The Commissioner Of Income Tax ,Jalandhar-Ii,Jalandhar v. Rakesh Chander Goyal

In the High Court for the States of Punjab and Haryana at Chandigarh … ITA No.613 of 2007 Date of decision:31.3.2008 The Commissioner of Income Tax ,Jalandhar-II,Jalandhar Appellant Versus Rakesh Chander Goyal .. Respondent Coram: Hon’ble Mr.Justice Satish Kumar MittalHon'ble Mr.Justice Rakesh Kumar Garg Present:Mr.Sanjiv Bansal, Advocatefor the Revenue/appellant. Rakesh Kumar Garg,J 1.The Revenue has filed the present Appeal under Section260A of the Income Tax Act, 1961(for short ‘the Act’) against theorder dated 11.52007 passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar (for short ‘the Tribunal’), in IT(SS)A No.9(ASR)/2006 for the Block period from 1.4.1987 to 20.5.1997 raisingthe following proposed substantial question of law: - “a)Whether on the facts and in the circumstances of thecase , the ITAT has erred in law to not hold theassessee as an agent to the non-resident under Section163 of the Income Tax Act ?” A search operation was carried out in the case of M/sHotel Park Avenue, Phillaur on 20.5.1997 under Section 132 of theAct. The residential premises of the assessee was also searched. Itcame to the notice of the Revenue that one Shri Raj Kumar Goyal,brother of the assessee was maintaining some bank accounts.Source of deposits in these bank accounts were required to beexplained. Therefore, proceedings under Section 158BD of the Actto bring to tax unexplained income of Raj Kumar(Non-resident Indianbrother of the assessee) were initiated. Since Raj Kumar Goyalbrother of the assessee was a Non Resident Indian therefore,proceedings under Section 163 of the Act were taken up against theassessee. A show cause notice was given to the assessee on25.11.2003, to provide an opportunity to explain as to why he shouldnot be treated as an agent of Raj Kumar Goyal for the purpose offraming assessment under section 158BD of the Act. In response tothe show cause notice, the assessee furnished written explanationdated 30.1.2004 explaining therein that none of the provisions ofSection 163 of the Act is applicable in his case. The DeputyCommissioner of Income Tax, Phagwara Circle, Phagwara vide hisorder dated 10.3.2005 passed under Section 163 of the Act treatedthe assessee as an agent of his Non Resident Indian brother. Feeling aggrieved against this order, the assessee filedan appeal before the Commissioner of Income Tax(Appeals),Jalandhar. While allowing the appeal of the assessee, theCommissioner of Income Tax (Appeals), held that neither there is anybusiness connection nor the existence of income under Section 9(1) of the Act to the Non Resident Indian, which is a conditionprecedent for invoking sub clause(c ) and (d) of Section 163(1) of theAct and therefore, the order of the Assessing Officer to hold theappellant as an agent of his non-resident Indian brother was setaside. Not satisfied with the order of the Commissioner ofIncome Tax(Appeals), the Revenue filed the appeal before theTribunal challenging the said order. The Tribunal while dismissing theappeal filed by the Revenue held that neither there was any businessconnection of the assessee with the non-resident Indian, nor did anyincome come into existence as having been received by the non-resident Indian so as to attract the provisions of Section 163(1)(c) ofthe Act. Further the assessee had also not been proved to be trusteeof the non-resident Indian so as to attract the provisions of Section163(1)(d) of the Act. We have heard learned counsel for the Revenue. Not satisfied with the order of the Commissioner ofIncome Tax(Appeals), the Revenue filed the appeal before theTribunal challenging the said order. The Tribunal while dismissing theappeal filed by the Revenue held that neither there was any businessconnection of the assessee with the non-resident Indian, nor did anyincome come into existence as having been received by the non-resident Indian so as to attract the provisions of Section 163(1)(c) ofthe Act. Further the assessee had also not been proved to be trusteeof the non-resident Indian so as to attract the provisions of Section163(1)(d) of the Act. We have heard learned counsel for the Revenue. It has been vehemently argued before us that theassessee was not able to explain as to why the deposits were heldby him jointly with Raj Kumar Goyal as Non Resident Indian brotherand he has not been able to disprove the trusteeship of the propertyjointly held with said Shri Raj Kumar Goyal. We find no force in theargument raised by the learned counsel for the Revenue. Whilegiving a categoric finding of fact, the Tribunal has observed asunder:- “ We have heard the learned D.R. and have gonethrough the material on record. Section 163 of the Actstates that “agent”, in relation to a non resident,includes any person in India, who is employed by or onbehalf of a non-resident, or who has any businessconnection with the non-resident, or from or throughwhom the non resident is in receipt of any income,whether directly or indirectly or who is the trustee of thenon-resident, and also includes any other person who,whether a resident or non resident, has acquired bymeans of a transfer a capital asset in India. In thepresent case, it has not been disputed before us, thatas noted by the learned CIT(A) in the impugned order,vide notice dated 25.11.2003, proceedings wereinitiated under Sections 163(1)(b) and 163(1)(c) i.e. toascertain whether the assessee has any businessconnection with the non resident and also to seewhether the non resident is in receipt of any incomefrom or through the assesse. However, the order waspassed by the A.O. Under Sections 163(1)(c) and 163(1)(d), the later section dealing with the question as towhether the assessee is or is not the trustee of the nonresident. That being so, evidently, the A.O. could notestablish any business connection of the assessee, withthe non-resident. Apropos the issue as to whether the non-resident was in receipt of any income, direct orindirect, through the assessee, in reply to show causenotice, the assessee has categorically said that therelevant KDR was held only in the name of Shri RakeshGoyal and that the entire proceeds were credited to hisbank account, on 16.3.1993. This itself shows that therewas no accrual of income to the non-resident, and oncethere was no accrual of income proved in the name ofnon-resident, section 163(1)(c) also could not beapplied on the assessee. Apropos the property heldjointly by the assessee and the NRI, as noted by thelearned CIT(A), there is no evidence of any income fromsuch property and the assessee has not been proved tobe a trustee of the NRI and the conclusion of the A.O.that the assessee was such a trustee, was a result ofmerely conjectures and surmises. Here again, theapplication of Section163(1)(c) of the Act against theassessee fails.” From the reading of the above conclusion of the Tribunal,it is clearly established that the assessee was not having anybusiness connection with the Non-resident Indian brother nor anyincome came into existence as having been received by the Non-resident Indian so as to attract the provisions of Section 163(1)(c) ofthe Act and the Department has also failed to prove the assessee asa trustee of the Non-resident Indian so as to attract Section 163(1)(d) of the Act. From the reading of the above conclusion of the Tribunal,it is clearly established that the assessee was not having anybusiness connection with the Non-resident Indian brother nor anyincome came into existence as having been received by the Non-resident Indian so as to attract the provisions of Section 163(1)(c) ofthe Act and the Department has also failed to prove the assessee asa trustee of the Non-resident Indian so as to attract Section 163(1)(d) of the Act. In view of the aforesaid discussion, we find no ground tointerfere in the present appeal. No substantial question of law isinvolved in the present appeal. Hence the appeal is dismissed. (RAKESH KUMAR GARG) JUDGE March 31, 2008 (SATISH KUMAR MITTAL)nk JUDGE