Representative liability under income tax cannot be imposed when the principal is already assessed or has been extinguished, so orders fall.

Orders purporting to treat a person as a representative/agent under section 163 must be made by an authority competent under the tax statute; a Commissioner lacks power to issue such an order in the circumstances described, and an order by the Commissioner is quashed. Where the principal has already been validly assessed for the relevant income, no separate assessment can be sustained against an alleged representative for the same income. If the principal has been liquidated or extinguished prior to proceedings, the statutory scheme contains no mechanism to treat another person as representative; consequently subsequent orders dependent on such treatment fall and appeals are allowed.

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Issues: (i) Whether the Commissioner (CIT) has power to pass an order under section 163 of the Income-tax Act, 1961; (ii) Whether proceedings under section 163 can be initiated against a representative/agent when the principal has already been assessed to tax for the same income; (iii) Whether a representative/agent can be treated as such when the principal has been liquidated/extinguished.

Issue (i): Whether the Commissioner has power to pass an order under section 163 of the Income-tax Act, 1961.

Analysis: The Tribunal examined the statutory scheme including section 163 read with provisions governing appealability (section 246) and appeal to the Tribunal (section 253). The absence of a provision enabling appeal against an order under section 163 to the Commissioner and the placement of an order under section 163 within the appealability structure indicated that such orders are to be made by an authority below the rank of Commissioner. The Tribunal also considered the commissioner's reliance on concurrent jurisdiction arguments and rejected them in light of the statutory text and scheme.

Conclusion: The Commissioner does not have authority to pass an order under section 163 of the Income-tax Act, 1961; the order passed by the CIT under section 163 is quashed.

Issue (ii): Whether proceedings under section 163 can be initiated against a representative/agent when the principal has already been assessed to tax for the same income.

Analysis: The Tribunal noted that the Assessing Officer had completed assessment under section 143(3) in the case of the principal (Monet Limited) as a non-resident and recorded returned income. Given that the principal was assessed in respect of the relevant income, the Tribunal held that there cannot simultaneously be a separate assessment in the hands of the alleged representative/agent for the same income, particularly where the alleged representatives are also non-residents.

Conclusion: Proceedings under section 163 cannot be validly initiated against the representative/agent for the same income once the principal has been assessed; this ground favours the assessee.

Issue (iii): Whether a representative/agent can be treated as such when the principal has been liquidated/extinguished.

Analysis: The Tribunal took judicial notice of the corporate removal order dated 19.12.2018 under section 308 of the Companies Act, 2001 which showed that the principal (Monet Limited) had been removed from the register and extinguished prior to the impugned proceedings. The Tribunal contrasted section 163 with provisions (such as succession provisions) that substitute legal heirs and found no mechanism in section 163 to treat a representative where the principal no longer exists.

Conclusion: Where the principal has been liquidated/extinguished, there can be no representative/agent under section 163; this finding is in favour of the assessee.

Final Conclusion: The order passed by the CIT under section 163 of the Income-tax Act, 1961 was without authority, and the consequent order framed under section 263 of the Income-tax Act, 1961 which rested on that basis also falls; the impugned orders are set aside and the appeals are allowed.

Ratio Decidendi: An order treating a person as agent under section 163 of the Income-tax Act, 1961 must be made by an authority competent under the Act (not the Commissioner in the facts of this case); where the principal has been validly assessed for the relevant income no valid separate assessment can be made against the alleged representative for the same income, and a representative cannot be treated as such if the principal has been extinguished.

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