HUNGERFORD INVESTMENT TRUST LTD Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) This appeal is directed against the judgment and order of P.K. Banerjee J. dated January 31, 1972, reported as Hunger-ford Investment Trust Ltd. v. ITO [1976] 102 ITR 314, dismissing the appellant's application made under Article 226 of the Constitution challenging the notices under Section 34 and Section 23(2) of the Indian I.T. Act 1922, for the assessment years 1949-50, 1950-51 and 1951-52. The relevant facts of this case may briefly be stated : The appellant, M/s. Hungerford Investment Trust Ltd., having its registered office at Singapore, Malaya, holds all the shares of M/s. Turner Morrison and Co. Ltd., a company incorporated in India. An order under Section 23A, before its amendment in 1955, was passed by the ITO in the case of M/s. Turner Morrison and Co, Ltd., and proceedings were taken under Section 34 by the ITO in order to tax the dividend deemed to have been declared u/s, 23A in favour of M/s. Hungerford Investment Trust Ltd., for the assessment years 1949-50, 1950-51 and 1951-52. The Hungerford Investment Trust Ltd. filed a return. It appears that the ITO obtained approval of the Commissioner on 24th March, 1954, and thereafter issued the notice under Section 34 in the name of M/s. Turner Morrison and Co. Ltd., agents of M/s. Hungerford Investment Trust Ltd., for the year 1949-50. Though the approval was made as aforesaid the notice under Section 34 was issued against Hungerford Investment Trust Ltd. Return was filed by Turner Morrison & Co. Ltd., as agents of Hungerford Investment Trust Ltd., and the status was shown as non-resident. For the year 1950-51 the notices were issued on Hungerford Investment Trust Ltd. for the income in respect of dividend deemed to have been declared under Section 23A ; similarly for 1951-52 also notice was served on Hungerford Investment Trust Ltd. M/s. Turner Morrison and Co. Ltd., as agents of the appellant, filed return mentioning the name of the assessee as M/s. Hungerford Investment Trust Ltd. and the address given was of Singapore. Thereafter, it appears, that the appellant was not finally assessed but M/s. Turner Morrison and Co. Ltd. was, however, assessed. The ITO assessed M/s. Turner Morrison and Co. Ltd. as agent of Hungerford Investment Trust Ltd. and taking the status as nonresident. Being aggrieved by the said assessment order M/s. Turner Morrison and Co. Ltd. preferred an appeal to the AAC who disposed of the same in favour of M/s. Turner Morrison and Co. Ltd. In so far as the assessments for the years 1949-50, 1950-51 and 1951-52, the AAC set aside the assessments against M/s. Turner Morrison and Co. Ltd. with the following observations and directions.

(2.) In view of the various reasons discussed above the assessment for 1949-50 made by the ITO on the resident company, M/s. Turner Morrison & Co. Ltd. as agents of the non-resident company, M/s. Hungerford Investment Trust Ltd., in order to tax the deemed dividend under Section 23A is set aside and the ITO is directed to make a direct assessment on the non-resident company. The assessee is the non-resident company and the ITO has wrongly adopted the alternative machinery of assessment on the resident company as agent of the non-resident company, which machinery was barred by limitation, and hence the ITO had no alternative but to make the direct assessment on the non-resident company and, therefore, the ITO is directed to make the assessment direct on the non-resident company to tax the deemed dividend under Section 23A. In connection with the assessments for the years 1950-51 and 1951-52, as stated earlier, the notices under Section 34 were validly issued taking the assessee as non-resident company directly and the returns of income were also submitted showing the assessee as non-resident company and, therefore, the proceedings are set aside from the date of issue of notice under Section 23(2) and the ITO is directed to make the assessments on the non-resident company after giving fresh opportunity to the asssessee under Section 23(2).

(3.) Shri P.T. Sanyal on behalf of the appellant contends that the AAC cannot give any direction to make fresh assessments directly on the nonresident company merely because the present assessment made on the resident company as agents of the non-resident company are invalid and it is stated that, according to Section 34(3), the direction can be given only in respect of the same assessee and not in respect of another assessee. In view of the reasons stated above, the assessee is the non-resident company, M/s. Hungerford Investment Trust Ltd., and in connection with the assessments for the years 1950-51 and 1951-52, the ITO initiated proceedings for direct reassessment on the non-resident company, but inadvertently in the assessment order the assessee was shown as the resident company as agents of the non-resident company and, therefore, in my opinion, the AAC is justified in giving a direction to make fresh direct assessment on the non-resident company as the assessee all throughout remains the nonresident company and the direction visualises only a change in the machinery for the assessment. Similarly, in connection with the assessment of 1949-50, though the ITO sought to adopt the machinery of assessment on the non-resident company through the resident agent, the AAC is justified in giving direction to make a direct assessment on the non-resident company as the assessee remains the non-resident company and only machinery of assessment is sought to be changed.