M.M.KUMAR, J. - (1.) 'Whether passing of an order under s. 163(2) of the IT Act, 1961 (for brevity 'the Act') declaring a person as an agent of his NRI 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 s. 256(1) of the Act. The Revenue respect of asst. yr. 1973 -74 which are as under : "(i) Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in cancelling the assessment made by the AO and confirmed by the learned first appellate authority on the agent of the non -resident assessee who himself admitted to be an agent by signing the return of income; (ii) Whether , on the facts and in the circumstances of the case, the learned Tribunal was right in law in holding that the AO was required to pass an order under s. 163(2) of the IT Act, 1961 to treat Sh. Sudershan Kumar as an agent of the non -resident assessee, who signed and made the return himself, to be an agent of the non -resident assessee ? (iii) Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in holding that the become final as the same was not challenged -
(2.) FACTS are not in dispute and are being noticed insofar as relevant for the controversy raised. The assessee filed return for the asst. yr. 1973 -74 declaring total income of Rs. 6,417 as an agent of his NRI brother Shri Prem Kumar Bhagat. this order under s. 146 of the Act but he came before the Appellate Assistant Commissioner (for brevity 'the AAC') direction that the ITO should first of all record a finding whether Shri Prem Kumar Bhagat is an NRI. Thereafter he was 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 ITO issued notice under s. 143(2) but the assessee did not reply to the notice. Consequently the ITO proceeded to frame the best judgment assessment under s. 144 of the Act which was completed at a net income of Rs. 67,420 vide (2) was issued and again the assessee failed to turn up despite service. The ITO framed the assessment ex parte and the assessee raising the contentions that the ITO was not justified in appointing Sudershan Kumar as an agent of Shri Prem Bhagat -NRI without granting opportunity of hearing under s. 163 of the Act. The AAC rejected the contention and confirmed. On further appeal, the order of AAC was challenged before the Tribunal. There was difference of opinion between JM who expressed the opinion for affirmation of the order whereas AM 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 s. 163 of the Act prior to making of the assessment and particularly in view of the further distinguished the decision of the Bombay High Court in the case of Harakchand Makanji & Co. vs. CIT (1948) 16 ITR 119 (Bom) and concluded that it was not applicable to the case as that was rendered under the old Act of 1922 in which there was no provision for filing an appeal against order of appointment of agent of non -resident. The learned AM held that the issue was fully covered in favour of the assessee as per the decision of the jurisdictional High Court in the case of CIT vs. Kanhaya Lal Gurmukh Singh (1973) 87 ITR 476 (P&H) which has been followed by the Madras High Court in the case of CIT vs. Express Newspapers (P) Ltd. 1977 CTR (Mad) 457 : (1978) 111 ITR 347 (Mad).;