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TMI Blog1978 (5) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the stipulated time. The AAC did not agree with this contention on the ground that the assessee failed to produce copies of its foreign assessment orders. Secondly, it was explained by the assessee that a reply to the show cause notice of the ITO was in fact sent by registered post on 1st Aug., 1975 and that the ITO should have considered the said explanation before imposing the penalty. The AAC rejected this point on the ground that no evidence was produced to show that the assessee did send the explanation on 1st Aug., 1975 and that the date stamp of the ITO on the said explanation which is on record, showed that it was received on 18th Aug., 1975, that is, after the ITO passed the penalty order on 13th Aug., 1975. Then, the AAC observed that the appeal before him was barred by limitation because the penalty order and the relevant demand notice was served on Sri Unni, an employee of the assessee, in the premises of the ITO on 4th Sept., 1975. As the said Sri Unni left the notice in the office of the ITO, the latter sent the notices by registered post and the same were served on the assessee on 3rd Oct., 1975. According to the AAC, the correct date of service was 4th Sept., 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months reckoned from the due date of payment. His point was that the slight delay in payment of tax was due to genuine difficulties arising out of the special circumstances of the case and not with any fraudulent notice to evade the payment of the legitimate taxes. Hence, the penalty imposed was not justified. 5. He then stated that the authorities below did not consider the special features of the case and the crucial fact that the assessee as well as J.M. Baxi Co was all along cooperating with the Department and never adopted any recalcitrant attitude. He contended that penalty for non-payment of tax was meant for those non-cooperative assessees who, in spite of their ability to pay, adopt an evasive stand with a view to frustrating the collection of tax. He stated that, it was unfortunate that the explanation of the assessee sent by registered post on 1st Aug., 1975, which assured the ITO that J.M. Baxi Co. were contacting the non-resident assessee for expeditious payment of the tax, was never considered. He expressed surprise as to how the said explanation was received in the ITO as late as 18th Aug., 1975 when the appellants held the postal acknowledgement showing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarantee bond the surety had undertaken to be treated as the agent of the non-resident without going through the formalities laid down under s. 163(2) of the IT Act. Hence, he urged that the stand of the Revenue to the effect that J.M. Baxi Co became an agent under s. 163(2) of the Act solely by virtue of the guarantee bond is an error on record. Thirdly, he stated that the assessment has, in fact, been made on the non-resident and non on J.M. Baxi Co. Treating them as agents under s. 163(2) of the IT Act. He took us through the whole of the assessment order to support this statement. He urged that the default, if any, was, therefore, that of the non-resident assessee. Hence, the show cause notice should have been served on the non-resident or his agent duly authorised to receive the notice. This has not been done. The notice was no doubt addressed to the non-resident care of J.M. Baxi Co. but that did not amount to service of the notice of the real addressee. J.M. Baxi Co. were not obliged to open the letter as it was not addressed to them. At best, they might be expected, but not legally obliged, to forward the letter to the real addressee. It was only as a matter of exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are held as agents, they became liable to pay not only the tax but also the penalty for non-payment thereof as provided for in the IT Act. Then, he stated that the assessee was asked to show cause but there was no compliance on the date fixed as is evident from the date stamp of 18th April, 1975 on the explanation. If there is no explanation, the ITO had to impose the penalty as decided in the case of CIT vs. Gangaram Chapolia(1). 9. We have carefully considered the contentions of both the sides as well as the facts on record. The question raised in this appeal is whether the penalty imposed under s. 221 of the IT Act was justified in the facts and circumstances of the case. The further question which arises prior to the above question is whether the appeal filed before the AAC was within the prescribed time and so was maintainable. As stated earlier, the AAC has dismissed the appeal on both counts. Taking up the second question first, we find that in the case of Fatechand Agarwal vs. CIT(2), it has been held that it is the duty of the Revenue to establish that the service of an order or notice was made on the assessee himself or on somebody duly authorised by him to receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely technical. In the instant case, assuming but not admitting, that the tax demand was properly raised on J.M. Buxi Co., we find no contumacious or dishonest conduct on their part, not any deliberate attempt to improperly withhold the payment of the tax for which they stood surety. On the contrary, their conduct throughout has been one of cooperation with Revenue. They filed the particulars without which the assessment could not have been expeditiously and properly made. In their absence, the ITO would have been obliged to issue a notice under s. 139(2) or 148 to the non-resident direct to go through the formalities of s. 163(2) which is an appellate action. Again, they received the demand notice, took steps to have the tax paid by the non-resident which is apparent from the fact paid in full though after a delay of about five months. The delay is, in our opinion, merely technical or venial in the particular facts and circumstances of the case. The ITO was quite aware that the earner of the income whom he taxed stayed out of India and it cannot be denied that contacting a non-resident and making arrangements for remittance of substantial funds from abroad is a time-taking affair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined Code in itself and is exhaustive of the matters dealt therein. The only remedies open to the tax payer (and so to the ITO) are to be found within the four corners of the Act (vide Rao Bahadur Ravulu Subba Rao, and Tribune Trust(4). The Act prescribes the procedure by which a person may be treated as an agent of a non-resident for the purposes of the Act. Hence, the only way in which a person can be treated as an agent of another and made liable for the tax payable by the latter is to follow the specific procedure laid down in Chapter XV-C of the IT Act. In this case, no such procedure has been followed. No proposal to treat J.M. Baxi Co. as agents of the non-resident was made, were not given an opportunity of being heard and no formal order under s. 163(2) was passed declaring them as agents. Hence, the argument of the learned Departmental representative that, because of the guarantee bond the procedure laid down in the IT Act could be dispensed with, is not acceptable. Under the guarantee bond, J.M. Baxi Co. became liable as surety within the meaning of Chapter VIII of the Indian Contract Act, 1872. They did not become agents, the law relating to which is different and la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause notice was inadequate or unreasonable because, on the admission of the appellants, they have in fact given a reply within the stipulated time. Similarly we do not think that the assessment order is vitiated merely because, the name of the assessee is shown in the assessment order as a vessel, inanimate object while income-tax, being a direct tax is levied on living persons. The intention of the assessing officer is quite clear: he assessed the person who earned the income from the operation of the vessel named in his order. However, the other contention regarding the real addressee appears to us to be well-taken. When a summon is addressed to A care of B, then the real addressee remains A and the service on B does not under the Code of Civil Procedure amount to service on A unless it can be shown that B after receipt of the letter actually handed it over or informed its contents to A in which case service on A becomes effective when it was handed over or when its contents were communicated. We find support for this view in the decisions of Kalekhan Mohammed Hanif(6) and Smt. Lalit Kapur(7). The fact that there is a possibility of the postman serving the notice not on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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