2003 (6) TMI 20 - HC - Income Tax

Non-resident - In the writ petition the petitioners have challenged two notices. One dated passed by the Deputy Commissioner of Income-tax. treating CESC Limited as representative assessee / agent of the non-resident assessee, u/s 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 - In the result, this appeal succeeds in part only with regard to the notice under section 148 relating to reopening of the assessment under section 147 on the ground that this notice was issued on March 20, 2001, when the return submitted by the principal was pending and the assessment whereof was not completed till March 30, 2001. The notice, dated March 20, 2001, issued under section 148 impugned in the writ petition is, therefore, hereby quashed

Issues Involved:
1. Jurisdiction of the High Court to entertain the writ petition.
2. Validity of the notice under section 163(2) of the Income-tax Act, 1961.
3. Validity of the notice under section 148 of the Income-tax Act, 1961.
4. Double assessment and liability of the representative assessee.
5. Availability and applicability of alternative remedies.

Detailed Analysis:

1. Jurisdiction of the High Court to Entertain the Writ Petition:
The petitioners contended that the service of notices at Calcutta gave rise to the cause of action within the jurisdiction of the Calcutta High Court. The court considered whether the service of the notices constituted an integral part of the cause of action. It was concluded that the mere communication of the order at Calcutta did not confer jurisdiction upon this court, as the substantive proceedings and jurisdiction lay with the Deputy Commissioner of Income-tax (DCIT), Mumbai.

2. Validity of the Notice under Section 163(2):
The court examined whether the DCIT, Mumbai, had jurisdiction to treat CESC as a "representative assessee" under section 163(2). It was found that CESC, having engaged Linklaters and Paines (L&P) and made payments to them, fell within the definition of an agent under section 163(1)(b) and (c). The court held that the DCIT, Mumbai, was within his jurisdiction to issue the notice under section 163(2). The participation of CESC in the proceedings further validated the jurisdiction. Therefore, the notice under section 163(2) was not without jurisdiction and the writ petition in this regard was dismissed.

3. Validity of the Notice under Section 148:
The court analyzed whether the notice under section 148, issued for reopening the assessment under section 147, was valid. It was determined that the notice was issued on March 20, 2001, while the assessment was completed on March 30, 2001. The court held that there could be no question of escapement of assessment until the assessment was completed. Therefore, the notice under section 148 was deemed to be without jurisdiction and was quashed. The court allowed the writ petition to this extent.

4. Double Assessment and Liability of the Representative Assessee:
The court addressed the issue of double assessment, noting that the assessment of the non-resident's income in the hands of the representative assessee (CESC) did not constitute double assessment. The liability of the representative assessee is confined to the income arising from transactions with the non-resident. The court clarified that the assessment made at the hands of the representative assessee is in the capacity of the representative of the principal and not an independent assessment.

5. Availability and Applicability of Alternative Remedies:
The respondent argued that the order under section 163 was appealable and that the availability of an alternative remedy should preclude the writ petition. The court acknowledged that the existence of an alternative remedy is a factor but not an absolute bar to the writ jurisdiction, especially if the order is prima facie without jurisdiction. However, in the case of the notice under section 163, the court found that the DCIT, Mumbai, had jurisdiction, and therefore, the writ petition was not maintainable in this regard.

Conclusion:
The appeal was allowed in part. The notice under section 148 was quashed as it was issued without jurisdiction. The writ petition concerning the notice under section 163 was dismissed. The judgment of the learned single judge was modified accordingly.

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