Representative assessee jurisdiction fails where agency order is unauthorised, principal already assessed, and company has ceased to exist.

Section 163 requires the prescribed opportunity of hearing before a person is treated as an agent of a non-resident, but the Tribunal held that the Commissioner was not the competent authority to make that determination, so the agency order was quashed. Proceedings under section 263 against an alleged representative assessee were also held unsustainable where the principal had already been assessed on the same income under section 143(3). The Tribunal further held that no representative assessee could be proceeded against after the principal company had been removed from the register and had ceased to exist, as there could be no representation of a non-existing principal. The jurisdictional foundation therefore failed and the impugned orders could not survive.

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Issues: (i) whether the Commissioner had authority to pass an order treating the assessee as an agent under section 163 of the Income-tax Act, 1961; (ii) whether proceedings under section 263 could be initiated against the alleged representative assessee when the principal had already been assessed to tax; and (iii) whether a representative assessee could be proceeded against after the principal company had ceased to exist.

Issue (i): whether the Commissioner had authority to pass an order treating the assessee as an agent under section 163 of the Income-tax Act, 1961.

Analysis: Section 163 provides the circumstances in which a person may be treated as an agent of a non-resident and requires an opportunity of being heard, but it does not indicate that a Commissioner is the authority empowered to make such a determination. The appeal provisions were also read to mean that an order under section 163 is contemplated at a level below the Commissioner, because such an order is separately appealable in the statutory scheme.

Conclusion: The Commissioner had no authority to pass the order under section 163, and that order was liable to be quashed.

Issue (ii): whether proceedings under section 263 could be initiated against the alleged representative assessee when the principal had already been assessed to tax.

Analysis: The principal had already been assessed under section 143(3) on the very income in question. Once the principal assessment had been completed, a separate action against the alleged representative assessee for the same income was not sustainable on the facts found by the Tribunal.

Conclusion: Proceedings under section 263 against the alleged representative assessee were not sustainable once the principal had been assessed to tax.

Issue (iii): whether a representative assessee could be proceeded against after the principal company had ceased to exist.

Analysis: The material on record showed that the principal company had been removed from the register and had ceased to exist before the impugned action. Section 163 was treated as distinct from provisions that permit substitution of legal heirs, and the Tribunal held that there could be no representative of a non-existing principal.

Conclusion: A representative assessee could not be proceeded against after the principal company had ceased to exist.

Final Conclusion: The impugned jurisdictional foundation failed, and the orders passed under sections 163 and 263 could not survive, so the assessees succeeded in the appeals.

Ratio Decidendi: An order treating a person as an agent of a non-resident must be made by the competent statutory authority, and where the principal has already been assessed or has ceased to exist, proceedings founded on an invalid agency determination cannot be sustained.

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