)
Palogix Infrastructure Pvt. Ltd. & Ors vs Deputy Commissioner Of Income Tax on 11 May, 2016
Author: Harish Tandon
Bench: Harish Tandon
In The High Court At Calcutta
Constitutional Writ Jurisdiction
Appellate side
Present :
The Hon'ble Justice Harish Tandon.
W. P. No. 18140 (W) of 2013
Palogix Infrastructure Pvt. Ltd. & Ors.
-vs-
Deputy Commissioner of Income Tax,
Circle-11, Kolkata & Ors.
Mr. N.K. Poddar,
Mr. Ananda Sen,
Ms. Smita Mukherjee,
Mr. Amit Agarwal
..... For the Petitioner.
Mr. R.N. Bandopadhyay.
.... For the Respondent.
Judgment on: 11.05.2016
The Court:
Although various reliefs are claimed in the instant Writ Petition pertaining
to the transfer of all assessment records of the Petitioner No. 1 Company from
Gwalior to Kolkata, the Writ of Mandamus be issued against the Respondents act
in accordance with the law, the order of assessment dated 19th March, 2013,
order dated 30th May, 2013 rejecting the prayer for stay of the operation of the
order dated 19th March, 2013 but during the pendency of the instant Writ
Petition all the assessment records of the Petitioner No. 1 Company has been
transferred to Kolkata in exercise of power under Section 124 and Section 127 of
the Income Tax Act, 1961. The entire argument is rest upon the competence and
jurisdiction of the Assistant Commissioner of Income Tax at Gwalior in passing
the order of assessment on 19th March, 2013 under Section 143(3) of the Act.
The undisputed facts relating to the subsisting claim in the Writ Petition
are that the principal business of the Petitioner No. 1 Company is to provide
logistic service to various person for transportation of their goods from one place
to another. The Petitioner No. 1 Company was incorporated and registered with
the Registrar of Companies in Gwalior having its registered office at National
College Building, Naya Sarafa, Danaoli, Gwalior and filed the income tax returns
for and upto an assessment year 2010-2011 with the Assistant Commissioner of
Income Tax, Circle 1, Gwalior, the Respondent No. 4 herein. Subsequently, the
transfer order was passed under Section 127(1) of the Act transferring the
jurisdiction from Assistant Commissioner of Income Tax, Circle 1 to Joint
Commissioner of Income Tax, Range-1, Gwalior. A telephonic information was
received by the Petitioner No. 2 from the Income Tax Office, Gwalior in relation to
a proceeding pending before the Respondent No. 5 in respect of the assessment
year 2010-2011. In a letter dated 22nd December, 2012, it was informed to the
Respondent No. 5 that the registered office of the Petitioner No. 1 Company has
been transferred from Gwalior to Kolkata and therefore the jurisdiction to initiate
a proceeding lies with the Assessing Officer at Kolkata. The Respondent No. 5
continued with the proceedings and directed the production of the books of
accounts for the financial year ending with 31st March, 2010. Subsequently, an
order of assessment is passed by the Respondent No. 5 on 19th March, 2013
under Section 143(3) of the Act computing the total income at Rs.
47,57,16,810/- and raised a demand of Rs. 17,43,14,470/-.
The said assessment order is challenged by the Petitioner No. 1 Company
in an appeal before the Commissioner of Income Tax (Appeals)--I, Gwalior, the
Respondent No. 9 which is still pending.
Amidst the pendency of the said statutory appeal the present Writ Petition
is filed not only for a direction to transfer all files relating to each of the
Respondents but transfer all assessment records of the Petitioner No. 1 Company
to Kolkata from Gwalior and also challenge is made in assessment order dated
19th March, 2013 passed by the Respondent No. 5.
The basis for challenge apart from the above undisputed facts are that
though the Petitioner No. 1 Company was incorporated and registered at Gwalior
but the entire business activities all through are controlled from its corporate
and head office situated at Kolkata. It is further stated that the Petitioner holds a
trade license issued by the Kolkata Municipal Corporation and is also registered
with the Department of Commercial Taxes, West Bengal for payment of Central
Sales Tax and value added tax. All the directors of the Petitioner No. 1 Company
are also residing in Kolkata and the board meetings are held at the corporate and
head office situated at Kolkata. Since the registered office of the company was
situated at Gwalior the return was filed in the assessment year 2010-2011 as per
the advice of the then tax consultants at Gwalior. The extraordinary general
meeting of the shareholders of the Petitioner No. 1 Company was held on 22nd
February, 2010 at the corporate and head office at Kolkata and it was resolved
that the registered office should be shifted from Madhya Pradesh to the State of
West Bengal and an application was made before the Company Law Board,
Mumbai Branch and was subsequently approved vide order dated 15th March,
2011. Subsequently, Form- 18 was filed before the Registrar of Companies, West
Bengal on the basis of the said order and a fresh certificate of registration was
issued by the Deputy Registrar of Companies, West Bengal regarding the shifting
of the registered office on 21st May, 2011. The factum of shifting the registered
office was communicated to the Respondent No. 4 on 29th March, 2011 with the
request to address all future communications at the said address at Kolkata.
Subsequently, an online application in prescribed form was made on 12th
September, 2011 for migration of the Permanent Account Number (PAN) from
Gwalior to Kolkata which was subsequently approved and a communication in
this regard was sent to the Petitioner No. 1 Company. The Respondent No. 4 was
thereafter informed on 20th September, 2011 to transfer all income tax records of
the Petitioner No. 1 Company to the income tax officer at Kolkata. It is, thus
stated that the income tax returned for the assessment year 2011-2012 was filed
before the Deputy Commissioner of Income Tax, Circle-11, Kolkata and was duly
processed under Section 143(1) of the Act. Apart from the aforesaid facts the
challenge to the impugned assessment order dated 19th March, 2013 is further
founded on denial of any notice having issued under Section 143(2) of the Act by
the Respondent No. 4 on 27th September, 2011.
According to the department, the Petitioner No. 1 Company filed its return
till the assessment year 2012-2013 and cases were selected for scrutiny under
CASS and the notices under Section 143(2) of the Act were issued for the
aforesaid assessment years by the ACIT, Gwalior. Subsequently, an order was
passed under Section 127 of the Act transferring the case of the Petitioner No. 1
Company from Respondent No. 4 to the Respondent No. 5. The return for the
year 2011-2012 was processed until the order dated 5.9.2013 passed under
Section 127 by the competent authority. By the said order the cases of the
Petitioner No. 1 Company was transferred from Gwalior to Kolkata. It is further
stated that mere shifting the registered office from Gwalior to Kolkata does not
take away the jurisdiction of the income tax officer at Gwalior until the order
under Section 127 of the Act was passed. It is thus stated the order dated 19th
March, 2013 for the assessment year 2010-2011 is passed as the proceeding was
initiated on the basis of a notice dated 27.9.2011 issued under Section 143(2) of
the Act and therefore cannot be said to be without jurisdiction.
Mr. Poddar, the learned Advocate appearing for the Petitioner submits that
Section 124(4) of the Act clearly provides that if any question over the jurisdiction
of the assessing officer is raised the assessing officer has to refer the matter for
determination under sub-section 2 of said section before the assessment is made
in the event he is not satisfied with the correctness of the claim. According to Mr.
Poddar the point of jurisdiction was raised as sub-section 1 of Section 124 of the
Act postulates that the assessing officer shall have jurisdiction over any area
within the limit thereof the assessee carries on a business or profession or where
he has more than one place of his business then the principal place of his
business shall be the deciding factor. He, thus, submits that though the
registered office of the Petitioner No.1 Company was at Gwalior at one point of
time the entire business was transacted and / or carried on at Kolkata and
therefore the assessing officer at Gwalior cannot assume jurisdiction. On the
aforesaid submissions Mr. Poddar relies upon a judgment of this Court in case of
India Glycols Ltd. -Vs- Commissioner of Income-tax reported in (2005) 274
ITR 137.
Mr. Poddar would thus contend that once the question over the jurisdiction
is raised it was not open to the assessing officer to proceed for assessment
without following the procedure provided under sub-sections 2 & 4 of Section
124 of the Act which is mandatory as held by the Andhra Pradesh High Court in
case of Devi Dayal Marwah -Vs- Commissinoer of Income-tax reported in
(1964) 52 ITR 829 and by the Punjab & Haryana High Court in case of
Joginder Singh -Vs- Commissioner of Income-tax reported in (1981) 128
ITR 14. Mr. Poddar vehemently submits that the returns for those assessment
years were filed under a mistaken advice as Section 124(1) of the Act clearly
provides that the assessing officer shall have a jurisdiction within the limit of an
area within which the business is principally carried on and therefore the
incorporation and registration at a different place of the company is not the
determinant factor. He, thus, submits that though the appeal has been filed but
the appeal is not competent as the question raised in the Writ Petition cannot be
decided by a statutory authority as held by the Supreme Court in case of Rai
Bahadur Seth Teomal -Vs- Commissioner of Income-tax reported in (1959)
36 ITR 9. Mr. Poddar emphatically submits that the assessing officer have
wrongly proceeded and assumed jurisdiction as the notice under Section 143(2)
of the Act was issued on 27.09.2011 which is sufficient compliance of the said
provision. He further submits that proviso to sub-section 2 of Section 143 clearly
provides that the notice is mandatorily required to be served within 6 (six)
months from the end of the financial year in which the return is furnished and
not the issuance of the notice. According to him, the assessing officer has not
recorded a single finding on service of the alleged notice although the Petitioner
has categorically denied the service thereof. He thus relies upon a judgment of
the Supreme Court in case of Assistant Commissioner of Income-tax & Anr. -
Vs- M/s Hotel Blue Moon reported in (2010) 321 ITR 362 and an unreported
judgment delivered by the Division Bench of this Court in case of Commissioner
of Income-tax -Vs- Ma Kamakhyaya Enterprises decided on 23rd February,
2011. He, audaciously submits that returns for the subsequent assessment year
2011-2012 onwards were filed before the assessing officer at Kolkata and
therefore the contention of the department that those were filed before the
assessing officer at Gwalior is factually incorrect. He submits that the law
prescribes the composite assessment and not the piecemeal assessment and
therefore the order impugned is illegal, invalid and not sustainable. To buttress
the aforesaid contention he placed reliance upon a judgment of the Delhi High
Court in case of Kanji Mal & Sons -Vs- Commissioner of Income-tax reported
in (1982) 138 ITR 391. He thus concludes that the Writ Petition is maintainable
as the authorities have wrongly usurped the jurisdiction and the order dated 19th
March, 2013 is liable to be set aside.
The learned Advocate for the department raises a strong objection on the
maintainability of the Writ Petition. according to the Respondents, the Petitioners
have an efficaciously alternative remedy, by way of its statutory appeal and
having exhausted such remedy the instant Writ Petition is not maintainable. It is
submitted that the Income Tax Act does not provide the choice of jurisdiction at
the convenience of the assessee as held by the Allahabad High Court in case of
Sahara Airlines Ltd. -Vs- Director General of Income-tax (Inv.) North
reported in (2006) 152 Taxman 522 (All.). It is audaciously submitted that if
the proceeding is initiated and / or contemplated by an assessing officer the
same has to be completed by him and relies upon a judgment of the Punjab &
Haryana High Court in case of Lt. Col. Paramjit Singh -Vs- Commissioner of
Income-Tax and Anr. reported in (1996) 220 ITR 446. It is thus submitted
that the notice under Section 143(2) of the Act was issued on 27.09.2011 and
was served within the stipulated as recorded in the impugned assessment year
mere denial of service does not absolve the assessee from disclosing the further
documents in support thereof. Lastly, it is submitted that the Writ Petition is not
maintainable before this Court and should be dismissed in limine.
On the respective submissions of the learned Counsels the point which
emerges for consideration is whether the order dated 19th March, 2013 is liable
to be set aside having passed without following the mandatory requirement of
sub-section 4 of Section 124 of the Act and even if it is so whether this Court in
exercise of power under Article 226 of the Constitution of India interfere with
such order when such order is amenable to be challenged before an appellate
authority under the Act.
The language under sub-section 1 of Section 124 of the Act is amply clear
that the assessing officer has been vested with jurisdiction over any area within
the limits thereof any person carries on a business or profession or if he carries
on in more places than one where the principal place of his business of
profession is situated. It is manifest therefrom that if an assessee has a source of
income from his business or profession at different places the assessing officer
shall assume jurisdiction at the principal place of such business and not at
different places of his business. According to the Petitioner, the incorporation of
the company at a place where no business is carried on cannot be a decisive
factor for the purpose of assessment of jurisdiction by the assessing officer under
the said provision. There is no denial on the part of the department to the
categorical statement made in the Writ Petition that although the registered office
of the Petitioner No. 1 Company was at Gwalior but the control and management
was being done at the corporate and head office at Kolkata. The identical issue
arose in case of India Glycols Ltd (Supra) wherein the assessee claimed that it is
principal place of business was at Kolkata though the factory and registered
office was at Moradabad in the state of Uttar Pradesh. The challenge was made to
an assessment order on the plea that the jurisdictional commissioner at
Moradabad cannot assume jurisdiction and proceed to pass an order of
assessment and to issue various notices. It is sought to be argued that since the
registered office of the company was at Moradabad the jurisdictional
commissioner has rightly initiated a proceeding and proceeded for assessment
during the same as principal place of business. In the above backdrop it is held:
"Principal place of business of company is termed and / or treated as a
place wherefrom all control over the business activities is exercised. In other
words, the center of power of corporate body is located. The principal place of
business may or may not be registered place of business."
Apart from the clear exposition of law on the above subject I would like
to add few words. The Income Tax Act does not define the place of business in
the definition section. The "place of business" is defined in Black Law
Dictionary, 6th Edition as "the location at which one carries on his business or
employment." Section 124(1) of the Act uses the expression "principal place of
business" which would mean that the place where the governing power of the
corporation is exercised or where a decision to control the affairs and the
policies are prescribed and certainly not where the labour is performed in
executing the requirement of the corporation in transaction of its business. In
other words, it is a place at which the business of the company is managed. It
is essentially a question of fact to be decided on the facts involved in a case.
There may be a situation where the control and management is done from
the registered office of the company and therefore it is such place which is a
principal place of business of the company. The Writ Court should be slow to
decide such factual disputes as it requires the evidence to be led thereupon. In
the instant case though there is a categorical statement in the Writ Petition
that the affairs of the company and its business are managed and controlled at
the corporate and head office at Kolkata but no supporting documents are
annexed thereto and it would not be possible for this Court to make any
conclusive opinion thereupon. It is undeniable that the moment a question as
to the jurisdiction is raised before the assessing officer sub-section 4 of Section
124 of the Act which is mandatory in nature requires the reference of the
matter for determination to the authorities mentioned in sub-section 2 thereof
provided the assessing officer is not satisfied with the correctness of the said
claim. The observations made by the Supreme Court in case of M/s Hotel Blue
Moon (Supra) is conveniently quoted herein below:-
"But Section 143(2) itself becomes necessary only where it becomes necessary to
check the return, so that where block return conforms to the undisclosed income
inferred by the authorities, there is no reason, why the authorities should issue
notice under Section 143(2). However, if an assessment is to be completed under
Section 143(3) read with Section 158BC, notice under Section 143(2) should be
issued within one year from the date of filing of block return. Omission on the part
of the assessing authority to issue notice under Section 143(2) cannot be a
procedural irregularity and the same is not curable and, therefore, the requirement
of notice under Section 143(2) cannot be dispensed with."
Undisputedly, there is no finding recorded at the assessing officer on
raising of a dispute and its dissatisfaction thereupon in the impugned
assessment order dated 19th March, 2013. The attention of this Court is drawn
to various letters issued to the said assessing officer in course of the said
assessment proceeding to corroborate that such questions were raised before
the assessing officer.
The other pleas that the returns for the subsequent years were filed
before the assessing officer at Kolkata and not before the assessing officer at
Gwalior are concerned this Court finds that those are the disputed question of
fact as the Respondent says that the return for the subsequent assessment
years upto 2011-2012 were also filed before the assessing officer at Gwalior.
All the points raised by the Petitioner though appears attractive at the
first blush but his Court cannot overlook the vital fact that the Petitioner have
exhausted the remedy provided under the Act by filing an appeal before the
appellate authority against the impugned assessment order. It has been
categorically stated in the Writ Petition that the said appeal is still pending.
Any observation on the merit of the contention so raised may have a binding
effect on the appellate authority and this Court therefore feels it would not be
proper to make any conclusive observations thereupon.
This Court does not find any impediment on the part of Petitioner to
raise all such issues before the appellate authority where the entire matter is at
large. The plea of jurisdiction strikes at the root of the matter and can be
canvassed before the statutory appellate authority. The High Court in exercise
of power under Article 226 of the Constitution should be circumspect in
interfering with the order passed by the statutory authority when the remedy is
provided against such order in the Act itself. It is a rule of discretion and
convenience than the rule of compulsion and expulsion. The High Court
imposes a self-restrained in exercising the power under Article 226 of the
Constitution if there exists an efficacious alternative remedy.
The Apex Court in case of Commissioner of Income Tax & Ors. -vs-
Chhabil Dass Agarwal reported in (2014) 1 SCC 603 have summarized the
law as under:-
"11. Before discussing the fact proposition, we would notice the principle of law
as laid down by this Court. It is settled law that non-entertainment of petitions
under writ jurisdiction by the High Court when an efficacious alternative remedy is
available is a rule of self-imposed limitation. It is essentially a rule of policy,
convenience and discretion rather than a rule of law. Undoubtedly, it is within the
discretion of the High Court to grant relief under Article 226 despite the existence
of an alternative remedy. However, the High Court must not interfere if there is an
adequate efficacious alternative remedy available to the petitioner and he has
approached the High Court without availing the same unless he has made out an
exceptional case warranting such interference or there exist sufficient grounds to
invoke the extraordinary jurisdiction under Article 226. (See State of U.P. v. Mohd.
Nooh, Titaghur Paper Mills Co. Ltd. v. State of Orissa, Harbanslal Sahnia v. Indian
Oil Corpn. Ltd. and State of H.P. v. Gujarat Ambuja Cement Ltd.)
12. The Constitution Benches of this Court in K.S. Rashid and Son v. Income
Tax Investigation Commission, Sangram Singh v. Election Tribunal, Union of India
v. T.R. Varma, State of U.P. v. Mohd. Nooh and K.S. Venkataraman and Co. (P)
Ltd. v. State of Madras have held that though Article 226 confers very wide
powers in the matter of issuing writs on the High Court, the remedy of writ is
absolutely discretionary in character. If the High Court is satisfied that the
aggrieved party can have an adequate or suitable relief elsewhere, it can refuse to
exercise its jurisdiction. The Court, in extraordinary circumstances, may exercise
the power if it comes to the conclusion that there has been a breach of the
principles of natural justice or the procedure required for decision has not been
adopted. [See N.T. Veluswami Thevar v. G. Raja Nainar, Municipal Council, Khurai
v. Kamal Kumar, Siliguri Municipality v. Amalendu Das, S.T. Muthusami v. K.
Natarajan, Rajasthan SRTC v. Krishna Kant, Kerala SEB v. Kurien E. Kalathil, A.
Venkatasubbiah Naidu v. S. Chellappan, L.L. Sudhakar Reddy v. State of A.P., Shri
Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak
Sanstha v. State of Maharashtra, Pratap Singh v. State of Haryana and GKN
Driveshafts (India) Ltd. v. ITO.]
13. In Nivedita Sharma v. Cellular Operators Assn. of India, this Court has held
that where hierarchy of appeals is provided by the statute, the party must exhaust
the statutory remedies before resorting to writ jurisdiction for relief and observed
as follows: (SCC pp. 343-45, paras 12-14)
"12. In Thansingh Nathmal v. Supt. of Taxes this Court adverted to the rule of
self-imposed restraint that the writ petition will not be entertained if an effective
remedy is available to the aggrieved person and observed: (AIR p. 1423, para 7)
'7. ... The High Court does not therefore act as a court of appeal against the
decision of a court or tribunal, to correct errors of fact, and does not by assuming
jurisdiction under Article 226 trench upon an alternative remedy provided by the
statute for obtaining relief. Where it is open to the aggrieved petitioner to move
another tribunal, or even itself in another jurisdiction for obtaining redress in the
manner provided by a statute, the High Court normally will not permit by
entertaining a petition under Article 226 of the Constitution the machinery created
under the statute to be bypassed, and will leave the party applying to it to seek
resort to the machinery so set up.'
13. In Titaghur Paper Mills Co. Ltd. v. State of Orissa this Court observed: (SCC
pp. 440-41, para 11)
'11. ... It is now well recognised that where a right or liability is created by a
statute which gives a special remedy for enforcing it, the remedy provided by that
statute only must be availed of. This rule was stated with great clarity by Willes, J.
in Wolverhampton New Waterworks Co. v. Hawkesford in the following passage:
(ER p. 495) "... There are three classes of cases in which a liability may be established founded upon a statute. ... But there is a third class viz. where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. ... The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to."
The rule laid down in this passage was approved by the House of Lords in Neville v. London Express Newspaper Ltd. and has been reaffirmed by the Privy Council in Attorney General of Trinidad and Tobago v. Gordon Grant and Co. Ltd. and Secy. of State v. Mask and Co. It has also been held to be equally applicable to enforcement of rights, and has been followed by this Court throughout. The High Court was therefore justified in dismissing the writ petitions in limine.'
14. In Mafatlal Industries Ltd. v. Union of India B.P. Jeevan Reddy, J. (speaking for the majority of the larger Bench) observed: (SCC p. 607, para 77) '77. ... So far as the jurisdiction of the High Court under Article 226--or for that matter, the jurisdiction of this Court under Article 32--is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment.'"
(See G. Veerappa Pillai v. Raman & Raman Ltd., CCE v. Dunlop India Ltd., Ramendra Kishore Biswas v. State of Tripura, Shivgonda Anna Patil v. State of Maharashtra, C.A. Abraham v. ITO, Titaghur Paper Mills Co. Ltd. v. State of Orissa, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath and Sons, Whirlpool Corpn. v. Registrar of Trade Marks, Tin Plate Co. of India Ltd. v. State of Bihar, Sheela Devi v. Jaspal Singh and Punjab National Bank v. O.C. Krishnan.)
14. In Union of India v. Guwahati Carbon Ltd. this Court has reiterated the aforesaid principle and observed: (SCC p. 653, para 8) "8. Before we discuss the correctness of the impugned order, we intend to remind ourselves the observations made by this Court in Munshi Ram v. Municipal Committee, Chheharta. In the said decision, this Court was pleased to observe that: (SCC p. 88, para 23) '23. ... [when] a revenue statute provides for a person aggrieved by an assessment thereunder, a particular remedy to be sought in a particular forum, in a particular way, it must be sought in that forum and in that manner, and all the other forums and modes of seeking [remedy] are excluded.'"
15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titaghur Paper Mills case and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."
The Petitioners have challenged the impugned order before the appellate authority and therefore this Court does not feel that it is a fit case to exercise the power under Article 226 of the Constitution.
The Petitioner is at liberty to agitate all the points raised in the Writ Petition before the appellate authority and once such pleas are raised the authority shall decide the same by providing reasons therefore.
The Writ Petition, thus fails.
However, there shall be no order as to costs.
(Harish Tandon, J.) LATER After the judgment is delivered, the petitioner prays time for the stay of the portion of this order. This Court does not find that such prayer is entertainable. The prayer is thus refused.
(Harish Tandon, J.)