1978 (2) TMI 75 - HC - Income Tax

Summary

Issues Involved:
1. Liability of the representative assessee to pay advance tax under section 18A of the Indian Income-tax Act, 1922.
2. Retrospective application of section 161 of the Income-tax Act, 1961.
3. Whether the representative assessee is liable to pay interest under section 217(1) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Liability of the representative assessee to pay advance tax under section 18A of the Indian Income-tax Act, 1922:

The primary issue was whether the assessee, T.I. & M. Sales Ltd., was liable to pay advance tax under section 18A of the Indian Income-tax Act, 1922, for the financial years 1959-60 and 1960-61, given that it had not been appointed as a statutory agent during those years. The Tribunal found that the representative assessee, having been appointed only in November 1964, had no liability to pay advance tax for the said financial years. The Tribunal dismissed the revenue's appeals, leading to the reference of the question to the High Court.

2. Retrospective application of section 161 of the Income-tax Act, 1961:

The court examined whether section 161 of the Income-tax Act, 1961, which imposes duties, responsibilities, and liabilities on a representative assessee, could be applied retrospectively to hold the assessee liable for advance tax for financial years before its appointment as a statutory agent. The court noted that the statute should not be given retrospective effect unless expressly stated. The court emphasized that the opportunity granted to the representative assessee to be heard before being treated as such would become illusory if section 161 were applied retrospectively. The court concluded that section 161 does not have clear or categorical provisions for retrospective application and should not be interpreted to impose retrospective liability.

3. Whether the representative assessee is liable to pay interest under section 217(1) of the Income-tax Act, 1961:

The Appellate Assistant Commissioner had earlier remitted the interest payment under section 217(1) for non-payment of advance tax, as the Income-tax Act, 1961, became law only on April 1, 1962. The revenue contended that there was no right of appeal against the levy of interest under section 217 and that the Appellate Assistant Commissioner erred in holding that no interest was leviable. The court, however, upheld the Tribunal's decision that the representative assessee, not having been appointed during the relevant financial years, was not liable to pay advance tax or the interest thereon. The court also noted that rule 40 of the Income-tax Rules, 1962, allows the Income-tax Officer to reduce or waive interest, indicating that the legislature contemplated that a representative assessee could be held liable for advance tax and interest, but such liability must be prospective.

Conclusion:

The court answered the referred question in the negative, holding that the assessee was not liable to pay advance tax for the financial years 1959-60 and 1960-61, as it had not been appointed as a statutory agent during those years. The court emphasized that section 161 of the Income-tax Act, 1961, should not be applied retrospectively to impose liability on the representative assessee for past financial years. The court did not express any opinion on whether a representative assessee is liable to pay only the tax assessed or the tax including all penalties and interest, as this question was not agitated earlier. There was no order as to costs.