1982 (4) TMI 35 - HC - Income Tax

Summary

Issues:
Validity of notice under section 148 of the Income Tax Act, 1961 for the assessment year 1966-67. Whether the appellant No. 2 can be treated as the principal officer of the company under section 2(35)(b) of the Income Tax Act, 1961.

Analysis:
The appeal challenged a notice dated 25th February, 1975, under section 148 of the Income Tax Act, 1961, for the assessment year 1966-67, served on the appellant No. 1, a foreign non-resident company. The notice was based on the Income Tax Officer's intention to treat appellant No. 2 as the principal officer of the company under section 2(35)(b) of the Act. Appellant No. 2, the only director in India, contested this treatment, arguing that he was not the principal officer and that the notice was not properly served, rendering the proceedings invalid. The court of first instance upheld the Income Tax Officer's decision, stating that there was material to support the finding that appellant No. 2 was connected with the management of the company. The judge also ruled that a person can be treated as a principal officer without a prior hearing, as per the Act.

In the judgment, Sabyasachi Mukharji J. noted that the intention of the Income Tax Officer to treat a person as the principal officer is crucial, even if the person is not actively managing the company. The judge emphasized that the requirement of law is fulfilled if the officer indicates the intention to the person concerned, even if the notice does not explicitly state "principal officer." The judge also rejected the argument that a person must be given a chance to represent before being treated as a principal officer, citing the case of M. M. Ipoh v. CIT [1968] 67 ITR 106 (SC) to support this position.

The respondent argued that there were prima facie materials to treat appellant No. 2 as the principal officer and that the notice served on him was valid. The court agreed with the findings of the court of first instance, stating that there were sufficient materials to support the Income Tax Officer's intention to treat appellant No. 2 as the principal officer. The court also concurred that the determination of the principal officer can be made during the assessment proceedings and does not require a prior hearing. Therefore, the court dismissed the appeal, finding the notice under section 148 to be valid and within jurisdiction.

In conclusion, the court upheld the decision that appellant No. 2 could be treated as the principal officer of the company without a prior hearing, and the notice under section 148 was deemed valid. The appeal was dismissed, with no order as to costs.

Judges:
- R. N. PYNE J.
- S. C. GHOSE C.J.