TMI Blog1986 (2) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961, treating Alfred Herbert (India) Pvt. Ltd., the assessee, as an agent of the non-resident company for the said assessment years 1968-69, 1969-70 and 1970-71. Against the order passed by the Income-tax Officer under section 163 of the Act of 1961, the assessee filed revision applications before the Commissioner of Income-tax which, it appears, remained pending at the material time. On March 3, 1971, the Income-tax Officer issued notices under section 148 of the Income-tax Act, 1961, on the assessee in respect of assessment years 1968-69 and 1969-70 calling upon the assessee to file returns of income as the agent of the non-resident company on the ground that income chargeable to tax for these two years had escaped assessment within the meaning of section 147 of the Act. For the assessment year 1970-71, the Income-tax Officer issued notice under section 139(2) of the Act of 1961 calling upon the assessee to file a return of income also of the non-resident company. In compliance with the above notices, the assessee filed returns of income for the said assessment years showing nil income in each of the returns and also protested against the initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(3) read with section 163 were ab initio void as the original assessment had been completed on the non-resident company and the Income-tax Officer having already exercised the option of assessing the non-resident direct in the said original assessment was precluded from proceeding to assess the agent again under section 147(a) of the Act. The Tribunal allowed the additional grounds to be raised inasmuch as, in the opinion of the Tribunal, the said grounds were all raised as a question of law which went to the root of the matter. The Tribunal considered and construed sections 160, 161 and 166 of the Income-tax Act, 1961, and held that the Income-tax Officer had an option either to assess the non-resident company directly or to assess it through its agent in India. Once the Income-tax Officer opted for assessing the non-resident company directly, he could not assess the nonresident company through an agent in India for the same assessment year. The assessment of the non-resident company could not be split into two, one part to be assessed in the hands of the non-resident company and the other in the hands of the agent of the non-resident company in India. The Tribunal ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, the Tribunal was correct in holding that the reassessment proceedings initiated by the Income-tax Officer were illegal and without jurisdiction ?" The said question is before us in Income-tax Reference No. 112 of 1983. At the instance of the parties, the two references have been heard together. Learned advocate for the Revenue drew our attention to the relevant sections of the Income-tax Act, 1961, the material portions of which are noted hereafter " Section 2.- In this Act, unless the context otherwise requires, (7) 'assessee' means a person by whom any tax or any other sum of money is payable under this Act, and includes-... (b) every person who is deemed to be an assessee under any provision of this Act. Section 160.-(1) For the purposes of this Act, 'representative, assessee' means (i) in respect of the income of a non-resident specified in subsection (1) of section 9, the agent of the non-resident, including a person who is treated as an agent under section 163 ; (2) Every representative assessee shall be deemed to be an assessee for the purposes of this Act. Section, 161.-(1) Every representative assessee, as regards the income in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns under protest contending that reassessment could not be made in the hands of the assessee as notice had already been served on the agent. The Income-tax Officer completed the reassessment on the non-resident assessee direct. The assessments were challenged in appeal. The Appellate Assistant Commissioner rejected the appeal but the Tribunal took the view that as the assessments were originally made on the agent, a direct reassessment could not be made on the assessee under section 147(b) of the Income-tax Act. On a reference, a Division Bench of the Andhra High Court held that under the Income-tax Act, 1961, there was no bar to reassess the income in the hands of the principal even though the original assessment had been made on the agent. Construing section 160 of the Act, the High Court held that an agent who was a representative of the assessee would be deemed to be an assessee for the purpose of the Act. Therefore, the assessment made on the agent was in fact the assessment made on the principal. Construing section 166, the High Court held that it was made clear from the said section that the earlier sections would not prevent direct assessment of the person on whose be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfers a discretion or option upon the Income-tax Officer to choose, either initially or subsequent to the initiation of proceedings, as to whether he wants to assess and recover the tax from the non-resident firm or its agent. What all the section says is that merely because the representative-assessee, that is to say, the agent, is, in law, made responsible for the assessment and recovery of tax, it would not bar the assessment and recovery of tax from the nonresident principal. In other words, the law holds not only the non-resident principal but also the agent of such non-resident firm liable for assessment and for the recovery of tax under such assessment. No question of selecting one or the other arises either for the purpose of assessment or for the purpose of recovery of tax. Both are equally liable. ...... Thus, the terms 'either' and 'or' are used in section 166 to indicate the dichotomy between the assessment and the recovery. They are not, certainly, used for indicating that the assessment and recovery proceedings can be taken either against a non-resident principal or against the agent of, such non-resident principal. There is no justification for reading anything of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the above decisions, learned advocate for the Revenue, submitted that the Tribunal has patently erred in setting aside the assessments in the hands of the assessee. Learned advocate for the assessee contended on the other hand that law was well settled that in assessing a person either directly or through his representative, the Income-tax Officer had to make a choice as to which of the two would be assessed. Even in the case of a representative, it could not be disputed that the income was one. The only question which would arise would be in whose hands would such income be taxed. This was the law laid down by a number of High Courts as also the Supreme Court. He submitted that the two decisions of the Andhra Pradesh High Court cited and relied on on behalf of the Revenue should not be followed as the laid down in the said decisions should not be held to be good law. Learned advocate for the assessee submitted further that, in any event, the reassessment under section 147(a) in the hands of the assessee was clearly illegal inasmuch as it could not be said that there was any default on the part of the assessee to file its return on the ground of which the reassessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is derived. Income-tax is undoubtedly levied on the total taxable income of the taxpayer and the tax levied is a single tax on the aggregate taxable receipts from all the sources; it is not a collection of taxes separately levied on distinct heads of income. " (b) Trustees of Chaturbhuj Raghavji Trust v. CIT [1963] 50 ITR 693 (Bom). In this case, the Bombay High Court construed section 41 of the Indian Income-tax Act, 1922, which corresponds to sections 160 and 161 of the later Income-tax Act of 1961 and held that section 41 provided for two alternative methods, namely, either to tax the income in the hands of the trustee or directly in the hands of the person on whose behalf the income was receivable under the trust. One of such methods having been availed of by the Income-tax Department in directly assessing the beneficiary, the other was no longer available to the Department. (c) CIT v. H. E. H. Mir Osman Ali Bahadur [1966] 59 ITR 666. In this case, the Supreme Court construed section 41 of the Indian Income-tax Act, 1922 and held as follows (at p. 682): " Under this section the revenue has the option to levy or collect tax from the trustee or the beneficiary; the tax ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the beneficiary to charge in the hands of the representative assessee in a representative capacity or bring it to charge in the hands of the beneficiary by direct assessment on him. If it is charged to tax in the hands of the beneficiary, it cannot again be brought to tax in the hands of the representative assessee. This would appear to be clear on principle both having regard to the scheme of sections 161, 164 and 166 as also on the application of the doctrine that the Revenue cannot, in the words of the Supreme Court in Commissioner of Income-tax v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95, ' seek to assess the one income twice '. " (e) Premier Automobiles Ltd. v. S. N. Shrivastava, ITO [1970] 76 ITR 1 (SC). In this case, it was held by the Supreme Court that where during the assessment year concerned, the assessee is treated as an agent of the non-resident principal, it would become liable to pay advance tax in the financial year concerned. (f) Rajapalayam Mills Ltd. v. CIT [1978] 115 ITR 777. This decision was cited for the following observation of the Supreme Court (at p. 778-headnote): " It is settled law that though the profits of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer, knowing fully well that assessment in the said assessment year has already been made in the hands of the non-resident, had issued a fresh notice under section 143(3) of the Income-tax Act, 1961, calling upon the assessee as the representative of the non-resident to file a fresh return. This amounts to an assessment of the same income both in the hands of the representative and also the principal. So far as the other two assessment years are concerned, reassessment proceedings have no doubt been initiated. We note the definition in section 2(8) of the Act stating that assessment includes reassessment. Therefore, what is sought to be assessed in the hands of the representative is an income which has already suffered assessment in the hands of the non-resident. We are unable to construe sections 160-166 of the Income-tax Act, 1961, in the manner as has been done by the Andhra Pradesh High Court. With respect, we agree with the views taken by the other High Courts. In our view, the Income-tax Act, 1961, does not postulate that the income can be split up and different parts of such income can be assessed in the hands of different persons. The Supreme Court has cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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