TMI Blog1997 (3) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act to the AAC. The AAC set aside the assessment order with the direction that the ITO should first of all give a finding whether Shri Prem Kumar is a non-resident and after deciding it he should consider whether Shri Sudarshan Kumar has got no objection to being appointed as an agent of Shri Prem Kumar Bhagat; that thereafter, to frame assessment order after giving due opportunity to Shri Sudarshan Kumar of being heard in accordance with law. 4. The ITO, however, issued notice under section 143(2) and fixed the case for hearing. The assessee did not comply with the notice issued by him under section 143(2) of the Act to carry out the directions of the AAC mentioned above. The ITO, therefore, framed the best judgment assessment under section 144 of the Act at a net income of Rs.67,420 vide order dated 30-3-1981. The ITO reopened this assessment under section 146 vide order dated 23-7-1981, when the case was again fixed for hearing by issuing notice under section 143(2). The service of the notice was effected. The assessee failed to appear on the appointed date as nobody attended nor any application for adjournment was filed. 4.1 In view of the above facts, the ITO held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts mentioned above held that the assessee had no valid explanation for the investment of Rs.50,000 and the addition made by the ITO, therefore, was fully justified. Accordingly, he confirmed the order of the ITO and dismissed the appeal of the assessee. 8. The assessee being further aggrieved has preferred this appeal. Shri D.R. Miglani, learned counsel for the assessee contends, taking us through the grounds of the appeal and pointing out to each ground that the authorities below were notjustified in passing their respective orders and these are wrong on law and facts of the case. Shri Miglani admitted that ground No. 1 is general. However, regarding ground No. 2, which is as under, he contends that it is for the ITO to appoint the assessee as an agent and the ITO has failed to do so. Therefore, his order is illegal: "2. The appellant has been assessed as an Agent of the Non-Resident and the status is taken as Resident and Ordinary Resident. This is without the restraint of law and facts of the case on the file. Firstly, Shri Sudarshan Kumar has never been held to be an Agent of the Non-Resident Shri Prem Kumar Bhagat and secondly, the status under no circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order. He further contends that before the AAC, the contention of the learned counsel for the assessee was that proper opportunity of being heard was not given to the assessee, which has been proved and is evident from the record, that the assessee was given proper opportunity of being heard and it is the assessee who has not availed it leaving no alternative to the ITO, then to make best judgment assessment under section 144 of the Act. He further contends that the assessment made under section 144 of the Act can be challenged if the same is proved capricious or arbitrary. In the case of the assessee, it is not proved so. On merits, he contends that the apparent is the real and paper book of the assessee at page 10 proves that on 7-4-1972, the assessee first deposited the amount of Rs.55,000 making the available cash in the bank amounting to Rs.1,40,000. Out of it, thereafter on 7-4-1972, Rs.90,000 have been withdrawn. Therefore, onus is upon the assessee to prove the source of deposit of Rs.55,000 which the assessee has falled to prove and as such, the addition of Rs.55,000 is justified. He further contends that the addition of Rs.6,000 has also been upheld by the AAC o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee gives power to the ITO under law to make best judgment assessment under section 144 of the Act. However, the ITO has complied with the directions of the AAC, firstly that the assessee himself has filed the return, as the agent of Shri Prem Kumar Bhagat, non-resident who lives in England. Therefore, the conduct of the assessee himself proves that he is the agent of the non-resident Shri Prem Kumar Bhagat. Therefore, there is no need for the ITO to issue notice as to show cause that why the assessee should not be appointed as the agent of Shri Prem Kumar Bhagat. It is also not essential for the ITO to pass the order of appointment of an agent (on the assessee) of Shri Prem Kumar Bhagat (non-resident) in view of the fact that the assessee himself is admitting himself to be the agent of Shri Prem Kumar Bhagat. Therefore, if the ITO has made the best judgment assessment on him as agent of Shri Prem Kumar Bhagat, then it cannot be held invalid on the ground that the ITO has not passed the order treating the assessee as the agent of Shri Prem Kumar Bhagat on the facts of the case. Reliance can be placed in the decision of their Lordships of Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of relief under section 84 or to direct the ITO to allow the relief merely because the ITO brings an item to tax, he cannot be deemed to have considered its non-taxability though no such claim was made before him by the assessee. The cases relied upon by the learned counsel for the assessee, Express Newspapers (P.) Ltd's case, Kanhaya Lal Gurmukh Singh's case and Tata Engg. Locomotive Co. Ltd's case are not relevant and are distinguishable, in view of the fact that in those cases the return was not filed voluntarily as the agent of the non-resident. In this case, the assessee, who is the elder brother of the non-resident Shri Prem Kumar Bhagat, living in U.K. has voluntarily filed the return showing therein and making declaration thereto that he is the agent of his brother Shri Prem Kumar Bhagat, besides claiming to be so in two letters dated 20/27-2-1976, addressed to the ITO. 11. In view of our above discussion, we hold that the legal issues raised by the learned counsel for the assessee at this stage have no substance. However, looking to the facts of the case and the settled law that the Tribunal is there to do substantial justice, we are of the opinion that in this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. Thus, the learned DR contends that the assessee has deposited the amount of Rs.55,000 first and thereafter on the same day lie has withdrawn Rs.90,000 out of his total amount of deposit (Rs.90,000 + Rs.55,000) Rs.1,45,000 which is apparent from the paper book at page 10. He further contends that apparent is the real and, therefore, it is for the assessee to disprove. Reliance is placed on the decision in the cases of Kanhaya Lal Gumukli Singh, Habib Sons v. CIT[1963] 49 ITR 792 (Bom.). While Shri Miglani rebuts in saving that out of the amount of Rs.90,000 which was drawn on 7-4-1972, sum of Rs.55,000 had been deposited and, therefore, the deposit of Rs.55,000 is explained. In rebuttal, Shri Matharu says that onus is upon the assessee to prove it and the assessee has not even filed an affidavit at this stage to prove his stand, though the onus is upon the assessee to prove the source of the deposit of Rs.55,000 and from the entries which are on page 10 and is an extract out of the pass book of the assessee (7-4-1972 by Cash, Credit Rs.55,000, Balance Rs.1,45,000, 7-4-1972 to Sudarshan Cheque No. 504, Debit Rs.90,000, Balance Rs.55,000), prima facie shows that the amount of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee deserves to succeed on the short ground of the assessment being invalid on account of the ITO not appointing Shri Sudarshan Kumar to be an agent of the non-resident, Shri Prem Kumar Bhagat by passing an order under section 163 of the Income-tax Act, 1961 treating him to be so prior to the making of the assessment under appeal. The assessee's counsel, Shri D.R. Miglani, submitted that passing of such an order was a must and the ITO despite the AAC setting aside the assessment on two earlier occasions for that purpose did not pass such an order. He referred to the two earlier orders of the AAC setting aside the assessments framed i.e., prior to the order of the AAC now under appeal dated 26-11-1984 which were included in the paper book filed. The first order of the AAC was dated 25-8-1978 and the second dated 10-11-1982. He further stated that his argument all along was that a separate order was required to be passed appointing Shri Sudarshan Kumar to be the agent of the non-resident after giving him due opportunity of being heard prior to the making of the assessment but this aspect was not appreciated fully and the AAC, whose order now is in appeal, has altogether fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual fact, he will be treated as such. Under the old Act, no appeal lay against the order of the ITO by which a person was deemed to be an agent under section 43 of the old Act. The contention that a person was wrongly deemed to be an agent could only be taken as one of the grounds of attack against the assessment order. Section 246(g) of the 1961 Act provides for an appeal from an order under section 163 treating an assessee as the agent of a non-resident. Section 249(2) provides that the appeal should be presented within 30 days from the date on which intimation of the order treating him as agent is served. Sections 246 and 249 leave no manner of doubt that the ITO has to pass an order under section 163 before initiating proceedings by issuing a notice under section 148 of the Act. Nawal Kishore's case [1938] 6 ITR 61 (P.C.) is not applicable to a notice issued under section 148 of the 1961 Act to a person as an agent of a non-resident." It may be pointed out here that whereas in the case in hand the ITO has passed no order under section 163 of the Act, in the case of Kanhaya Lal Gurmukh Singh, an order under section 163 of the Act was passed by the ITO but that was pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alable. It is this provision as to right of appeal which creates the necessity to pass an order for a right of appeal cannot be lightly treated and dealt with. A right of appeal is one of the modes by which a decision which could otherwise be final can be challenged. It is not a procedural right but a substantive right. Indeed, it is a vested right. And such a right to enter the superior court accrues to the litigant and exists as on and from the date of lis commences, and although it may be actually exercised when the adverse situation comes into play, the record must disclose that such an order has been passed so that the aggrieved person may exercise his vested right of appeal and obtain redress. In our view, therefore, a written order treating the representative-assessee as the agent of the non-resident is necessary. Even if a person without being called upon to submit a return voluntarily submits 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 of Jadavji Narshidas Co. v. CIT [1957] 31 ITR 1 (Bom.) is distinguishable on the ground that it arose under the Act of 1922 which did not provide for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee gets allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 In this case, there is a difference of opinion, and, therefore, we refer it to the President of the Tribunal for its settlement under section 255(4) of the Income-tax Act, 1961. We frame the following questions for this purpose: "1. Whether, the Appellate Assistant Commissioner has erred in law and facts of the case in confirming the best judgment assessment made by the ITO under section 144 of the Act ? 2. Whether, on the facts and in the circumstances of the case, it can be held that the ITO has treated the assessee (Shri Sudarshan Kumar) was an agent of the Non-Resident Shri Prem Kumar Bhagat, younger brother) without living an opportunity of being heard by him, as to his liabilities to be treated as such, which is the requirement of section 163(2) of the Act and if it is so, then whether the best judgment made assessment by the ITO is void or voidable?" Per Shri P.K. Mehta, Accountant Member -- In my opinion, the controversy that arises is brought out by the following two questions: "1. Whether, on the facts and the circumstances of the case, it was incumbent on the ITO to pass an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessment on remand, the assessee again defaulted by not complying with notice under section 143(2) and an ex parte assessment under section 144 was followed and income earlier assessed was repeat ed. No order in terms of section 163(2) was passed. 5. The assessee impugned this third assessment order in appeal before AAC and raised several issues including treatment of the assessee as an agent without formal order under section 163. On this question of appointment of Shri Sudershan Kumar as an agent, the AAC held that Shri Sudershan Kumar had filed return of income on 10-5-1973 declaring himself to be an agent of Shri Prem Kumar. This fact was confirmed by him in his subsequent letters dated 20-2-1976 27-2-1976. In these circumstances, the question of appointment of agent was not in dispute and the plea raised by the assessee that a proper opportunity was not granted was unjustified. After rejecting all the claim of the assessee, the ld. AAC confirmed the assessment. 6. Being aggrieved, the assessee then challenged the assessment in appeal before the ITAT, Amritsar Bench, which were heard by ld. Members. The ld. Judicial Member, Shri P.S. Dhillon rejected th claim regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ld. Accountant Member also considered the changes made in the relevant provision relating to appointment of agent and held that Bombay High Court decision in the case of Harak Chand Makhan Ji Co. was not applicable in this case as that was rendered under the old 1922 Act. The Ld. Accountant Member held that the issue was fully covered in favour of the assessee as per decision of jurisdictions High Court in the case of Kanhava Lal Gurmukh Singh and of Madras High Court in the case of Express Newspaper (P.) Ltd. The Ld. Accountant Member extensively quoted from above decisions. Following above decisions, the Ld, Accountant Member held that failure of the ITO to pass order under section 163, appointing Shri Prem Kumar as agent of his non-resident brother before making of the assessment, vitiated the assessment. He cancelled the assessment order and allowed the appeal of the assessee. 8. Ld. Members did not agree even on the point of difference to be referred under section 254(4) of the I.T. Act. Ld. Judicial Member referred the following questions: "1. Whether, the AAC has erred in law and facts of the case in confirming the best judgment made assessment by the ITO under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther "Consider whether Shri Sudershan Kumar has no objection to being appointed as an agent". The assessment was set aside to carry out above directions. But the ITO except for issuing notice under section 143(2) did not do anything. He held that there was a failure on the part of the assessee and reassessment on old figures was justified. Thus, even in the third assessment order dated 27-3-1984, the directions regarding passing of order under section 163 were not complied with in spite of a second remand by the AAC. 12. It is more than clear from above facts that no order under section 163(2) was passed in this case in spite of specific directions to this effect. The directions given in the first as well as in the second order, became final and, therefore, the Assessing Officer had no option in the matter but to pass an order under section 163(2) appointing Shri Sudershan Kumar as agent of Shri Prem Kumar. The above view is quite in line with decision of jurisdictional Court in the case of Kan haya Lal Gurmukh Singh. The majority view in the above case, was available as early as in February 1971 and the AAC while passing order on 25-8-1978 was required to follow above decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to Shri Sudershan Kumar. The second assessment was to be passed having regard to the directions under section 250 of the I.T. Act and within the jurisdiction limited by the appellate order, but unfortunately, the ITO did not comply with final directions of the appellate authority. The sole question which was to be considered by the AAC in the third round was whether order passed by ITO confirmed to the directions given in the first appellate order. Instead of considering above question, the AAC in the third order dated 26-11-1984 took a totally different view and held that it was not necessary to give any notice to Shri Sudershan Kumar or to appoint him as agent of Prem Kumar. He impliedly held that his predecessor in the first order had taken a wrong view of the matter and it was not necessary to serve any notice or appoint Shri Sudershan Kumar as agent under section 163(2) of the I.T. Act, having regard to the facts of the case. The AAC forgot that he had no jurisdiction to review matters which had attained finality. It is settled law that even a higher Court cannot alter or modify directions which has attained finality. Their power and jurisdiction are co-terminus with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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