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TMI Blog2007 (7) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... 998 - - - Dated:- 26-7-2007 - M. M. KUMAR and AJAY KUMAR MITTAL JJ. Sanjiv Bansal for the commissioner. JUDGMENT The judgment of the court was delivered by M. M. Kumar J.- Whether passing of an order under section 163(2) of the Income-tax Act, 1961 (for brevity "the Act"), declaring a person as an agent of his non-resident Indian assessee brother is mandatory" is the question which permeate through this reference made at the instance of the Revenue by the Income-tax Appellate Tribunal (for brevity "the Tribunal") under section 256(1) of the Act. The Revenue has claimed that three questions would emerge from the order dated December 9, 1997, passed in ITA No. 97/Asr/1985 in respect of the assessment year 1973-74 which are as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Assistant Commissioner (for brevity "the AAC") challenging the order of the Income-tax Officer. The Appellate Assistant Commissioner vide his order dated August 25, 1978, set aside the assessment order with a direction that the Income-tax Officer should first of all record a finding whether Shri Prem Kumar Bhagat is an non-resident Indian. Thereafter, he has to consider whether Shri Sudershan Kumar has got no objection to be appointed as an agent of his brother Shri Prem Kumar Bhagat and then to frame the assessment order after giving due opportunity to Sudershan Kumar of being heard. 3. The Income-tax Officer issued notice under section 143(2) but the asses-see did not reply to the notice. Consequently, the Income-tax Officer procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference of opinion between the Judicial Member who expressed the opinion for affirmation of the order whereas the Accountant Member expressed the opinion against the order. He observed that the issue was required to be decided concerning appointment of Shri Sudershan Kumar as an agent of non-resident Shri Prem Kumar Bhagat under section 163 of the Act prior to making of the assessment and particularly in view of the specific orders of the Appellate Assistant Commissioner dated August 25, 1978, and November 10, 1982, which had not been complied with by the Income-tax Officer. He further distinguished the decision of the Bombay High Court in the case of Harakchand Makanji and Co. v. CIT [1948] 16 ITR 119 and concluded that it was not appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity. The orders thus were not complied. The assessment order was found to be vitiated and bad in law for non-compliance with the provisions of section 163(2) of the Act. 6. Feeling aggrieved, the Revenue sought reference under section 256(1) of the Act and accordingly the Tribunal has referred the aforementioned questions for the opinion of this court. 7. After hearing learned counsel for the parties, we are of the view that the provisions of section 163(2) of the Act would require examination and the same reads as under : "163. (2) No person shall be treated as the agent of a non-resident unless he has had an opportunity of being heard by the Assessing Officer as to his liability to be treated as such." 8. These provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the cases of CIT v. Express Newspapers P. Ltd. [1978] 111 ITR 347 and CIT v. S. G. Sambandam and Co. [2000] 242 ITR 708. It is also appropriate to mention that even if the assessee was found to be an agent in one assessment year it does not necessarily lead to an inference that he would also be an agent in the next assessment year as has been held by the hon'ble Supreme Court in the case of H. L. Sud, ITO v. Tata Engineering and Locomotive Co. Ltd. [1969] 71 ITR 457. 9. It is true that Sudershan Kumar himself held out by his conduct that he was agent of his non-resident Indian brother when he filed the return and paid tax and, therefore, failure to serve notice under section 163(2) of the Act may not have invalidated the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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