1976 (12) TMI 38 - HC - Income Tax

Summary

Issues Involved:
1. Whether an agent can be assessed without being appointed as such under the provisions of the Income-tax Act.
2. Whether the penalty levied on the representative-assessee for late filing of returns is justified.

Summary:

Issue 1: Appointment of Agent
The primary question is whether an agent can be assessed without being formally appointed under the provisions of the Income-tax Act. The court examined the relevant sections, including sections 5, 9, 160, and 163 of the Income-tax Act, 1961. The court noted that under section 163, certain persons can be treated as agents of non-residents, but an order must be passed to recognize this status. The court emphasized that the necessity to pass an order is not dispensed with merely because the agent did not object to the status. The court highlighted that the right of appeal against such an order under section 246(g) is a substantive right, and the absence of a formal order recognizing the agent's status denies the agent the opportunity to contest the assessment and penalty.

Issue 2: Justification of Penalty
The court considered whether the penalty of Rs. 52,747 levied u/s 271(1)(a) for late filing of returns was justified. The court noted that penal proceedings are quasi-penal in nature and require an element of contumaciousness or deliberate avoidance of law. The representative-assessee's explanation for the delay, including the need for instructions from the principal and political disturbances in Nepal, was rejected without sufficient consideration. The court emphasized that the representative-assessee was denied the opportunity to contest the penalty during the appeal process u/s 246(g). The court concluded that the penalty was not properly levied, as there was no finding of wilful default or deliberate avoidance of responsibility by the representative-assessee.

Conclusion:
The court answered the question in favor of the representative-assessee and against the department, holding that the penalty was not justified due to the lack of a formal order appointing the representative-assessee as an agent and the absence of evidence of deliberate default. The court awarded costs to the representative-assessee with counsel's fee of Rs. 250.