Special limitation and prior notice for agent status controlled reassessment and invalidated assessments of non-resident representative assessee

Reassessment notices issued to a person treated as agent of a non-resident were held time barred because the special limitation period for that status had expired, and the general limitation argument could not override the specific statutory bar. Assessments framed on the basis that the assessee was an agent were also held invalid because no prior notice or order had been issued treating the assessee as agent for the relevant years, contrary to the statutory requirement of hearing and prior determination of representative status. The assessments and notices therefore could not be sustained.

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Issues: (i) Whether reassessment notices issued to a person treated as agent of a non-resident were barred by limitation under the special time limit applicable to such cases. (ii) Whether assessments framed treating the assessee as agent were invalid when no notice and order under the statutory provision governing treatment as agent had been issued for the relevant assessment years.

Issue (i): Whether reassessment notices issued to a person treated as agent of a non-resident were barred by limitation under the special time limit applicable to such cases.

Analysis: The special limitation rule for a person treated as the agent of a non-resident applies where reassessment is proposed in that capacity. The notices for the relevant years were issued beyond two years from the end of the assessment years concerned. Since the admitted facts showed expiry of the prescribed period, the general limitation argument could not prevail over the specific statutory restriction.

Conclusion: The reassessment notices for the affected assessment years were time barred and the issue was decided against the Revenue.

Issue (ii): Whether assessments framed treating the assessee as agent were invalid when no notice and order under the statutory provision governing treatment as agent had been issued for the relevant assessment years.

Analysis: The statutory scheme requires that a person cannot be treated as an agent of a non-resident without an opportunity of being heard on liability to be so treated. The provision governing representative assessee status was held to be analogous to the earlier provision under the 1922 Act, under which the Supreme Court had held that status must first be fixed before assessment is framed. As no notice or order treating the assessee as agent had been issued for the later assessment years, the procedural safeguard built into the statute was not complied with.

Conclusion: The assessments made without prior notice and determination of agent status were invalid and the issue was decided against the Revenue.

Final Conclusion: The statutory preconditions for reassessment and for treating the assessee as a representative assessee were not satisfied, so the assessments could not be sustained.

Ratio Decidendi: Where a statute requires prior notice and opportunity of hearing before a person can be treated as agent of a non-resident, assessment in that capacity cannot be made unless that statutory precondition is first fulfilled, and the special reassessment limitation applicable to such agents must be strictly observed.

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