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 Mittal Hon'ble Mr.Justice Rakesh Kumar Garg Present: Mr.Sanjiv Bansal, Advocate for the Revenue/appellant. Rakesh Kumar Garg,J 1. The Revenue has filed the present Appeal under Section 260A of the Income Tax Act, 1961(for short ‘the Act’) against the order 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 raising the following proposed substantial question of law: - “a)Whether on the facts and in the circumstances of the case , the ITAT has erred in law to not hold the assessee as an agent to the non-resident under Section 163 of the Income Tax Act ?” A search operation was carried out in the case of M/s Hotel Park Avenue, Phillaur on 20.5.1997 under Section 132 of the Act. The residential premises of the assessee was also searched. It came 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 be explained. Therefore, proceedings under Section 158BD of the Act to bring to tax unexplained income of Raj Kumar(Non-resident Indian brother of the assessee) were initiated. Since Raj Kumar Goyal brother of the assessee was a Non Resident Indian therefore, proceedings under Section 163 of the Act were taken up against the assessee. A show cause notice was given to the assessee on 25.11.2003, to provide an opportunity to explain as to why he should not be treated as an agent of Raj Kumar Goyal for the purpose of framing assessment under section 158BD of the Act. In response to the show cause notice, the assessee furnished written explanation dated 30.1.2004 explaining therein that none of the provisions of Section 163 of the Act is applicable in his case. The Deputy Commissioner of Income Tax, Phagwara Circle, Phagwara vide his order dated 10.3.2005 passed under Section 163 of the Act treated the assessee as an agent of his Non Resident Indian brother. Feeling aggrieved against this order, the assessee filed an appeal before the Commissioner of Income Tax(Appeals), Jalandhar. While allowing the appeal of the assessee, the Commissioner 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 condition precedent for invoking sub clause(c ) and (d) of Section 163(1) of the Act and therefore, the order of the Assessing Officer to hold the appellant as an agent of his non-resident Indian brother was set aside. Not satisfied with the order of the Commissioner of Income Tax(Appeals), the Revenue filed the appeal before the Tribunal challenging the said order. The Tribunal while dismissing the appeal filed by the Revenue held that neither there was any business connection of the assessee with the non-resident Indian, nor did any income come into existence as having been received by the non- resident Indian so as to attract the provisions of Section 163(1)(c) of the Act. Further the assessee had also not been proved to be trustee of the non-resident Indian so as to attract the provisions of Section 163(1)(d) of the Act. We have heard learned counsel for the Revenue. It has been vehemently argued before us that the assessee was not able to explain as to why the deposits were held by him jointly with Raj Kumar Goyal as Non Resident Indian brother and he has not been able to disprove the trusteeship of the property jointly held with said Shri Raj Kumar Goyal. We find no force in the argument raised by the learned counsel for the Revenue. While giving a categoric finding of fact, the Tribunal has observed as under:- “ We have heard the learned D.R. and have gone through the material on record. Section 163 of the Act states that “agent”, in relation to a non resident, includes any person in India, who is employed by or on behalf of a non-resident, or who has any business connection with the non-resident, or from or through whom the non resident is in receipt of any income, whether directly or indirectly or who is the trustee of the non-resident, and also includes any other person who, whether a resident or non resident, has acquired by means of a transfer a capital asset in India. In the present case, it has not been disputed before us, that as noted by the learned CIT(A) in the impugned order, vide notice dated 25.11.2003, proceedings were initiated under Sections 163(1)(b) and 163(1)(c) i.e. to ascertain whether the assessee has any business connection with the non resident and also to see whether the non resident is in receipt of any income from or through the assesse. However, the order was passed by the A.O. Under Sections 163(1)(c) and 163 (1)(d), the later section dealing with the question as to whether the assessee is or is not the trustee of the non resident. That being so, evidently, the A.O. could not establish any business connection of the assessee, with the non-resident. Apropos the issue as to whether the non-resident was in receipt of any income, direct or indirect, through the assessee, in reply to show cause notice, the assessee has categorically said that the relevant KDR was held only in the name of Shri Rakesh Goyal and that the entire proceeds were credited to his bank account, on 16.3.1993. This itself shows that there was no accrual of income to the non-resident, and once there was no accrual of income proved in the name of non-resident, section 163(1)(c) also could not be applied on the assessee. Apropos the property held jointly by the assessee and the NRI, as noted by the learned CIT(A), there is no evidence of any income from such property and the assessee has not been proved to be a trustee of the NRI and the conclusion of the A.O. that the assessee was such a trustee, was a result of merely conjectures and surmises. Here again, the application of Section163(1)(c) of the Act against the assessee fails.” From the reading of the above conclusion of the Tribunal, it is clearly established that the assessee was not having any business connection with the Non-resident Indian brother nor any income came into existence as having been received by the Non- resident Indian so as to attract the provisions of Section 163(1)(c) of the Act and the Department has also failed to prove the assessee as a 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 to interfere in the present appeal. No substantial question of law is involved in the present appeal. Hence the appeal is dismissed. (RAKESH KUMAR GARG) JUDGE March 31, 2008 (SATISH KUMAR MITTAL) nk JUDGE