TMI Blog1981 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... stated. -The assessee is a limited company, and for the assessment years 1962-63 to 1964-65, it has been treated as the agent of the non-resident, M/s. CAIL of France. The assessee entered into an agreement dated 24th August, 1956, with a non-resident French company known as M/s. Societe Francaise De Construction Mecanique, Ancients Establishments, Cail Denain (Nord), France (hereinafter referred to as the " CAIL ") for the sake of brevity. The assessee agreed to buy from the said non-resident company complete machinery and equipment valued at Rs. 60,75,000 (approximately). According to the original contract, the terms of payments were that 10% of the price was to be paid on receipt of the import licence, 60% against shipping documents, and the balance, at the end of the two subsequent crushing seasons. The terms of payment were subsequently modified in accordance with the terms of the import licence, and these amended terms were incorporated in the document dated 17th June, 1957. According to the amended agreement, the amount of price remaining unpaid after the first and subsequent instalments would carry interest at the rate of 5% per annum and the whole of the interest so accrui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone proper conclusion could be reached whether the assessee could be held to be an agent or not. It would appear that thereafter for nearly two and a half years the ITO did nothing, and on 3rd March, 1969, issued a notice under s. 163 of the I.T., Act, 1,961, for the assessment year 1962-63. In this notice, a copy whereof is, annexed as annex F, five grounds were indicated by the ITO for his prima facie view which was that the assessee was liable to be treated is the agent of a non-resident. Thereafter on 13th March, 1969, in response to the said notice the assessee raised several contentions, but ultimately by his, order dated 28th March, 1969, the ITO rejected these contentions and held that the assessee-company was liable to be treated as the agent of the non-resident. By two separate orders, also dated 28th March, 1969, he passed similar orders for the assessment years 1963-64 and 1964-65. It would appear that thereafter reassessment was done and the assessee preferred appeals, both from the decision of the ITO treating the assessee as an agent of the non-resident as also against the reassessment for the assessment years 1962-63, 1963-64 and 1964-65. The AAC initially dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal allowing the additional grounds to be urged for the first time before the Tribunal is reflected in question No. 1. The Tribunal thereafter appears to have upheld the several contentions raised by the assessee-company before it. In its view, the Order under s. 163 of the I.T. Act, 1961, is to be passed first and then a notice under s. 148 of the said Act is to be served on the assessee. In this view of the matter, the notice dated 31st March, 1965, was held by the Tribunal to be improper. The Tribunal also upheld the contention raised on behalf of the assessee that this notice cannot be deemed to exist after the AAC has set aside the order of the ITO under s. 163. The Tribunal was, accordingly, of the view that there was no valid notice under s. 148 properly served on the assessee and hence the assessments for all the years were invalid and could not be sustained. A further technical contention of the assessee, which does not appear to be necessary to be gone into, was also upheld by the Tribunal. These conclusions of the Tribunal are reflected in question No. 2. Section 163 of the I.T. Act, 1961, occurs in Chap. XV which provides for liability in special cases. One ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar contention in Blue Star Engineering Co. (Bombay) P. Ltd. v. CIT [1969] 73 ITR 283 (see observations at P. 296). Indeed, the point had been clearly negatived by the decision of the Privy Council in CIT v. Nawal Kishore Kharaiti Lai [1938] 6 ITR 61. It had been expressly held therein that under the Indian I.T. Act, 1922, it was not necessary for the validity of a notice calling for a return of income under s. 23(2), where it is served upon person as the agent of a non-resident under s. 43, that it should have been preceded not only by the notice of the intention prescribed by S.: 43 and by the opportunity of being heard prescribed by the proviso thereto but also by an order declaring the person to be the agent of the non-resident person or treating him as such agent. The question to be considered is whether the same position enures after the enactment of the I.T. Act, 1961. The differences between the Act of 1922 and the Act of 1961 have been noted by a Full Bench of the Punjab and Haryana, High Court in CIT v. Kanhaya Lai Gurumukh Singh [1973] 87 ITR 476. There was a difference of opinion initially, which was resolved on a reference to a third judge, and the majority judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether an order of assessment which was made without serving a recognition order on the representative-assessee was void and unenforceable or (to decide) the specific question which directly arose before the Punjab and Haryana High Court. We were also referred at the Bar to a decision of the Calcutta High Court in CIT v. T.I M. Saks Ltd. [1978] 114 ITR 59. On the aspect of the matter which we are considering, the said decision is of no assistance. It may be pointed out that as far as the Punjab and Haryana High Court is concerned, we are invited on behalf of the Department to concur with D. K. Mahajan J., who was of the clear view that the decision in Nawal Kishore's case [1938] 6 ITR 61 (PC), had not been shaken or otherwise affected by the change in phraseology of the corresponding provisions in the I.T. Act, 1961. He had upheld the contention of the Department, and we were invited to follow his judgment in preference to those of the other two judges. Before expressing our views in the matter it is necessary to consider question No. 1. It is now well settled, as far as this court is concerned, that a point which goes to the jurisdiction of the assessment can be allowed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mately found favour with the majority will be required to be upheld inasmuch as it is the view in favour of the assessee. If the period of limitation of two years prescribed under s. 149(3) creates a difficulty for the working out of these provisions, it is for the Revenue to seek an amendment of those provisions. In our view, the Tribunal was thus right in holding that an order under s. 163 of the I.T. Act, 1961, is to be passed in the first place and thereafter a notice under s. 148 is to be served on the assessee who is sought to be made liable as a representative assessee, namely, as the agent of a non-resident. On the facts of the instant case, such determination under s. 163 took place for the three assessment years in question on 28th March, 1969, by three separate orders. It was only then or thereafter that a fresh notice under s. 148 was required to be issued. Since by that time the period of limitation under sub-s. (3) of s. 149 had expired, no such notice could be validly issued. The earlier notice issued was clearly not in order, and any assessment, reassessment or recomputation done in Pursuance of such invalid notice is required to be held as invalid, as the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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