1963 (4) TMI 81 - HC - Income Tax

Invalid Notices of Demand for Advance Tax Quashed

The court found the notices of demand for advance tax to be illegal and without jurisdiction due to the absence of a valid appointment of the petitioners ... - Issues Involved:1. Legality and jurisdiction of notices of demand for advance payment of tax issued to petitioners as agents of non-resident firms.2. Validity of appointment of petitioners as statutory agents under section 43 of the Indian Income-tax Act for the assessment year 1962-63.3. The requirement of notice and opportunity of being heard for valid appointment under section 43.4. Applicability of previous year's appointment for subsequent assessment years.5. Vicarious liability for advance tax under section 18A.Issue-wise Detailed Analysis:1. Legality and Jurisdiction of Notices of Demand:The petitioners challenged the notices of demand for advance payment of tax issued under section 29 of the Indian Income-tax Act, claiming they were illegal, void, and without jurisdiction. The court found that the notices were issued without a valid appointment of the petitioners as agents for the assessment year 1962-63, making the demand for advance tax unlawful. The court concluded that the notices of demand were 'illegal and void, and without jurisdiction.'2. Validity of Appointment as Statutory Agents:The petitioners argued that no advance payment of tax could be demanded unless they were properly appointed as agents under section 43 for the assessment year 1962-63. The court agreed, noting that for the assessment year 1962-63, no notice under section 43 was issued, nor was any order passed appointing the petitioners as agents. The court emphasized that the appointment for the assessment year 1961-62 could not be used to impose liability for the subsequent year.3. Requirement of Notice and Opportunity of Being Heard:The court highlighted that section 43 required the Income-tax Officer to give notice and an opportunity to be heard before appointing someone as a statutory agent. The court referenced previous decisions, including Bhagwanji Laxmidas & Co. v. Commissioner of Income-tax, which established that compliance with these requirements was essential for a valid appointment. The court found that these formalities were not observed for the assessment year 1962-63, rendering any such appointment invalid.4. Applicability of Previous Year's Appointment:The court rejected the respondent's argument that the appointment for the assessment year 1961-62 could extend to the financial year 1962-63. Citing previous rulings, the court reiterated that each assessment year is self-contained, and a new notice under section 43 is required for each year. The court stated, 'The appointment of the assessment year 1961-62 cannot be availed for the purposes of the liability in respect of the assessment year 1962-63.'5. Vicarious Liability for Advance Tax:The court addressed the respondent's contention that the appointment for the assessment year 1961-62 made the petitioners liable for advance tax under section 18A for the financial year 1962-63. The court disagreed, stating that the vicarious liability imposed by section 43 was limited to the assessment year for which the appointment was made. The court clarified, 'The vicarious liability imposed on a person by his appointment as a statutory agent under section 43 is only in respect of the liability for the assessment year for which the appointment is made.'Conclusion:The court concluded that the notices of demand for advance payment of tax were illegal and without jurisdiction due to the absence of a valid appointment of the petitioners as agents for the assessment year 1962-63. The court ordered the notices to be quashed and directed the respondent not to take any further steps in enforcing them. The petitioners were awarded costs in Miscellaneous Petition No. 229 of 1962, with no order as to costs in Miscellaneous Petition No. 230 of 1962.