2014 (4) TMI 29 - HC - Income Tax

Jurisdiction to continue reassessment u/s 147 - There was No reply to notice u/s 142(1) to file return - The petitioner pointed out that the jurisdiction to assess a non-resident company is determined either on the basis of the location of the permanent establishment (PE) of the non-resident company or the location of a source of income accruing to the company in India and that the petitioner did not have any source of income in Noida as none of its clients in India were located there, nor did the petitioner have a PE in India. It was accordingly submitted that the notice issued by the Noida officer was without jurisdiction. Held that - The question whether the initiation of reassessment proceedings by the Noida officer was valid or not would depend upon whether the petitioner had a PE within the jurisdiction of the Noida officer in which case the notification No.263 issued on 14-9-2001 would apply. Whether this jurisdictional fact existed or not cannot be examined in these proceedings taken under Article 226 since the question is hotly contested, the revenue alleging that the petitioner did have a PE at Noida by the name Adobe India and the petitioner emphatically denying the same. In the absence of any evidence unmistakably and indisputably establishing the existence or otherwise of the PE, we would hesitate to enter this prohibited arena in writ proceedings. It needs no citation of authority to support the proposition that the Court exercising its jurisdiction under Article 226 of cannot enter into disputed questions of fact which is best left to be resolved in the alternative remedies available to the petitioner. The conduct of the assessee has been one of defiance - mere filing of the return can never amount to submitting to the jurisdiction - The filing of the return in response to the notice under Section 148 defines the stand taken by the assessee - Section 148 says that the return called for by the notice issued under that section shall be treated as if such a return were a return required to be furnished under Section 139 of the Act - a return of income conveys the position taken by the assessee to the assessing authority. The petitioner, not having made the Noida officer aware that no income chargeable to tax had escaped assessment and having merely told him that he has no jurisdiction to issue reassessment notices, was not acting strictly in accordance with law - The writ remedy being a discretionary remedy, the discretion can be exercised in favour of the writ petitioner only if his conduct has been in conformity with law- Decided against Assessee.

Summary

Issues Involved:
1. Jurisdiction of the Noida officer to issue reassessment notices.
2. Validity of reassessment proceedings initiated by the Noida officer.
3. Transfer of jurisdiction from Noida to Delhi.
4. Compliance with procedural requirements under the Income Tax Act.
5. Petitioner's conduct and response to notices.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Noida Officer to Issue Reassessment Notices:
The petitioner, a non-resident company incorporated in Ireland, challenged the jurisdiction of the Deputy Director of Income Tax, International Taxation, Noida (Noida officer) to issue reassessment notices under Section 148 of the Income Tax Act, 1961. The petitioner argued that its jurisdiction was determined by the location of its "permanent establishment" (PE) or the source of income in India, neither of which was in Noida. The respondent countered that the Noida officer had jurisdiction as the petitioner had a "dependent agent PE" in Noida in the form of Adobe India, which was the petitioner's associated enterprise. The court noted that the existence of a PE was a disputed fact and could not be resolved in writ proceedings under Article 226.

2. Validity of Reassessment Proceedings Initiated by the Noida Officer:
The petitioner contended that the reassessment notices issued by the Noida officer were invalid due to lack of jurisdiction. The respondent argued that the notices were valid as per the CBDT's notification No.263 issued on 14.09.2001, which granted jurisdiction to the Noida officer based on the presence of a PE. The court emphasized that the validity of the reassessment proceedings hinged on whether the petitioner had a PE in Noida. This factual determination was best left to the assessment and appellate authorities under the Income Tax Act, rather than being adjudicated in writ proceedings.

3. Transfer of Jurisdiction from Noida to Delhi:
The petitioner also challenged the transfer of proceedings from the Noida officer to the respondent in Delhi. The respondent pointed out that the transfer was effected by an order dated 06.03.2013 issued by the DIT (International Taxation)-II, New Delhi, to avoid multiplicity of proceedings. The court found that the transfer was valid and that the respondent in Delhi was entitled to continue the reassessment proceedings initiated by the Noida officer.

4. Compliance with Procedural Requirements Under the Income Tax Act:
The petitioner argued that the notices under Section 142(1) for the assessment year 2004-05 were barred by limitation and that the reassessment proceedings should be dropped. The respondent maintained that the notices were valid and that the petitioner had not filed returns in response to the notices issued under Section 148. The court agreed with the respondent, stating that the petitioner was required to file returns in response to the notices under Section 148, as mandated by the Supreme Court in "G.K.N. Drive Shafts (India) Ltd. vs. ITO". The court emphasized that filing a return in response to a notice under Section 148 was a statutory obligation and not merely a procedural formality.

5. Petitioner's Conduct and Response to Notices:
The court noted the petitioner's conduct of not filing returns in response to the notices issued under Section 148 and characterized it as defiant. The court held that the petitioner's failure to comply with the statutory requirement of filing returns undermined its case. The court emphasized that the writ remedy was discretionary and could be denied if the petitioner's conduct was not in conformity with the law.

Conclusion:
The court dismissed the writ petitions, concluding that the validity of the reassessment proceedings depended on factual determinations best left to the assessment and appellate authorities. The court also highlighted the petitioner's non-compliance with statutory obligations and found no real prejudice to the petitioner that would justify the exercise of extraordinary jurisdiction. The court thus upheld the reassessment proceedings initiated by the Noida officer and continued by the respondent in Delhi.