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TMI Blog2006 (9) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... ts with M/s. Valentine Maritime (Gulf) LLC, UAE (for short "Valentine"). It appears that the assessee-company as well as the aforesaid Valentine were being separately assessed to income-tax regularly. The Assessing Officer issued a notice under section 163 of the Income-tax Act on 5-2-2002 proposing to treat the assessee-company as representative assessee of Valentine under section 163. At the beginning of the Assessing Officer's order dated 5-3-2002 passed under section 163, the Assessing Officer has mentioned that the aforesaid notice was issued on the Indian address of the assessee company as well as on the London address. The notice issued on Indian address was addressed to Jamnagar, which was returned undelivered by the postal authorities and was received back in the Assessing Officer's office on 18-2-2002 as per the photograph of the relevant document filed by the learned Departmental Representative vide letter dated 14-7-2006. The Assessing Officer while passing his order under section 163 stated that there was no response to the notice issued on the London address and therefore, the Assessing Officer passed ex parte order under section 163, treating the assessee-company as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee also demanded the reasons recorded before reopening the assessment under section 147. 5. The learned Counsel for the assessee submitted before us that even though the assessee was allowed seven days time for filing the return of income under section 148, without waiting for the assessee's reply, the Assessing Officer framed the assessment ex parte on 28-3-2002, whereas the notice under section 148 itself was received by the assessee on 27-3-2002. The learned Counsel submitted that the order passed under section 163 without allowing any opportunity to the assessee is bad in law and the consequential order passed under section 144 read with sections 147 and 163 is also ab initio void. 6. The learned counsel for the assessee also challenged the validity of the order on the ground that the relevant income has been independently brought to a charge of tax in the case of Valentine vide order dated 28-3-2002 passed under section 143(3) of the Income-tax Act by the same Assessing Officer. Valentine appealed against this order, which was also dismissed by the learned CIT(A) as mentioned by him at para 7.2 of his order. The learned counsel submitted that the Assessing Officer m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee has failed to produce any evidence that the said notice was received by it only on 27-3-2002. The assessee also failed to adduce any evidence that the notice issued on 5-2-2002 under section 163 was never received by the assessee. 9. Coming to the merits of the double assessments, the learned CIT Departmental Representative invited our attention to the detailed discussions given by the learned CIT(A) at paras 5.2 to 5.5 of his order, which may be reproduced below: "5.2 The appellant has relied on the decision of the Allahabad High Court in the case of CIT v. Dhampur Sugar Mills Ltd. 170 ITR 449 and contended that simultaneous assessment on principal as well as the agent cannot be made. It has been submitted that in view of this decision, since the income has been assessed in the hands of Valentine, it cannot be assessed in the hands of the appellant. 5.3 I have considered the submission of the appellant's counsel and the order of the Assessing Officer. On a careful consideration this contention of the appellant is not acceptable. The scheme of the Act provides for taking action against the non-resident as well as its agent as representative assessee. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext the Hon'ble High Court made the impugned observation. The matter did not relate to framing of assessment on the principal as well as the agent, as is the case here. 5.5 Therefore, in view of the above, the assessments made by the Assessing Officer on the appellant and Valentine simultaneously are valid and these grounds of appeal are rejected." 10. The learned CIT Departmental Representative pointed out that the learned CIT(A) has supported his order by relying on the Andhra Pradesh High Court decision in the case of Barium Chemicals Ltd. v. ITO [1975] 100 ITR 637 and the Kerala High Court decision in the case of CIT v. Fertilizers Chemicals (Travancore) Ltd. [1987] 166 ITR 823. It is claimed by the learned CIT Departmental Representative that these decisions settled the issue and that two assessments are permissible under law. 11. W e have given our careful consideration to the rival submissions. We have also carefully gone through the relevant facts as emerging from the records and have considered the precedents relied upon before us by both the sides. We have no hesitation in holding that the Assessing Officer was wholly unjustified in passing the impugned orders u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 148 issued by the Assessing Officer was received by the assessee on 27-3-2002 at London, as informed by the assessee to the Assessing Officer vide letter dated 2-4-2002. The Assessing Officer passed his ex parte order on 28-3-2002, even though the limitation period for passing such order would be expiring on 31-3-2003. On the same day, the Assessing Officer passed a separate assessment order in the case of Valentine bringing to the charge of tax the same income on substantive basis. Before completing the ex parte assessment, the Assessing Officer did not think it necessary to issue any other notice to the assessee. In our view, the ex parte. assessment has been framed by the Assessing Officer without allowing any opportunity to the assessee and even before the expiry of the period of 7 days given to the assessee for filing return of income. Such ex parte order in our view cannot be sustained in law. 14. Another important issue is as to whether the Assessing Officer having already assessed. the income in the hands of the real assessee, can make a protective assessment in the case of the assessee holding it to be agent of Valentine. It would be appropriate to deal with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the income, the other was no longer available to the department: Their Lordships further observed: 'Section 41 was a special enabling provision which permitted the assessment in the hands of the trustees but did not preclude the direct assessment in the hands of the beneficiaries.' Their Lordships concluded: 'There is nothing in section 41 which would indicate that the choice between the alternative methods provided therein has to be made only at the time of the assessment of the trustees or that the choice only belongs to the income-tax Officer who is assessing the trust.' If these observations are read in the context in which they are made, it would not be difficult to understand that what all their Lordships said was that Champavahoo having already been assessed and tax recovered from her, the income-tax Officer could not have proceeded against the trustees for recovery of tax on the same transaction. It is true that their Lordships have read section 41(2) to suggest that there are two alternative methods, namely, either to tax the income in the hands of the trustees, or directly in the hands of the person on whose behalf the income was receivable. But the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rries on the business, the liability to pay the tax on the income received by him, regardless of its destination or enjoyment. A non-resident may have several representative assessees in respect of several heads under which income is derived by him. There can, therefore, be more than one assessment in respect of the income accrued or arisen to a non-resident provided there are more than one representative assessee. Direct assessment on the non-resident in respect of other income would not affect the jurisdiction of the Income-tax Officer to assess the agent of the non-resident on income arising to the nonresident through him. Inasmuch as a representative assessee can have recourse to section 162 which confers on him the right to get reimbursement of the tax paid by him as also the right to get a 'certificate from the Income-tax Officer for retention', it cannot be said that he is aggrieved by the assessment made upon him in accordance with the provisions contained in Chapter XV. The assessee-company had entered into a collaboration agreement with a foreign company for construction of a synthesis gas plant. The assessee was to pay certain amount to the foreign company. The Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure as to in whose hands the income should be brought to the charge of tax or for which assessment year such income is assessable. In such a situation, the department is legally justified in making two assessments out of which one is substantive assessment and the other is protective assessment. This is what has happened in the present case. The Assessing Officer has brought to a charge of tax the relevant income on substantive basis in the hands of Valentine and on protective basis in the hands of the assessee-company. The learned CIT(A) at para 7.2 of his order has made following observations: "However, I find that vide appellate order No. CIT(A)XXXI/DDIT(IT)2(1)/IT.214/02-03/03-04 dated 28-7-2003, I have held that the benefit of Indo-UAE DTAA is not available to the Valentine and therefore there is no question of any exemption being available to the Valentine under Article 8(2) of the DTAA. I have also upheld the taxability of the contract amounts by applying provisions of section 44BB of the Income-tax Act. Since Valentine's income from sub-contract with Saipem is held as taxable in India and the appellant has been assessed as representative assessee of Valentine the order in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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