Judgement

Appeal (No. 129 of 1936) by special leave, from a judgment of the High Court (June 26, 1934) upon a reference by the Commissioner of Income-tax under s.66, sub-s.2, of the Income-tax Act (XI. of 1922).

The respondents were a firm of jewellers carrying on business in Delhi. They received loans from a banker carrying on business in Jaipur, outside British India, and paid interest thereon. The Income-tax Officer, on February 2, 1928, served a notice on the respondents calling on them to show cause why they should not be treated as agents of the banker in Jaipur for the purposes of the Act. No year of assessment was mentioned in the notice.

0 Law. Rep. 65 Ind. App. 12 ( 1937- 1938) Commnr. of Income-Tax, v. Nawal Kishore-Kharaiti Lal

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The respondents appeared and were heard on February 13, 1928. No formal order declaring them agents of the banker was made, but a note was recorded and they were served with notice under ss. 22 and 34 of the Act for the years 1926-27 and 1927-28 as agents of the banker. An appeal by the respondents was dismissed. On May 5, 1931, notice was served on the respondents stating that it was proposed to treat them as agents of the banker for the year 1926-27. On May 8, 1931, after hearing their objections, the Income-tax Officer held they were agents of the banker, and on June 8, 1931, an order of assessment was made. Appeals against the order were dismissed by the Assistant Commissioner. The respondents applied to the Commissioner for a reference to the High Court, under s. 66, and the Commissioner referred the questions which are quoted in the judgment of the Board.

The High Court answered the questions as follows "The answer to the first question referred to us by the Commissioner is that the petitioner could not be held in 1926 to be the agent for Seth Banji Lal for the purposes of assessment of 1926-27 since no order by the Income-tax authorities treating him as such agent was passed until May 8, 1931."

"Our answer to the third question referred to us is that the assessment proceedings actually taken against the petitioner under s. 34 on May 18, 1931, for the year 1926-27 were time barred."

The High Court further held that in view of the answers to the first and third questions the second did not arise.

1937. July 20 and 22. Dunne K.C., and Hubert Hull for the appellant. The question here turns on the construction of s. 43 of the Act, and is whether a formal order has to be made that the person whom it is proposed to be charged is going to be treated as an agent. It is submitted that by giving notice a person may be deemed to be an agent and can be assessed. There is nothing in the Act requiring an order to be made. Under s. 43 it has first to be ascertained whether a person is an agent. That having been ascertained, the question of assessment arises. It is a distinct question; Nawal Kishore Kharaiti Lal v. Commissioner of Income-tax.(( 1930) 4 I. T. C. 451.)

[Reference was made to Commissioner of Income-tax, Bombay v. Bombay Trust Corporation, (( 1929) L. R. 57 I. A. 49.)]

Where there is a pending case, there is nothing to prevent assessment at any time Maharajadhiraj of Darbhanga v. Commissioner of Income-tax, Bihar and Orissa (( 1934) L. R. 61 I. A. 312.); Commissioner of Income-tax, Burma v. N. N. Burjorjee.(( 1931) I. L. R. 9 R. 161.) Here there was a proceeding pending from 1928. The notice given was a valid notice under s. 43. If notice is given of intention to treat a person as agent, that is sufficient. The agent can ask for what year it is intended. In any event he would know, when he is assessed, for what particular year he is assessed. Here there can be no doubt what year was intended.

Hull, following, referred to Nawal Kishore Kharaiti Lal v. Commissioner of Income-tax (( 1930) 4 I.

T. C. 451.), and s. 30, sub-s. 2. Sect. 31 makes the matter plainer.

De Gruyther K.C., and S. Hyam for the respondent. There are two questions—namely, the liability to be assessed, and how the asse