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Issues Involved:
1. Legality of assessment of the non-resident company through its agent. 2. Validity of reassessment proceedings initiated by the Income-tax Officer. Summary: Issue 1: Legality of Assessment of the Non-Resident Company Through Its Agent The Tribunal considered sections 160, 161, and 166 of the Income-tax Act, 1961, and held that the Income-tax Officer had an option either to assess the non-resident company directly or to assess it through its agent in India. Once the Income-tax Officer opted for assessing the non-resident company directly, he could not assess the non-resident company through an agent in India for the same assessment year. The Tribunal concluded that the assessment of the non-resident company could not be split into two, one part to be assessed in the hands of the non-resident company and the other in the hands of the agent of the non-resident company in India. Issue 2: Validity of Reassessment Proceedings Initiated by the Income-tax Officer The Tribunal allowed the additional grounds raised by the assessee, holding that the reassessment proceedings initiated under section 147(a) read with section 163 were ab initio void. The Tribunal noted that the assessee was not treated as an agent of the non-resident company during the relevant accounting years and thus had no obligation to file returns for the non-resident company. Furthermore, the Tribunal held that there was no question of reassessment under section 147(b) as no prior assessment had been made in the hands of the assessee for the first two assessment years. Court's Decision: The High Court upheld the Tribunal's decision, agreeing that the reassessment proceedings were illegal and without jurisdiction. The Court held that the Income-tax Act, 1961, does not allow the splitting of income to be assessed in the hands of different persons. The Court found that the basic requirements of section 147(a) were not met, as there was no default on the part of the assessee in not filing a return. The reassessment could not be supported under section 147(b) either, as there had been no previous assessment of the assessee. The Court answered the referred questions in the affirmative and in favor of the assessee, with no order as to costs.
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