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[2007] 164 Taxman 616 (Punjab & Haryana)/[2009] 311 ITR 266 (Punjab & Haryana)/[2007] 212 CTR 130 (Punjab & Haryana) [2007] 164 TAXMAN 616 (PUNJ. & HAR.) HIGH COURT OF PUNJAB AND HARYANA Commissioner of Income-tax v. Prem Kumar Bhagat * M.M. KUMAR AND AJAY KUMAR MITTAL, JJ. IT REFERENCE NO. 75 OF 1998 JULY 26, 2007 Section 163 of the Income-tax Act, 1961 - Non-resident - Agent of - Assessment year 1973-74 - Whether provisions of section 163(2) are mandatory in character - Held, yes - Whether where return of non-resident assessee was filed by his brother as agent of assessee, an order under section 163(2) was required to be passed by AO declaring brother of assessee as agent of assessee - Held, yes Words and phrases : 'shall' as occurring in section 163 of the Income-tax Act, 1961 FACTS One 'S' had filed a return of income as an agent of his NRI brother, the assessee. The ITO completed the assessment. However, the AAC set aside the assessment with a direction that the ITO should first of all record a finding as to whether the assessee was an NRI, thereafter, he should consider whether 'S' had got no objection to be appointed as an agent of his brother and then to frame the assessment order after giving due opportunity of being heard to 'S'. The ITO, however, reframed the assessment without complying with said direction. On appeal, the assessee challenged the order of the ITO on the ground that the ITO was not justified in appointing 'S' as his agent without granting opportunity of hearing under section 163. However, the AAC upheld the impugned order on the ground that while filing return of the assessee, 'S' had declared himself to be his agent. On second appeal, the Tribunal held that the assessment order was vitiated and bad in law for non-compliance of section 163(2). On reference : HELD The provisions of section 163(2) are mandatory in character because in said section the expression 'shall' has been used and, therefore, an order was required to be passed by the ITO declaring 'S' as an agent of his assessee brother. Therefore, the Tribunal was right in law : (i) in cancelling the assessment made on the agent of the non-resident assessee, who…

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