TMI Blog1976 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years 1960-61 to 1962-63. He called for objections and gave time till February 20, 1963. No representations were made by the representative-assessee or, in common parlance, the agent. On February 27, 1963, the Income-tax Officer served on the agent a notice under section 139(2) read with section 148 of the Act calling upon the agent to file returns of the income of the assessee for the assessment year 1961-62. The representative-assessee filed such a return on January 28, 1965. The assessment was completed by the officer on February 27, 1965. Contemporaneous with the completion of the assessment, the officer issued a notice to the agent to show cause why penalty proceeding should not be initiated and levied penalty under section 271(1)(a) of the Act for filing returns belatedly. The agent's reply was that he could not file the returns earlier, as he had to be instructed by his principal and that he had to obtain some particulars from him and also pleaded that due to unsettled political conditions prevalent in Nepal, the delay has occurred. The Income-tax Officer has rejected this explanation and levied a penalty of Rs. 52,747. He calculated the penalty at 2 per cent. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-resident accepted and appointed as such, is called a representative-assessee of such a non-resident. Under section 160, a representative-assessee is defined. It means in respect of the income of a non-resident specified in clause (i) of sub-section (1) of section 9, the agent of the non-resident including a person, who is treated as an agent under section 163. The other sub-clauses in section 160 are not relevant for our consideration. Section 163 is a residuary section providing for the contingency when in certain circumstances certain persons would be treated as an agent of a non-resident. One such person is, who is employed by and on behalf of the non-resident ; the others may have business connections with the non-resident or from whom or through whom the non-resident is in receipt of any income directly or indirectly or who is a trustee of the non-resident. It also includes such other person, who has acquired by means of a transfer a capital asset in India. Certain exceptions also are created in section 163 in the matter of such statutory treatment of persons as agents of non-resident. We are not, however, concerned with them. Under section 246 appearing in Chapter 20 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es cannot be attributable to any laches on his part and that there is sufficient cause for the non-furnishing of the returns by him in time, etc. In particular, he would certainly have an opportunity of representing to the concerned authority that the penal proceedings which might follow after the completion of the assessment need not be undertaken, as there are sufficient grounds for the non-invocation of such proceedings. The decision relied upon by the revenue in Commissioner of, Income-tax v. Nawal Kishore Kharaiti Lal [1938] 6 ITR 61 (PC) cannot help them. Considering a similar provision under the earlier Act, the Privy Council said : " Under the Indian Income-tax Act it is not necessary to the validity of a notice calling for a return of income under section 23(2), where it is served upon a person as agent of a non-resident under section 43, that it should have been preceded not only by the notice if the intention prescribed by section 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. It is open to the Income-tax Officer under the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits a return as agent of a non-resident, the necessity to pass an order recognising him as such agent cannot be dispensed with. The case in Jadavji Narshidas and Co. v. Commissioner of Income-tax [1957] 31 ITR 1 (Bom) is distinguishable on the ground that it arose under the Act of 1922 which did not provide for a right of appeal against such treatment orders. In Commissioner of Income-tax v. Kanhaya Lal Gurmukh Singh [1973] 87 ITR 476 (Punj) a similar question arose which was in fact decided by a majority of judges as there was a difference of opinion. The learned judges in that case said : " It is, therefore, necessary under this (section 163(2)(i) of 1961 Act) sub-section not only to issue a notice of his intention to treat the person as the agent of a non-resident, but to pass an order treating him as an agent of the non-resident after hearing him." They were of the view that the status as an agent of the non-resident must be determined before the issue of notice under section 148. They also refer to section 249(2) of the Act which provides that an appeal should be presented against such a recognition order within 30 days from the date on which the intimation of the order tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by him. Section 161 as such refers to taxes and not to any penalty. Even section 2(43), prior to its amendment on April 1, 1965, refers only to income-tax and super-tax chargeable under the Act. Having regard to the express provisions which create a vicarious liability on the representative-assessee to be liable for tax, as it is popularly understood, the necessity to provide him with an order treating him as agent of the non-resident becomes all the more important. This would enable him to place his difficulties in the matter of the delays in submission of his return even in the appeal under section 246(g) of the Act and secure a limited relief. He could have by initiating and participating in such an appeal relieve himself of the liability to pay penalty for no fault of his. Though the words " assessment proceedings " are comprehensive enough, yet having regard to the two distinct chapters provided in the Act dealing with the assessment proceedings and penalty, the significance which such a dichotomy projects has to be borne in mind. Under the 1961 Act unlike the Act of 1922, this distinction in placing the two proceedings in two distinct compartments and chapters gives ..... X X X X Extracts X X X X X X X X Extracts X X X X
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