Judgment:
G.T. Nanavati, J.
1. Though these references pertain to three different assesses and eight assessment years, they were heard together and disposed of by the common judgment as the questions referred to this court are identical.
2. From the facts stated by the Tribunal and on the basis of the record, it appears that Husain Kasam Dada, the assessee in W.T.R. No. 1 of 1979 and Mommad Sidiqu Maji Rahimtula, the assessee in W.T.R. No. 2 of 1979 and Valimohmed Rahimtulla, the assessee in W.T.R. No. 3 of 1979 are neither citizens of India nor residing in India. However they had received income in India from the advances made to or deposits kept with Dilawar Syndicate (P) Ltd., Junagadh. On May 14, 1971, Dilawar Syndicate (P) Ltd. filed returns for all the three assessees for the assessment years 1963-64 to 1970-71. While passing the assessment orders, the Wealth-tax Officer also passed orders for issuance of show-cause notices under section 18(1)(a) of the Wealth-tax Act, 1957 ('the Act'), for the late submission of the returns. Those notices were not replied to and in the absence of any explanation on behalf of the assessees, orders for levying penalty were passed. It appears from the orders levying penalty that even though the assessees were informed about the date fixed for hearing of the assessment proceedings nobody had appeared on behalf of the assessees. Aggrieved by the orders imposing penalty, the assessees, through their agent, Dilawar Syndicate (P) Ltd., preferred appeals before the Appellate Assistant Commissioner. What was contended before the Appellate Assistant Commissioner was that the deposits made by the assessees were invested with Kathiawar Industries Ltd. and therefore, they believed that it was not their obligation to file wealth-tax returns. In May, 1971, it was bought to their notice by the tax consultant that they were under a statutory obligation to file wealth-tax returns as agent of these assessees and it was for that reason that they filed the returns. It was also contended that before imposing penalty show-cause notices were not served on the legally authorised agent. It was further contended that there was no deliberate or intentional default on their part, and therefore, the order of penalty was not legal and sustainable.
3. The Appellate Assistant Commissioner held that as returns were field by Dilawar Syndicate (P) Ltd. voluntarily acting as an agent of the assessees, section 22(1) of the Act applied and it was the statutory obligation of the appellant viz., Dilawar Syndicate (P) Ltd., to file wealth-tax returns within time. As regards the contention that the show-cause notices were not served, the Appellate Assistant Commissioner held that notices were served upon B. M. Ratiya of Dilawar Syndicate (P) Ltd., as authorised representative of the assessees, Ratiya had represented the assessees during the assessment proceedings and therefore, it was not correct to say that show-cause notices were not properly served. He also held that Dilawar Syndicate (P) Ltd. had acted as agent of the assessees right from 1946 and, therefore, it was not correct to say that only when their attention was drawn by their tax consultant they realised that they had to file the returns. He therefore, dismissed the appeals and confirmed the orders passed by the Wealth-tax Officer.
4. Aggrieved by the orders passed by the Appellate Assistant Commissioner, Dilawar Syndicate (P) Ltd., preferred eight separate appeals before the Tribunal for each of the three assessees as the orders pertained to eight different assessment years, viz., assessment years 1963-64 to 1970-71. The Tribunal held that issuance of notices under section 22(2) was a necessary conditions precedent before treating Dilawar Syndicate (P) Ltd. as the agent of the assessees and as no such notice was issued, even though they can be regarded as the agent of the assessees, the penalty proceedings cannot be said to have been validly initiated. Taking this view the Tribunal allowed the appeals and ordered deletion of penalty imposed upon the assesses.
5. The Revenue, therefore preferred 24 separate applications for referring the following three questions to this court :
'1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in deleting the penalties imposed under section 18(1)(a) of the Wealth-tax Act, 1957
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that without service of notice as required under section 22(2) of the Wealth-tax Act, 1957, no person could be held liable to file return of net wealth of a person residing outside India
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that a person who being in possession or custody of any asset of a person residing outside India filed return of net wealth of the person residing abroad without receipt of notice under section 22(2) of the Wealth-tax Act, 1957, was not liable to be penalised under section 18(1) of the Wealth-tax Act, 1957 ?'
6. As the said question do arise out of its orders, the Tribunal has referred the same to this court for its opinion.
7. What is contended by learned counsel for the Revenue is that the Tribunal has committed an error of law in holding that without service of notice under section 22(2) of the Act, no person could be held liable to file the return of net wealth of a person residing outside India and that he cannot be made liable to pay penalty under section 18(1)(i).
8. Before we refer to the relevant provisions of law, it would be profitable to again emphasise the facts which are not in dispute. Dilawar Syndicate (P) Ltd. had voluntarily filed wealth-tax returns. During the wealth-tax proceedings, they had represented the assessees by acting as their agent. They had not raised any contention during the assessment proceedings, that they were not the agent of the assessees. It also appears that tax was paid by them on behalf of the assessees. The person who represented them during the assessment proceedings was served with the show-cause notice whereby penalty proceedings were initiated.
9. We may now turn to section 22. It becomes apparent from sub-section (1) thereof that tax may be levied upon and recovered from an agent of the person liable to pay tax under the Act who is residing outside India. The agent of the assessee is deemed to be for the purpose of the Act, the assessee in respect of such tax. Sub-section (2) reads as under :
'(2) Any person employed by or on behalf of a person referred to in sub-section (1) or through whom such person is in the receipt of any income, profits and gains, or who is in possession or has custody of any asset of such person and upon whom the Assessing Officer has caused a notice to be served of his intention of treating him as the agent of such person shall for the purposes of sub-section (1) be deemed to be the agent.'
10. Persons who are not employed as agents by their principals can also be regarded as agents, according to this sub-section. It specifies different person who can be regarded as agents of the assessee. It provides that (i) any person employed by or on behalf of a person liable to pay tax under the Act but residing outside India; (ii) any person through whom such person that is the person residing outside India liable to pay tax under the Act, is in receipt of any income, profits or gains; or (iii) any person who is in possession or has custody of any asset of such person that is the person residing outside India liable to pay tax in India. However, this sub-section further provides that before treating any such person as an agent, the Assessing Officer should be cause a notice to be issued of his intention of treating him as an agent of such person. If such notice is issued and if the Assessing Officer is satisfied about the conditions necessary for treating any such person as agent, he can treat such person a agent and thereafter he is to be deemed as agent of the person residing outside India but who is liable to pay tax under the Act. Thus, sub-section (2) provides who can be deemed to be an agent of a non-resident assessee. If such persons are to be treated as agents, the requirement of giving notice will become applicable. There is no such requirement of issuing a notice to a person who is otherwise appointed as agent or who has acted as agent and who has been accepted as agent of the assessee. Whereas sub-section (1) refers to an agent who is either appointed or accepted as agent, sub-section (2) indicates who can be treated as an agent.
11. As pointed out above, in this case, the Assessing Officer had no occasion to treat Dilawar Syndicate (P) Ltd. as the agent because Dilawar Syndicate (P) Ltd. had acted as agent of the assessees by filing returns voluntarily and represented the assessees throughout the assessment proceedings. In fact, they had described themselves as the agent of the assessees and, thus, admitted that they were the agent of the assessees. We are of the opinion that in these cases, it was not at all necessary for the Assessing Officer to issue notice to the respondents under section 22(2) as the cases were governed by section 22(1). The view which we are taking is also, to some extent, supported by a decision of the Bombay High Court in the case of Jadavji Narshidas and Co. v. CIT : [1957]31ITR1(Bom) . This was a case under the Indian Income-tax Act, 1922. Though the relevant provisions of that Act and the provisions with which we are concerned cannot be said to be identical, the observations made in that decision can usefully be applied to this case also. Therein, the High Court has held that as the assessee made the return without being called upon to submit a return by notice under section 22(2) and in that return he admitted the status as an agent of the non-resident, non-service of notice was of no consequence. The High Court observed that once he filed the return as agent, without being called upon to do so, he admitted his status as agent. The bombay High Court also held that the provision requiring notice to be given to such a person is a procedural requirement and no a condition precedent to the initiation of the proceedings.
12. In this case also, it can be said that the respondents having voluntarily filed the wealth-tax returns on behalf of the assessees, admitted their status as their agents, it was not necessary for the Wealth-tax Officer to give any further notice to them under section 22(2) before levying any penalty upon the assessees.
13. In that view of the matter, question No. 1 will have to be answered in the negative, that is, in favour of the Revenue and against the assessees. Question No. 2 is also answered in the negative, that is, in favour of the Revenue and against the assessees. Question No. 3 is also answered in the negative, that is, in favour of the Revenue and against the assessees. There will be no order as to costs.
14. As eight separate appeals were filed in each case and eight separate reference were made in each case, the Tribunal ought to have made separate references in respect of each of the assessment years. As that has not been done by the Tribunal, we direct the office to give separate numbers to the references treating reference No. 1 as reference for the assessment year 1963-64, and likewise, to give separate numbers to other references for different years.
15. Reference answered in the negative.