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Income Tax Appellate Tribunal, MUMBAI BENCH “H ”, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI GAGAN GOYAL
आदेश/ ORDER
PER VIKAS AWASTHY, JM: These three appeals by the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-57, Mumbai [in short ‘the CIT(A)’] for the Assessment Years 2011-12, 2012-12 and 2013-14 respectively. All the three impugned orders are of even date i.e. 04/10/2022. Since, facts germane
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to the issue in all the three appeals are identical, these appeals are taken up together for adjudication and are decided by this common order.
Appeal of the Revenue in ITA No.88/Mum/2023 for assessment year 2011-12 is taken as the lead case, hence, the facts are narrated from the said appeal. The department in its appeal has assailed the findings of CIT(A) on following grounds:
“ 1.Whether on the facts and circumstances of the. case and in law, Ld. CIT(A) was correct in holding that order u/s 163 is required to be passed even when assessee (appellant company) has not replied to the show-cause notice for the same.
2.Whether on the facts and circumstances of the case and in law, Ld. CIT(A) was correct in holding that without order u/s 163 assessee (appellant company) had been denied the opportunity of appeal against being treated as representative assessee even though assessee did not avail itself of the opportunity to file appeal before Hon'ble DRP. 3.Whether on the facts and circumstances of the case and in law, Ld. CIT(A) was correct in holding the assessment order passed u/s 143(3) r.w.s. 147 and 144C as void ab initio without adjudicating on the merits of the case.” 3. Shri Naresh Kumar appearing on behalf of the assessee at the outset supporting the order of CIT(A) submitted that the assessee has been treated as representative assessee of M/s. Mausmi Ventures Ltd.( in short ‘MVL’) in terms of section 163(1) of the Income Tax Act, 1961 [in short ‘the Act’], however, no order u/s. 163 of the Act was passed by the Assessing Officer holding the assessee as representative assessee of the said company. The ld. Authorized Representative OF the assessee submitted that assessment u/s. 143(3) of the Act was framed in the name of MVL vide order dated 17/03/2015. Thereafter, assessment for assessment year 2011-12 was reopened and notice u/s. 148 was issued to MVL on 31/03/2018. MVL in response to notice u/s.148 of the Act vide letter dated 30/04/2018 asked the Assessing Officer to treat return
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filed u/s. 139(1) of the Act as return filed u/s. 148 of the Act. MVL was dissolved on 23/05/2018 and fact was informed to the Assessing Officer vide letter dated 18/10/2018. Despite the fact that the Assessing Officer was aware of dissolution of MVL, he issued notice u/s. 143(2) of the Act on 25/10/2018 in the name of MVL, a non-existing entity. Thereafter, the Assessing Officer issued summons u/s.131 of the Act on 07/12/2018 to Keystone Realtors Pvt. Ltd. ( in short ‘KRPL’), wherein the Assessing Officer inter-alia show caused KRPL/respondent to explain as to why it should not be treated as representative assessee u/s. 163 of the Act. The respondent/KRPL gave a detailed reply to summons on 17/12/2018. Thereafter, the Assessing Officer issued show cause notice u/s. 163 of the Act on 21/12/2018 to treat KRPL as agent of MVL for the assessment year 2011-12, 2012-13 and 2013-14. The said notice was received by the respondent on 24/12/2018. The Assessing Officer without passing the order u/s. 163 of the Act passed the draft assessment order u/s. 144C(1) r.w.s. 143(3) of the Act in the name of KRPL as representative assessee of MVL. Subsequent thereto, the Assessing Officer passed final assessment order in the name of KRPL as representative assessee of MVL on 08/02/2019.
3.1 Against final assessment order the assessee filed appeal before the CIT(A), inter-alia, assailing the order of Assessing Officer in passing final assessment order u/s. 144C(3) r.w.s. 143(3) and 147 of the Act treating KRPL as a representative assessee of MVL. The CIT(A) after considering facts of the case and various decisions cited by the assessee held the assessment order bad in law and void ab initio. The ld. Authorized Representative of the assessee prayed for dismissing appeal of the Revenue and upholding the impugned
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order. In support of his submissions, the ld. Authorized Representative placed reliance on the following decisions:
(i) CIT vs. Belapur Sugar and Allied Industries Ltd., 141 ITR 404(Bom)&
(ii)Suez Tractebel SA vs. DDIT(IT) , 35 taxamann.com 419(Bang-Trib).
Per contra, Smt. Madhumalti Ghosh representing the Department strongly supported the assessment order. The ld. Departmental Representative submitted that the assessee is trying to hoodwink the process of law by taking frivolous pleas. The Assessing Officer had issued notice u/s. 163 of the Act to the assessee/respondent. The assessee failed to respond to the notice issued u/s. 163 of the Act . Since, no reply was received by the Assessing Officer in response to the show cause notice issued u/s.163 of the Act, the Assessing Officer had no reason to believe that the assessee is aggrieved against treating it as representative assessee of MVL.
We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered the decisions on which the ld. Authorized Representative for the assessee /respondent has placed reliance.
The issue before us is in narrow encompass i.e. Whether the Assessing Officer without passing order u/s. 163 of the Act, can treat KRPL/respondent as representative assessee of MVL while completing assessment.
Before proceeding further to decide this issue, it would be relevant to refer to some of the dates.
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Date Events 22/11/2011 Return of Income for A.Y.2011-12 filed u/s.139(1) of the Act by MVL. 17/03/2015 Assessment u/s. 143(3) of the Act made in the name of MVL. 31/03/2018 Notice u/s.148 of the Act issued in the name of MVL. 30/04/2018 MVL filed letter in response to notice u/s. 148 of the Act to treats its return of income filed u/s.139(1) as return u/s. 148 of the Act. 23/05/2018 MVL dissolved. 18/10/2018 The A.O was informed about dissolution of MVL. 25/10/2018 Notice u/s. 143(2) of the Act issued in the name of MVL. On various Notice u/s. 142(1) of the Act issued in the name of MVL. dates 07/12/2018 Summons u/s. 131 of the Act issued to KRPL. 17/12/2018 Reply of KRPL in response to summons u/s. 131 of the Act. 21/12/2018 Show cause notice u/s. 163 of the Act to treat KRPL as representative assessee of MVL for the A.Ys 2011-12, 2012-13 & 2013-14. 28/12/2018 Draft assessment order passed by the A.O in the name of KRPL as representative assessee of MVL. 08/02/2019 Final assessment order passed by A.O in the name of KRPL as representative assessee of MVL.
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The provisions qua treating any person in India as representative assessee/agent in relation to a Non-resident are contained in section 163 of the Act. The same is reproduced herein below:
“163. (1) For the purposes of this Act, "agent", in relation to a non-resident, includes any person in India— (a) who is employed by or on behalf of the non-resident; or (b) who has any business connection with the non-resident; or (c) from or through whom the non-resident is in receipt of any income, whether directly or indirectly; or (d) who is the trustee of the non-resident; and includes also any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India : Provided that a broker in India who, in respect of any transactions, does not deal directly with or on behalf of a non-resident principal but deals with or through a non- resident broker shall not be deemed to be an agent under this section in respect of such transactions, if the following conditions are fulfilled, namely:- (i) the transactions are carried on in the ordinary course of business through the first-mentioned broker; and (ii) the non-resident broker is carrying on such transactions in the ordinary course of his business and not as a principal.
[Explanation.—For the purposes of this sub-section, the expression "business connection" shall have the meaning assigned to it in Explanation 2 to clause (i) of sub-section (1) of section 9 of this Act.]
(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.” A bare perusal of sub-section (2) to section 163 would show that before any person is treated as agent of Non-resident, an opportunity of hearing by the Assessing Officer has to be given to such a person. The Assessing Officer after issuing show cause notice to such a person has to pass a speaking order considering the reply/submissions, if any of such person appointing such person as assessee in representative capacity. The requirement for passing an order u/s. 163 of the Act for appointing a person as an agent is borne out from
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the fact that the said order is appealable. Section 246(1) of the Act list out the orders against which appeal is maintainable before the CIT(A). An order made u/s. 163 of the Act treating the assessee as an agent of a Non-resident is an appealable order and is mentioned against clause (d) of section246(1) of the Act. Thus, from conjoint reading of section 163 and section 246(1)(d) of the Act, it is unambiguously clear that before treating any person as agent a separate order has to be passed u/s. 163 of the Act, after affording opportunity of hearing to such a person on whom a liability in respect of a Non-resident is to be fastened.
In the instance case, we find that though the Assessing Officer has issued show cause notice u/s. 163 of the Act to KRPL to treat it as representative assessee of MVL for the Assessment Years 2011-12, 2012-13 and 2013-14, but no order u/s. 163 of the Act has been passed by the Assessing Officer holding KRPL as representative assessee of MVL. The assessment order passed in the name of KRPL treating it as representative of MVL without passing order u/s. 163 of the Act lacks jurisdiction and hence, suffers from incurable legal infirmity.
The Hon'ble Bombay High Court in the case of CIT vs. Belapur Sugar and Allied Industries Ltd.(supra) was ceased of a similar issue, wherein the assessment was framed on a person in representative capacity without there being any order u/s. 163 of the Act. The Hon'ble High Court after considering facts of the case, provisions of section and the decision in the case of CIT vs. Kanhaiyalal Gurmukh Singh, 87 ITR 476 held that order u/s. 163 of the Act is to be passed in the first place and thereafter a notice u/s. 148 is to be served on
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the assessee who is sought to be made liable as representative assessee i..e. the agent of a Non-resident. In the absence of order u/s. 163 of the Act, notice issued u/s. 148 is invalid.
In the case of Suez Tractebel SA vs. DDIT (supra) a notice u/s. 148 of the Act was issued in the name of an agent without there being any order u/s. 163 of the Act. The Tribunal held the notice u/s. 148 of the Act without jurisdiction, hence, the consequent proceedings arising there from were held to be vitiated.
In the instant case though at the time of issuance of notice u/s. 148 of the Act, MVL was very much in existence. Notice u/s. 148 of the Act was rightly issued in the name of MVL. Thereafter, MVL was dissolved on 23/05/2018. The information regarding dissolution of MVL was conveyed to the Assessing Officer on 18/10/2018, yet the Assessing Officer issued notice u/s. 143(2) of the Act in the name of MVL, a non-existing entity. No notice u/s. 143(2) of the Act was served in the name of KRPL. The notice u/s. 143(2) of the Act in the name of a non-existing entity itself makes the assessment null and void. Further, the assessment made in the name of KRPL as representative assessee of MVL without a separate order u/s. 163 of the Act, makes the assessment null and void.
Thus, for the reasons recorded above, we hold the assessment order unsustainable. We find no infirmity in the impugned order, hence, the same is upheld and appeal of the Revenue is dismissed.
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ITA NO.89/MUM/2023(A.Y. 2012-13) & ITA NO.90/MUM/2023(A.Y.2013-14)
Both sides are unanimous in stating that the facts in the impugned assessment years are identical to the facts in Assessment Year 2011-12. Therefore, the submissions made by rival sides for Assessment Year 2011-12 would hold good for Assessment Year 2012-13 and 2013-14. 15. We find that the ground, raised by the Revenue in both these appeals are identical to the grounds raised in appeal for Assessment Year 2011-12. The facts are also stated to be identical. In the light of undisputed facts, the findings given while adjudicating appeal of Revenue for Assessment Year 2011- 12 would mutatis mutandis apply to both these appeals. For parity of reasons, appeal of the Revenue for Assessment Year 2012-13 and 2013-14 fails.
To sum up, appeal of Revenue for assessment years 2011-12,2012-13 and 2013-14 are dismissed. Order pronounced in the open court on Wednesday the 31st day of May, 2023. Sd/- Sd/- (GAGAN GOYAL) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER मुंबई/ Mumbai, �दनांक/Dated 31/05/2023 Vm, Sr. PS(O/S)
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��त�ल�प अ�े�षतCopy of the Order forwarded to :
अपीलाथ�/The Appellant , 2. ��तवाद�/ The Respondent. 3. The PCIT 4.. �वभागीय ��त�न�ध, आय.अपी.अ�ध., मुबंई/DR, ITAT, Mumbai 5. गाड� फाइल/Guard file.
BY ORDER, //True Copy// (Dy./Asstt. Registrar), ITAT, Mumbai