2009 (3) TMI 214 - AT - Income Tax

Issues Involved:
1. Applicability of the time limit under section 149(3) to the assessee who voluntarily filed the return of his principal non-resident.
2. Whether the assessee was treated as an agent under section 163 of the Income-tax Act.
3. Whether an order under section 163(2) is mandatory for treating a person as an agent of the non-resident.
4. The distinction between an agent under general law and a statutory agent under section 163.

Issue-wise Detailed Analysis:

1. Applicability of the time limit under section 149(3):
The controversy arose when M/s. J.M. Baxi & Co. filed returns as the agent of a non-resident Singapore company, M/s. Thoresen Chartering Singapore Pte. Ltd. (TCSPL), for assessment years 1998-99 to 2002-03. The revenue issued notices under section 148 for the first three assessment years after the expiry of the two-year period specified in section 149(3). The Special Bench was constituted to determine if the time limit under section 149(3) applied to the assessee who had voluntarily filed returns without an order under section 163 treating them as an agent.

2. Whether the assessee was treated as an agent under section 163:
The assessee contended that they were an agent under section 163 and thus the time limit under section 149(3) should apply. The revenue argued that the assessee was an agent under general law and not specifically treated as an agent under section 163. The Special Bench held that the assessee was not treated as an agent under section 163 since no order under section 163(2) was passed. The Bench emphasized that the term "treated" implies an adjudication or formal recognition of the agent's status, which must precede the issuance of a notice under section 148.

3. Whether an order under section 163(2) is mandatory:
The Bench concluded that an order under section 163(2) is mandatory for treating a person as an agent of the non-resident. This order must be passed after giving the person an opportunity to be heard. The Bench referred to several judicial precedents, including the decision of the Punjab & Haryana High Court in Kanhaya Lal Gurmukh Singh, which held that passing an order under section 163(2) must precede the issuance and service of a notice under section 148.

4. Distinction between an agent under general law and a statutory agent under section 163:
The Bench distinguished between an agent under general law (section 160(1)(i)) and a statutory agent under section 163. It held that the provisions of section 163(2) apply to both categories of agents. The Bench noted that the term "agent" in section 160(1)(i) includes persons treated as agents under section 163. Therefore, the liabilities and obligations of agents under general law and statutory agents are similar.

Conclusion:
The Special Bench concluded that the assessee, who voluntarily filed returns as an agent of the non-resident, was not treated as an agent under section 163. Consequently, the time limit under section 149(3) did not apply. The Bench emphasized that an order under section 163(2) is mandatory to treat a person as an agent of the non-resident, and such an order must precede the issuance of a notice under section 148. The Bench answered the question referred to it in the negative, in favor of the revenue and against the assessee.

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