Income Tax Act, 1961

--Liability in special cases--Agent of non-resident Hearing opportunity not given to assessee-agent--According to provision of section 163(2) before treating a person as an agent of foreign company an opportunity of hearing has to be given to said person for it to file objection in that regard. Further, no order under section 163 was passed, as such, assessee-company could not be treated as an agent of foreign company as per section 163. Held: As per the provisions of section 163(2), before treating a person as an agent, an opportunity of being heard has to be given to such person for it to file objections it may have in that regard. In the facts and circumstances of the case on hand, as mentioned above and in the light of the provisions of section 163, no proper opportunity was afforded to the assessee company of being heard in the matter and that the proper procedure for issue of notice under section 148 to the Indian Company, i.e., TESA for treating it as an agent of the assessee company was not adhered to. It is also relevant to mention here that before treating any person as an agent of a foreign company or person, an order has to be passed in accordance with the provisions of section 163 and that order requires to be communicated to the parties concerned. [Para 8.3] It is a settled principle of law that before treating a person as an agent under section 163, it is necessary under section 163 for the assessing officer to issue a notice to the concerned person informing him of his intention to treat that person as the agent of a non-resident and to pass an order treating him as an agent of the non-resident only after hearing such person in the matter. In the case on hand, as admitted by the Departmental Representative and also after perusing the records, it is seen that no there is no order passed by the assessing officer under section 163 treating TESA as an agent of the assessee company for assessment year 2002-03. Consequently, the notice under section 148 dated 31-3-2005 issued by the assessing officer to TESA on behalf of the assessee-company is bad in law and all subsequent proceedings culminating in the passing of the order of assessment would not the test of judicial scrutiny. In this view of the matter, the order of assessment passed under section 143 read with section 147 on 31-3-2006 for assessment year 2002-03, based on the invalid notice issued under section 148 on 31-3-2005 is cancelled. [Para 8.5]