Old Income Tax Demands Cannot Surface On Portal Without Serving Underlying Orders: Bombay High Court

The Bombay High Court recently observed that old income tax demands could not be sustained where the underlying orders were not made available to the taxpayer, observing that such demands cannot be permitted to surface without proper disclosure.

“Old matters and demands cannot be allowed to suddenly surface on the portal without the underlying orders being available and served. Consequently, the impugned demands cannot be sustained,” the court said.

A Division Bench of Justices B. P. Colabawalla and Firdosh P. Pooniwalla held that the writ petition was maintainable before it under Article 226(2) of the Constitution, noting that even a part of the cause of action arising within its territorial jurisdiction was sufficient to entertain the plea.

The case arose from a petition by Capgemini Technology Services India Ltd., which has challenged alleged tax dues for the assessment years 2001–02, 2002–03 and 2003–04, along with a recovery notice issued under Section 220 of the Income Tax Act. These demands were originally raised against a different entity that was later merged into the petitioner.

According to the company, the existence of these demands came to its notice only after it received the recovery notice in February 2023.

It thereafter sought copies of the underlying orders through applications under the Right to Information Act. However, the department furnished only illegible computation screenshots for certain years and stated that records for one year were unavailable, despite directions issued by the appellate authority under the RTI Act.

Opposing the petition, the Revenue raised a preliminary objection to territorial jurisdiction, contending that since the original orders were passed by an assessing officer in Delhi, only the Delhi High Court could entertain the matter. It relied on precedents to argue that jurisdiction is determined by the location of the authority issuing the impugned orders.

Rejecting this objection, the court noted that jurisdiction over the petitioner's case had already been transferred from Delhi to Pune under Section 127 of the Income Tax Act. It held that the Pune officer was now the competent authority to deal with recovery, grievance redressal, and further proceedings, rendering the Delhi officer functus officio.

The bench emphasised that the recovery notice was received in Pune, the petitioner's registered office was located there, and any coercive recovery consequences would be suffered there.

“Therefore, a part of the cause of action has clearly arisen within the territorial jurisdiction of this Court,” it observed.

Holding that Article 226(2) permits a High Court to exercise jurisdiction where the cause of action arises wholly or in part, irrespective of where the authority is situated, the court concluded that the petition was maintainable and proceeded to entertain it.

For Petitioner: Advocates Dharan V. Gandhi along with  Advocate Aanchal Vyas

For Respondents: Advocate Arjun Gupta (through V.C.) for Respondent Nos.1 and 3.