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of <h1>Privy Council Reverses High Court on Income Tax Assessment Order Validity</h1> <h3>Commissioner of Income-tax Versus Nawal Kishore Kharaiti Lal</h3> The Privy Council allowed the appeal, reversing the High Court's judgment on the validity of an assessment order under Sec. 34 of the Indian Income-tax ... - Issues:Validity of assessment order under Sec. 34 of the Indian Income-tax Act, 1922 for the year 1926-27; Interpretation of Secs. 34, 42(1), and 43 of the Act; Compliance with procedural requirements for treating a person as an agent of a non-resident for income-tax assessment purposes.Analysis:The judgment pertains to an appeal from the High Court at Lahore involving the Commissioner of Income-tax, Punjab, North-West Frontier, and Delhi Provinces. The case revolves around the assessment order made by the Income-tax Officer at Delhi for the year 1926-27 on a respondent firm acting as an agent for a Hindu undivided family in Jaipur. The key provisions in question are Secs. 34, 42(1), and 43 of the Indian Income-tax Act, 1922.The first issue concerns the necessity of a specific order declaring a person as the agent of a non-resident before serving a notice under Sec. 43 for income-tax assessment. The High Court had invalidated the assessment due to the absence of such an order before a notice served in 1928. However, the Privy Council held that the Act does not mandate such a prior declaration of agency. The notice served in February 1928 was deemed valid for initiating proceedings under Sec. 43 for the assessment year 1926-27.The second issue raised was the lack of specification of the assessment year in a notice served in 1928, which was later rectified by a notice in 1931. The High Court did not address this question, but the Privy Council determined that the notice specifying the year is a procedural requirement under Sec. 43 and should be answered in the negative. The subsequent notice in 1931 could not cure the defect in the original notice.Lastly, the judgment clarified that no legal issue arose regarding the assessment amount, which included interest payable by third parties to the non-resident. This matter was not part of the questions referred to the High Court and was not discussed previously. Therefore, the Privy Council did not entertain this argument.In conclusion, the Privy Council allowed the appeal, reversed the High Court's judgment, and provided revised answers to the questions referred. The respondent firm was directed to pay the appellant's costs for the appeal and the reference in the High Court.
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