Wp/3624/2018 Of Hsbc Holdings Plc v. Deputy Commissioner Of Income-Tax-1 And 2 Ors

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY EXTRA ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3624 OF 2018 HSBC Holdings PLC… PetitionerV/s.Deputy Commissioner of Income-Tax-1 and ors … Respondents --- Mr.J.D.Mistri, Senior Advocate with Mr.Nishant Thakkari/by M/s Mint & Confreres for the Petitioner.Mr.Suresh Kumar for the Respondents. --- CORAM : AKIL KURESHI AND S.J.KATHAWALLA, JJ. DATE : JULY 01, 2019. P.C.:- 1.The petitioner has challenged a notice dated 27[th]March, 2018 issued by the respondent No.1-DeputyCommissioner of Income Tax, Hyderabad under section148 of the Income Tax Act, 1961 (“the Act” for short).Under such notice, he wishes to re-open the assessmentof the petitioner for the assessment year 2011-12. At theoutset, this petition is opposed by the respondents onthe ground that this Court has no territorial jurisdiction.On 24[th] June, 2019, we heard learned counsel for the 2 wp 3624-18-o parties on this limited issue and reserved our opinionthereon. 2.On behalf of the petitioner learned counsel wouldcontend that the petitioner is a company under the lawsof United Kingdom. Its registered office in India issituated at Mumbai. Petitioner’s bank accounts are inMumbai. The petitioner had filed the return of income forthe concerned assessment year at Mumbai and mostsignificantly the impugned notice has been served by theAssessing Officer to the petitioner at Mumbai. A part ofcause of action has therefore arisen within the limits ofthis Court. Learned counsel therefore contended that thisCourt would have jurisdiction to entertain this petition. 3.On the other hand, learned counsel for theDepartment submitted that no part of cause of actionhas arisen within the local limits of this Court. Thelocation of the petitioner would not give jurisdiction tothe Court to entertain the petition. With the facility ofelectronic filing of returns any one can file the returns On the other hand, learned counsel for the Priya Soparkar3wp 3624-18-ofrom anywhere in the country. Mere place of filing of thereturn would also therefore not be decisive. Theimpugned notice has been issued by the Assessing Officersituated at Hyderabad. Year after year the petitioner wasassessed by the same authority. The petitioner has notraised any objection to be assessed by the said authority.Mere service of impugned notice to the petitioner atMumbai would not mean that any part of cause of actionhas arisen within the limits of this Court. He pointed outthat when such a notice is issued by the Department,the same is electronically generated on Income TaxBusiness Application (ITBA) which in turn gets deliveredvia e-mail to the e-mail address given by the assesseein the return of income. Additionally, such notices areordinarily served to the assessee through speed-post.The respondents have also in reply pointed out that suchnotice was duly served to the petitioner on the e-mailaddress as well as through speed-post. Averments of therespondents in the affidavit-in-reply dated 24[th] April, 2019filed by the Joint Commissioner of Income Tax, Hyderabadmay be noted:- Priya Soparkar Priya Soparkar “3.9 With reference to Para No. 17 of the WritPetition, I say that the Petitioner submittedthat a second notice u/s 148 was served viaemail on the authorized representatives of thePetitioner at Mumbai seeking to reopen thereassessment for A.Y. 2011-12. This is a verycolourable way of presenting facts. Since it isnow mandatory to complete assessmentproceedings electronically, the notice u/s 148of the Act dated 27/3/2018 was generated onIncome Tax Business Application (ITBA). Whena notice is generated on ITBA, a copy of thenotice automatically gets delivered via emailto the email Id given by the assessee in itsreturn of income. To avoid any unforeseencircumstances like failure of the notice beingserved on the assessee through email on theemail Id given by it, the Assessing Officersusually serves a copy of the notice throughspeed post and also through email to anyother email Ids given by the assessee. This isconsidered a good practice and also ensuresno time barring date is missed. In the instantcase, a notice u/s 148 of the Act wasgenerated on ITBA on 27/03/2018 for A.Y.2011-12, which got automatically served tothe email Id given in the return of income ofthe Petitioner. Further, the same notice wasalso sent through email on the email @in.ey.com., @in.ey.com.) A copy of thesame notice was also sent to the assesseethrough Speed Post vide Tracking No.EN420147765IN on 27/3/2018. Therefore, thePetitioner’s averment that a second notice u/s148 was served on the authorizedrepresentatives of the Petitioner is wrong andmisleading. It is not a second notice, but thesame notice sent to as many email IDs as possible to ensure definite service. The NoticeNo.ITBA/AST/S/148/2017-18/1009439072(2)mentioned at the top of the notice is evidenceenough. If it was a second notice, it wouldbear different Notice number. Further, thePetitioner claimed that the notice was servedon the authorized representatives of thePetitioner at Mumbai. This is again amisrepresentation of facts by the Petitioner. Anemail ID is a virtual address. It doesn’t haveany fixed or physical place. An email messagecan be read/checked anywhere in the World.The Petitioner’s attempt to deceive theHon’ble Court is apparent in its attempt toattribute Mumbai as address to these fouremail IDs. Even otherwise, it can be seen thatout of the four email IDs to which the noticewas sent, one ( )belongs to the assessee-company, two( ) )toauthorizedrepresentatives based out of Hyderabad andonly one ( ) toauthorized representative based out ofMumbai. It is also the Hyderabad basedauthorized representatives viz. Shri RaviBharadwaj and Shri GBS Maitreya who mostlyappeared before the First Respondent inrelation to all assessment proceedings andother proceedings in relation to the Petitioner.Annexed hereto and marked “Exhibit-E” is acopy of the notice issued u/s 148 of the Actdated 27/3/2018 and marked “Exhibit-F” isevidence of the email through which a copy ofthe same notice is sent to four email IDs.” “3.21With reference to Para No.30 of theWrit Petition, I say that the Petitioner claimsthat the Hon’ble High Court of Judicature atBombay has jurisdiction by presentingmisleading facts in its Writ Petition. The “3.21With reference to Para No.30 of theWrit Petition, I say that the Petitioner claimsthat the Hon’ble High Court of Judicature atBombay has jurisdiction by presentingmisleading facts in its Writ Petition. The assessment jurisdiction of the Petitionercompany lies with the First Respondent i.e.Deputy Commissioner of Income Tax(International Taxation) -1, Hyderabad. ThePAN of the Petitioner (AACCH4292A) lies inthe jurisdiction of the First Respondent sincemany years. Assessment proceedings in thecase of the Petitioner were conducted andcompleted in the office of the First Respondentfor A.Y.s 2011-12, 2012-13, 2013-14, 2014-15,2015-16 and 2016-17. The Petitioner willfullysubmitted itself to the jurisdiction of the FirstRespondent in all these proceedings. Never didthe Petitioner raise any objection with respectto its jurisdiction. The Petitioner also neversubmitted any request for transfer of PAN fromHyderabad to Mumbai. The authorizedrepresentatives of the Petitioner Shri RaviBharadwaj and Shri GBS Maitreya who areemployees of M/s SRBC and Associates LLPare operating out of its Hyderabad office andhave personally represented the Petitionerbefore the office of the First Respondentregularly. Even in the present assessmentproceedings for A.Y. 2011-12, the Petitionerhas not objected to the jurisdiction of the FirstRespondent. The first assessment proceedingsfor A.Y. 2011-12 were also completed in theoffice of the First Respondent. However,instead of filing the Writ Petition in the Hon’bleHigh Court of Judicature at Hyderabad, thePetitioner filed one in the Hon’ble High Courtof Judicature at Bombay. Place of operating abank account, correspondence address given,address of head office of the authorizedrepresentative firm, etc. cannot decide thejurisdiction of an assessee. The normaljurisdiction of the PAN, the jurisdiction wherescrutiny assessments and other income taxproceedings are being undertaken, theassessee’s willful and continuous submission Priya Soparkar to a jurisdiction over the years, etc. will decidethe jurisdiction of an assessee. The assesseecan always request for transfer of jurisdictionand PAN from one region to another, whichwas never done in the present case.Considering all these facts, the jurisdiction ofthe Petitioner lies with the office of the FirstRespondent, which is in Hyderabad, but notMumbai as claimed by the Petitioner.Therefore, in terms of 269 of the Act, theappropriate High Court in the present casewould be the Hon’ble High Court atHyderabad.” 4.The relevant facts thus are that the petitioner isbeing assessed by the Assessing Officer at Hyderabadfrom time to time. By the impugned notice the DeputyCommissioner of Income Tax, Hyderabad decided to re-assess the return of income for the assessment year2011-12. Mere fact that the petitioner has registeredoffice at Mumbai, obviously would not give jurisdictionto Mumbai High Court to entertain such a challenge.The location of the petitioner obviously cannot be adeterminative factor in the context of territorialjurisdiction. Clause (2) of Article 226 of the Constitutionprovides that powers conferred in the clause (1) to issuedirections, orders or writs may also be exercised by any Priya Soparkar 8wp 3624-18-o High Court exercising jurisdiction in relation to theterritories within which the cause of action, wholly or inpart arises for exercise of such power, notwithstandingthat the seat of such Government authority is not withinthose territories. Priya Soparkar 8wp 3624-18-o High Court exercising jurisdiction in relation to theterritories within which the cause of action, wholly or inpart arises for exercise of such power, notwithstandingthat the seat of such Government authority is not withinthose territories. 5.According to the petitioner, since the impugnednotice of re-assessment was served to the petitioner atMumbai, a part of cause of action can be stated to havearisen within the jurisdiction of this Court. In this context,learned counsel had relied on a decision of DivisionBench of Allahabad High Court in case of ModiCharitable Fund Society Vs. Income Tax Officer[1]. Itwas a case in which the Petitioner-assessee hadchallenged a notice of reopening of assessment beforethe High Court. The Department had raised the objectionof territorial jurisdiction contending that no part of thecause of action had arisen within the jurisdiction ofAllahabad High Court. The Court overruled the objectionand entertained the petition on merits. 6.On the other hand, we notice that Calcutta Highcourt in case of Ispat Industries Ltd. Vs. DeputyCommissioner of Income Tax and ors.[1] examined thequestion of territorial jurisdiction of the High Court wherethe assessee had been served a notice of reopening ofassessment under Section 148 of the Act. The learnedJudge held that this would not be sufficient to give theHigh Court territorial jurisdiction to entertain the writpetition. Following observations were made:- “Now so far the challenge to the order undersection 148 of the Act it appears that thenotice has been served on the petitioner to filereturn under section 148 of the said Act byrespondent No.1 who is having his office atMumbai. The order if any passed by the saidauthority, appeal will also have to be filed atMumbai and further the return also to be filedby the petitioner as an agent under section148 of the said Act is also at Mumbai. Noticehas been served upon the petitioner onlytreating the petitioner as a representativeassessee and not in its own identity but as anagent of the said foreign firm, who has beenassessed at Mumbai, and the return to befiled on behalf of the said firm beforerespondent No.2 at Mumbai who has thejurisdiction in the matter. There cannot be anyreason to accept the contention that the Assessing Officer of the petitioners shall havethe jurisdiction. Therefore, it cannot be saidthat any integral part of the cause of actionhas arisen within the jurisdiction of this HighCourt. In my opinion, the judgments cited beforeme by Mr.Bajoria will not extend any help tohim on this aspect. Furthermore, as theSupreme Court has held in State of Rajasthanv. Swaika Properties, AIR 1985 SC 1289, mereservice of a notice at Calcutta does notconstitute an integral part of the cause ofaction sufficient to acquire jurisdiction by thisHigh Court and to entertain a petition underarticle 226 of the Constitution. Therefore, I donot have any hesitation to hold in this matterthat the service of the notice under section148 of the said Act or under section 163 of thesaid Act or the order communicated atCalcutta cannot give any jurisdiction to thepetitioner to file this writ application in thisHigh Court and I hold that service of thenotice in the instant application cannotconstitute any part of the cause of action toentertain this application. Accordingly, on thatground this application must be dismissed.” 7.This was reiterated in a decision in case of CESCLtd. and another Vs. Deputy Commissioner ofIncome-Tax and others[1]. 8.Learned Single Judge of Madras High Court in case 1Vol.263 ITR 382 Priya Soparkar 11wp 3624-18-o 7.This was reiterated in a decision in case of CESCLtd. and another Vs. Deputy Commissioner ofIncome-Tax and others[1]. 8.Learned Single Judge of Madras High Court in case 1Vol.263 ITR 382 Priya Soparkar 11wp 3624-18-o of C.G.Shanmugham Vs. Union of India and others.[1]considered a case where the notice for recovery of taxwas issued by the Recovery Officer at Mumbai to the legalrepresentatives of the owner of property residing inMadras. The Court held that the Madras High Court hadno jurisdiction to entertain the petition. 9.It can thus be seen that the issue of the High Courtwhere the assessee was served with a notice ofreopening of assessment getting territorial jurisdictionto entertain a petition challenging such notice, is notfree from doubt. In the present case, we are not inclinedto thrash out this legal issue for our final opinion. Thisis so because even if we accept the contention of thecounsel for the petitioner that the facts of the case wouldsuggest arising of a part of cause of action within thejurisdiction of this Court, we are of the opinion that theCourt should not exercise such jurisdiction and insteadallow the petitioner to file appropriate petition beforethe High Court which has jurisdiction over the Assessing 12wp 3624-18-o Officer at Hyderabad . The assessee is being assessed totax consistently at Hyderabad. The assessee has a PANcard at such place. The assessee has never applied fortransfer of PAN card. Admittedly, therefore against theassessments that may be made by the DeputyCommissioner of Income Tax, Hyderabad, appeals wouldlie before the Appellate Commissioner stationed there.Further appeal at the hands of the aggrieved partywould lie before the Income Tax Appellate Tribunal,Telangana. Section 269 of the Act defines the High Courtas to mean in relation to any State the High court forthat State. Any challenge to the orders of AssessingOfficer, Appellate Commissioner or the Tribunal in thepresent case would lie before the High Court of Telangana(previously High Court of Andhra Pradesh). The AssessingOfficer and the Appellate Authorities therefore would bebound by the law propounded by the said High Court. 10.In central legislations such as the Income Tax Act,High courts give due respect to the pronouncements ofanother High Court, in order to avoid difference of Priya Soparkar 13wp 3624-18-o opinion in central legislations. On rare occasionsdiversion of views between the High Courts isinavitable. If we entertain this petition merely because asmall part of the cause of action may have arisen withinthe jurisdiction of this Court, we would be giving rise topossibility of different legal principles being applied incase of the same assessee on the same issue andpossibly in relation to the same assessment year. Anyappeal against the original assessment (if at all done) forthe assessment year 2011-12 would be governed by thelaw laid down by Telangana High Court. In the contextof challenge to the notice of reassessment, this Courtwould apply the decisions of Bombay High Court. Thiswould be wholly undesirable. 11.It is not unknown to law that in the context ofterritorial jurisdiction of the High Court, even if it isfound that a small portion of the jurisdiction may havearisen within the High Court, the Court would on theprinciple of convenience may refuse to entertain thejurisdiction. In case of Serious Fraud Investigation Priya Soparkar 14wp 3624-18-o 11.It is not unknown to law that in the context ofterritorial jurisdiction of the High Court, even if it isfound that a small portion of the jurisdiction may havearisen within the High Court, the Court would on theprinciple of convenience may refuse to entertain thejurisdiction. In case of Serious Fraud Investigation Priya Soparkar 14wp 3624-18-o Office Vs. Rahul Modi and another[1], the SupremeCourt observed that in case of an offence which is triableby the Special Court established or designated for anarea in which registered office of the company in relationto which the offence is committed, proper jurisdictionHigh Court would be the Court which has territorialjurisdiction over such Special Court. Though jurisdiction ofthe High Court where arrest and and detention mayhave taken place, would not be completely ousted, theCourt should not entertain the challenge even if thearrests were made within the jurisdiction of such Court. 12.In case of Madhya Pradesh State MiningCorporation Limited Vs. Sanjeev Bhaskar and others[2] the Supreme Court observed as under:- “23. Admittedly, the third-party rights werecreated in the meantime in favour of theMining Corporation pursuant to the order ofMadhya Pradesh High Court dated 16-7-1986.The order passed by the Madhya PradeshHigh Court was not challenged in any appeal.The Delhi High Court also failed to notice theaforesaid fact and failed to decide thejurisdiction of the High Court to entertain the 1(2019) 5 Supreme Court Cases 266 2(2013)12 supreme Court Cases 326 Priya Soparkar appeal against the order passed in favour ofthe Mining Corporation which was passedpursuant to the direction of the MadhyaPradesh High Court. In this background, it wasnot desirable for the Delhi High Court toentertain the writ petition. Even though therevisional order was passed by the CentralGovernment, the Delhi High Court ought tohave asked the first respondent to movebefore the Madhya Pradesh High Court forappropriate relief.” 13.Under the circumstances, this petition is notentertained. It would be open for the petitioner to movethe appropriate High Court for the same reliefs. Sincethis petition is pending before this Court for aconsiderable period of time with interim relief againstproceeding further with the assessment, we extend thisinterim order for a period of two weeks from today. (S.J.KATHAWALLA, J.) (AKIL KURESHI, J.) ….