2022 (12) TMI 1425 - AT - Income Tax

Revision u/s 263 against company dissolved/ non-existing - assessment in the hands of the representative/agent - Who may be regarded as agent u/s 163? - whether the CIT has power to pass an order u/s 163 of the Act? - HELD THAT - As per provisions of section 163 it does not show the authority as to who can pass the order u/s 163 of the Act. Though section 246 of the Act which contains the provisions relating to the appealable orders before the CIT at clause (d) which mentions An order made u/s 163 of the Act treating the assessee as agent of the non agent which means that the order u/s 163 of the Act is to be passed by an authority below the rank of a commissioner, because if the commissioner passes the order, then it cannot be appealed against before the ld. CIT(A). Section 253 of the Act contains the provisions relating to appeals to the appellate Tribunal and in the said section, there is mention of all orders passed under different sections of the Act which are appealable before the appellate Tribunal but there is no mention of order passed u/s 163 of the Act, which means that the commissioner has no power to pass an order u/s 163 of the Act. Though the ld. DR had vehemently stated that the commissioner has concurrent jurisdiction/powers as that of the Assessing Officer, but in light of the aforesaid discussion, we do not find any merit in this contention of the ld. DR. In light of the provisions of section 163 considered in light of the aforementioned discussion, order passed u/s 163 of the Act by the CIT, International-2 deserves to be quashed and treated as nonest. The ld. CIT assumed jurisdiction u/s 263 of the Act on the basis of order passed u/s 163 of the Act. Since the very basis order u/s 163 of the Act has been removed, the super structure i.e. order u/s 263 of the Act must fall. Original assessment against company Non resident now dissolved - As there is no dispute that the Assessing Officer framed assessment u/s 143(3) of the Act in the case of Monet Limited in the status of non-resident. In our considered opinion and understanding of law, since the principal has been assessed to tax than for the same income, there cannot be a separate assessment in the hands of the representative/agent, when the alleged representative/agent are also non-residents. Principal Monet Limited has been extinguished. Then how can there be representative /agent of non-existing company. Provisions of section 163 of the Act are not akin to that of section 159 wherein a legal heir is substituted in place of a deceased assessee. This answers the third issue raised by Shri Pardiwalla. CIT, International Taxation-2 passed an order u/s 163 of the Act without having any such authority and thereafter, wrongly assumed jurisdiction u/s 263 of the Act treating Cairnhill CIPEF Limited and Cairnhill CGPE Limited as representative /agent of Monet Limited which extinguished on 19.12.2018 and framed the impugned orders which do not have any support /backing of any provisions of the Act. Assessee appeal allowed.

Summary

Issues Involved:
1. Jurisdiction of the CIT to pass orders under section 163 of the Income-tax Act, 1961.
2. Initiation of proceedings against a representative under section 163 when the principal has been assessed.
3. Existence of a representative/agent under section 163 when the principal is no longer in existence.

Detailed Analysis:

Issue 1: Jurisdiction of the CIT under Section 163:
The appeals challenged the order of the CIT, International Taxation - 2 dated 31.03.2021 framed under section 263 of the Income-tax Act, 1961. The CIT passed a combined order under section 263 r.w.s 163 of the Act against both appellants. The appellant raised several objections, including the CIT's lack of jurisdiction to pass the order under section 163. The provisions of section 163 were analyzed, indicating that the order under this section should be passed by an authority below the rank of a commissioner, as it is appealable before the CIT(A). The absence of section 163 orders in the list of appealable orders before the Appellate Tribunal further supported the conclusion that the CIT lacks the power to pass orders under section 163.

Issue 2: Proceedings Against Representative When Principal Assessed:
The Assessing Officer had previously assessed the principal, Monet Limited, under section 143(3) of the Act. The question arose whether separate proceedings could be initiated against the representative/agent under section 163 when the principal had already been assessed. The judgment concluded that if the principal had been assessed, there should not be a separate assessment on the representative/agent, especially when both were non-residents. The extinction of Monet Limited further emphasized the impracticality of having a representative/agent for a non-existing company.

Issue 3: Existence of Representative/Agent When Principal Ceases to Exist:
The Corporate and Business Registration Department's order confirmed the removal of Monet Limited from the register, indicating the company's non-existence. This raised doubts about the existence of a representative/agent for a defunct principal under section 163. The judgment clarified that section 163 provisions do not allow for a representative/agent in the absence of the principal, unlike section 159 which deals with legal heirs in place of deceased assessees.

In conclusion, the order passed under section 163 by the CIT, International-2 was deemed unauthorized, leading to the subsequent order under section 263 being invalid. The judgment set aside the CIT's order dated 31.03.2021, allowing the appeals of the assessees in ITA No. 2022 & 2023/DEL/2021.