COMMISSIONER OF INCOME-TAX, PUNJAB, NORTH-WEST FRONTIER AND DELHI PROVINCES, LAHORE Vs. NAWAL KISHORE-KHARAITI LAL

JUDGEMENT

(1.) This appeal is brought from a decision of the High Court at Lahore by the Commissioner of Income-tax, Punjab, North-West Frontier and Delhi Provinces. On 8 June 1931, the Income- tax Officer at Delhi made an order under S.23, sub-s.3, read with S.34, Income-tax Act 1922, whereby for the year of assessment, 1926-27, he assessed the respondent firm upon a 'total income' of Rs.72,928 and determined that the tax payable thereon was Rs. 6,837. This assessment order was made upon the respondent firm whose name and style is Nawal Kishore-Kharaiti Lal and who carry on business as jewellers at Delhi, but it was made upon them as agent for a Hindu undivided family resident in the State of Jaipur outside British India. One Seth Banji Lal had been head of this family, but had died in December 1928. The validity of this assessment order is in substance the matter in dispute between the parties, but the case comes before their Lordships as an appeal by special leave from the judgment of the High Court upon a reference made under S. 66 of the Act formulating three questions of law for the High Court's decision. As these questions challenge the procedure adopted by the Income-tax authorities, it will be convenient to state first the steps which they had taken and then the objections raised by the respondent firm. Ss.34, 42 (1) and 43 of the Act are the provisions of chief importance in the case : 34. If for any reason income, profits, or gains chargeable to income-tax has escaped assessment in any year, or has been assessed at too low a rate, the Income-tax Officer may, at any time within one year of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub s. (2) of S. 22, and may proceed to assess or re-assess such income, profits or gains, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section :

(2.) Provided that the tax shall be charged at the rate at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be. 42 (1). In the case of any person residing out of British India, all profits or gains accruing or arising, to such person, whether directly or indirectly, through or from any business connexion or property in British India, shall be deemed to be income accruing or arising within British India, and shall be chargeable to income-tax in the name of the agent of any such person, and such agent shall be deemed to be, for all the purposes of this Act, the asseseee in respect of such income-tax :

(3.) Provided that any arrears of tax may be recovered also in accordance with the provisions of this Act from any assets of the non-resident person which are, or may at any time come, within British India. 43. Any person employed by or on behalf of a person residing out of British India, or having any business connexion with such person, or through whom such person is in the receipt of any income, profits or gains upon whom the Income-tax Officer has caused a notice to be served of his intention of treating him as the agent of the non-resident person shall, for all the purposes of this Act, be deemed to be such agent; Provided that no person shall be deemed to be the agent of a non-resident person, unless he has had an opportunity of being heard by the Income-tax Officer as to his liability.