The ITO, Ward-2(1),, v. Shri Siddharth S. Patel,,

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND BHAVESH SAINI JUDICIAL MEMBER) ITA.NO.1946 AND 1947/AHD/2004 ASSTT.YEAR : 1994-1995 AND 1995-1996 ITO WARD-2(1) BARODA. VS. SHRI SIDDHARTH S. PATEL 4 VRUNDAVAN SOCIETY NR.AMRAKUNJ SOCIETY RACE COURSE BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI C.K. MISHRA ASSESSEE BY : SHRI S.N.SOPARKAR O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THESE ARE TWO APPEALS BY THE REVENUE AGAINST THE ORDERS OF THE CIT(A) DATED 09-3 -2004 FOR A.Y.1994-95 AND 1995-96. 2. THE ONLY GROUND WHICH IS COMMON IN BOTH THE APP EALS OF THE REVENUE READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CAS E AND IN LAW THE LD.CIT(A) HAS ERRED IN CANCELING THE ASSESSMENT MAD E IN THE STATUS OF REPRESENTATIVE ASSESSEE THOUGH THE ASSESSMENT WAS C OMPLETED AFTER VALIDITY INITIATING PROCEEDINGS U/S.147 BY HOLDING THE ASSESSEE AS REPRESENTATIVE ASSESSEE OF LEGAL HEIRS OF LATE SMT. SAVITABEN R. PATEL FOR HOLDING POWER OF ATTORNEY OF SMT.SAVITABEN R. PATEL BEFORE DEATH AND THEREAFTER OF LEGAL HEIRS AND IS AGENT U/S.163(1) (B) OF THE ACT IN VIEW OF BUSINESS CONNECTION. 3. IT IS STATED BY THE LEARNED DR THAT LATE SMT.SAV ITABEN R. PATEL SOLD HER LAND TO SHRI SIDDHARTH S. PATEL (ASSESSEE). THIS T RANSACTION WAS CARRIED OUT BY AN IRRECOVERABLE POWER OF ATTORNEY GIVEN BY LATE SM T.SAVITABEN R. PATEL TO SHRI SIDDHARTH S. PATEL. SMT. SAVITABEN R. PATEL EXPIRE D ON 25-9-1995 AND LEGAL HEIRS OF THE DECEASED ALSO GAVE GENERAL POWER OF AT TORNEY TO SHRI SIDDHARTH S. PATEL. THAT LATE SMT.SAVITABEN R. PATEL DID NOT F ILE ANY RETURN OF INCOME IN RESPECT OF CAPITAL GAIN ARISING OUT OF THE TRANSFER OF THE ABOVE LAND AND ALSO ITA.NO.1946 AND 1947/AHD/2004 -2- INTEREST INCOME EARNED ON THE ABOVE MONEY. ALL THE LEGAL HEIRS OF LATE SMT.SAVITABEN R. PATEL WERE RESIDING OUTSIDE INDIA. IN THE ABOVE CIRCUMSTANCES THE ASSESSEE WAS TREATED AS REPRESEN TATIVE ASSESSEE OF LEGAL REPRESENTATIVE OF LATE SMT.SAVITABEN R. PATEL. HE THEREFORE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESS EE CANNOT BE TREATED AS LEGAL REPRESENTATIVE WITHIN THE MEANING OF SECTION 163 OF THE INCOME TAX ACT. HE THEREFORE SUBMITTED THAT THE ORDER OF THE CIT(A) MA Y BE REVERSED AND THAT OF THE AO BE RESTORED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND STATED THAT THE SECTION 163 DEFINES THE PERSON WHO SHOULD BE REGARD ED AS AN AGENT. AS PER THE SECTION 163(1) AN EMPLOYEE OR A PERSON WHO IS HAVI NG BUSINESS CONNECTION WITH THE NON-RESIDENT OR IS A TRUSTEE OF NON-RESIDE NT CAN BE TREATED AS AGENT OF SUCH NON-RESIDENT. HE HAS STATED THAT DURING THE C OURSE OF ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE IS TREATED AS LEG AL HEIR OF LATE SMT.SAVITABEN R. PATEL. HOWEVER THE AO HAS NOT EVEN BROUGHT ON RECORD THE NAME OF THE LEGAL HEIRS OF LATE SMT.SAVITABEN R. PATEL. WITHOU T BRINGING THE NAME OF THE LEGAL REPRESENTATIVE ON RECORD HOW HE PRESUMED THA T THEY ARE NON-RESIDENT AND THE ASSESSEE IS HAVING BUSINESS CONNECTION WITH THE M. THE ASSESSEE IS BUYER OF PLOT OF LAND SOLD BY SMT.SAVITABEN. THIS WAS ONLY CONNECTION ASSESSEE WAS HAVING WITH SMT.SAVITABEN. THE POWER OF ATTORNEY WA S GIVEN TO THE ASSESSEE TO COMPLETE THE TRANSACTION OF SALE OF SUCH PLOT. THE ASSESSEE DOES NOT HAVE ANY BUSINESS CONNECTION WITH HER LEGAL HEIRS. HE FURTH ER SUBMITTED THAT AS PER SECTION 163(2) BEFORE APPOINTING ANYBODY AS AN AGEN T THE AO HAS TO GIVE AN OPPORTUNITY TO SUCH PERSON. NO SUCH OPPORTUNITY WA S GIVEN TO THE ASSESSEE. IN VIEW OF THE ABOVE HE STATED THAT THE ORDER OF THE CIT(A) SHOULD BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF TH E BOTH THE SIDES AND PERUSED MATERIAL PLACED BEFORE US. WE FIND THAT T HE SECTIONS 160(1) AND 163(1) OF THE INCOME TAX ACT DEFINE THE TERM REPR ESENTATIVE ASSESSEE. THESE TWO SECTIONS READ AS UNDER: ITA.NO.1946 AND 1947/AHD/2004 -3- 160. REPRESENTATIVE ASSESSEE.--(1) FOR THE PURPOSE S OF THIS ACT 'REPRESENTATIVE ASSESSEE' MEANS-- (I) IN RESPECT OF THE INCOME OF A NON-RESIDENT SPE CIFIED IN SUB-SECTION (1) OF SECTION 9 THE AGENT OF THE NON-RESIDENT INCLUD ING A PERSON WHO IS TREATED AS AN AGENT UNDER SECTION 163; (II) IN RESPECT OF THE INCOME OF A MINOR LUNATIC OR IDIOT THE GUARDIAN OR MANAGER WHO IS ENTITLED TO RECEIVE OR IS IN RECEIPT OF SUCH INCOME ON BEHALF OF SUCH MINOR LUNATIC OR IDIOT; (III) IN RESPECT OF INCOME WHICH THE COURT OF WARD S THE ADMINISTRATOR- GENERAL THE OFFICIAL TRUSTEE OR ANY RECEIVER OR MA NAGER (INCLUDING ANY PERSON WHATEVER HIS DESIGNATION WHO IN FACT MANAG ES PROPERTY ON BEHALF OF ANOTHER) APPOINTED BY OR UNDER ANY ORDER OF A COURT RECEIVES OR IS ENTITLED TO RECEIVE ON BEHALF OR FOR THE BEN EFIT OF ANY PERSON SUCH COURT OF WARDS ADMINISTRATOR-GENERAL OFFICIAL TRU STEE RECEIVER OR MANAGER; (IV) IN RESPECT OF INCOME WHICH A TRUSTEE APPOINTE D UNDER A TRUST DECLARED BY A DULY EXECUTED INSTRUMENT IN WRITING W HETHER TESTAMENTARY OR OTHERWISE (INCLUDING ANY WAKF DEED WHICH IS VALI D UNDER THE MUSSALMAN WAKF VALIDATING ACT 1913 (6 OF 1913)) R ECEIVES OR IS ENTITLED TO RECEIVE ON BEHALF OR FOR THE BENEFIT OF ANY PERSON SUCH TRUSTEE OR TRUSTEES; (V) IN RESPECT OF INCOME WHICH A TRUSTEE APPOINTED UNDER AN ORAL TRUST RECEIVES OR IS ENTITLED TO RECEIVE ON BEHALF OR FOR THE BENEFIT OF ANY PERSON SUCH TRUSTEE OR TRUSTEES. 163. WHO MAY BE REGARDED AS AGENT.--(1) FOR THE PU RPOSES OF THIS ACT 'AGENT' IN RELATION TO A NON-RESIDENT INCLUDES AN Y PERSON IN INDIA-- (A) WHO IS EMPLOYED BY OR ON BEHALF OF THE NON-RES IDENT; OR (B) WHO HAS ANY BUSINESS CONNECTION WITH THE NON-R ESIDENT; OR (C) FROM OR THROUGH WHOM THE NON-RESIDENT IS IN RE CEIPT OF ANY INCOME WHETHER DIRECTLY OR INDIRECTLY; OR (D) WHO IS THE TRUSTEE OF THE NON-RESIDENT; ITA.NO.1946 AND 1947/AHD/2004 -4- AND INCLUDES ALSO ANY OTHER PERSON WHO WHETHER A R ESIDENT OR NON- RESIDENT HAS ACQUIRED BY MEANS OF A TRANSFER A CA PITAL ASSET IN INDIA: PROVIDED THAT A BROKER IN INDIA WHO IN RESPECT OF A NY TRANSACTIONS DOES NOT DEAL DIRECTLY WITH OR ON BEHALF OF A NON-RESIDE NT PRINCIPAL BUT DEALS WITH OR THROUGH A NON-RESIDENT BROKER SHALL NOT BE DEEMED TO BE AN AGENT UNDER THIS SECTION IN RESPECT OF SUCH TRANSAC TIONS IF THE FOLLOWING CONDITIONS ARE FULFILLED NAMELY:-- (I) THE TRANSACTIONS ARE CARRIED ON IN THE ORDINAR Y COURSE OF BUSINESS THROUGH THE FIRST-MENTIONED BROKER; AND (II) THE NON-RESIDENT BROKER IS CARRYING ON SUCH T RANSACTIONS IN THE ORDINARY COURSE OF HIS BUSINESS AND NOT AS A PRINCI PAL. *EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION THE EXPRESSION BUSINESS CONNECTION SHALL HAVE THE MEANING ASSIGN ED TO IT IN EXPLANATION 2 TO CLAUSE (I) OF SUB-SECTION (1) OF S ECTION 9 OF THIS ACT. (2) NO PERSON SHALL BE TREATED AS THE AGENT OF A NO N-RESIDENT UNLESS HE HAD HAD AN OPPORTUNITY OF BEING HEARD BY THE ASSESS ING OFFICER AS TO HIS LIABILITY TO BE TREATED AS SUCH. THE AO HAS NOT SPECIFIED IN HIS ORDER UNDER WHICH S ECTION AND WHICH CLAUSE HE HAS TREATED THE ASSESSEE AS AN AGENT OF LEGAL REPRE SENTATIVE OF LATE SMT.SAVITABEN. AT THE TIME OF HEARING BEFORE US T HE LEARNED DR WAS UNABLE TO POINT OUT THE SPECIFIC CLAUSE OF EITHER UNDER SECTI ON 160 OR 163 WHICH IS APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESS EE IS TREATED AS REPRESENTATIVE ASSESSEE OF LEGAL HEIRS OF LATE SMT.SAVITABEN. HOW EVER WHO ARE LEGAL HEIRS OF SMT.SAVITABEN PATEL ARE NOT SPECIFIED. THE ONLY CO NNECTION BETWEEN THE ASSESSEE AND SMT.SAVITABEN PATEL IS THAT THE ASSESS EE PURCHASED THE PLOT ADMEASURING ABOUT 8000 SQ.FT. FROM HER AND SHE HAD GIVEN POWER OF ATTORNEY TO THE ASSESSEE TO COMPLETE THE SALE TRANSACTION. ADM ITTEDLY LATE SMT.SAVITABEN PATEL WAS NOT A NON-RESIDENT. CONSIDERING THE TOTA LITY OF THE ABOVE FACTS IN OUR OPINION NEITHER SECTION 160(1) NOR SECTION 163(1) WAS APPLICABLE. THE CIT(A) HAS ALSO RECORDED THE SIMILAR FINDING. THE RELEVANT PORTION OF HIS FINDING RECORDED IN THE ORDER READS AS UNDER: ITA.NO.1946 AND 1947/AHD/2004 -5- .. I DO NOT AGREE WITH THE VIEW OF THE ASSESSING OFFICER THAT THE POWER OF ATTORNEY WAS GIVEN TO THE APPELLANT TO APP OINT HIM AS HER AGENT. THE APPELLANT HAS BEEN ASSESSED IN THE STATUS OF RE PRESENTATIVE ASSESSEE OF LEGAL REPRESENTATIVE OF LATE SMT. SAVITABEN. TH E PROVISIONS OF SECTION 160(1)(I) AND 163(1) WHICH DEFINE THE REPRESENTATIV E ASSESSEE ARE NOT APPLICABLE IN THE APPELLANTS CASE SINCE AT THE TIM E OF SIGNING OF THE POWER OF ATTORNEY MS. SAVITABEN WAS A RESIDENT. FU RTHER IT IS ALSO NOTICED THAT LATE SMT. SAVITABEN WAS A RESIDENT. F URTHER IT IS ALSO NOTICED THAT LATE SMT. SAVITABEN ENTERED INTO TRANS ACTION FOR SALE OF LAND DURING F.Y. 1993-94 WHEREAS THE POWER OF ATTORNEY W AS GIVEN BY HER LEGAL REPRESENTATIVE (NON-RESIDENT) IN 1997 AFTER H ER DEATH IN SEPT. 1995 AND THUS IT CANNOT BE SAID THAT APPELLANT ENTERED I NTO TRANSACTION WITH NON-RESIDENT LEGAL REPRESENTATIVE. IT IS ALSO SEEN THAT POWER OF ATTORNEY GIVEN BY LEGAL HEIRS OF LATE SMT. SAVITABEN IS ALSO IN CONSEQUENCE OF THE ORIGINAL TRANSACTION ENTERED INTO BY APPELLANT AND LATE SMT. SAVITABEN. THEREFORE IN VIEW OF THIS ORIGINAL TRANSACTION ALS O THE APPELLANT CANNOT BE MADE LEGAL REPRESENTATIVE/AGENT OF THE NON-RESID ENT I.E. LEGAL HEIR OF LATE SMT. SAVITABEN. THEREFORE I AM OF THE OPINIO N THAT PROVISIONS OF SECTION 160(1)(I) AND 163(1) DO NOT APPLY IN THIS C ASE AND THE APPELLANT CANNOT BE TREATED REPRESENTATIVE ASSESSEE OF LEGAL REPRESENTATIVES OF LATE SMT. SAVITABEN. AFTER CONSIDERING ARGUMENTS OF BOTH THE PARTIES AND FACTS ON RECORD WE ENTIRELY AGREE WITH THE ABOVE FINDINGS OF THE CIT(A) THE SA ME IS SUSTAINED. 6. IN THE RESULT THE REVENUES APPEALS ARE DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 13 TH APRIL 2010. SD/- SD/- (BHAVESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 13-04-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD