1. Tax has been levied on the assessee firm in this case in its capacity as agents of Messrs. Jamal Ramji & Co., a non-resident firm. Section 43 of the Indian Income-tax Act provides :
'43. Any person employed by or on behalf of a person residing out of the taxable territories, or having any business connection 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.
2. Under the said provision of section 43, the Income-tax Officer issued a notice to the assessee firm declaring his intention to tax the assessee in its status of agents of M/s. Jamal Ramji and Co. The assessee then stated that it had no objection to being treated as an agent. The assessee was assessed accordingly. It appears that a similar order was passed for the next assessment year 1942-43. Thereafter, every years including the year in question, i.e., assessment year 1947-48, no separate notice under section 43 was issued to the assessee but only a notice under sub-section (2) of section 22 of the Act was issued to it in its capacity as agents to M/s. Jamal Ramji & Co. In response to this notice the assessee had every year been submitting returns of income of the non-resident assessee and was taxed in its capacity as agents to M/s. Jamal Ramji & Co. In the assessment year 1947-48 also, the assessee filed his return in response to the non-resident firm in its capacity as agents without raising any protest before the Income-tax Officer. In appeal taken by the assessee to the Appellate Assistant Commissioner, however, for the first time he raised a contention that the assessment was bad in law inasmuch as no notice under section 43 had been served on him. This contention failed before the Appellate Assistant Commissioner. The same contention was only a procedural one and, therefore, absence of notice by itself would not invalidate the assessment. It further held that on the facts of the case notice under section 43 was waived by the assessee. In this view of the matter, the Tribunal dismissed the appeal of the assessee. On an application made under sub-section (1) of section 66 the Tribunal has drawn up a statement of case and referred to this court the following question :
'Whether, on the facts and circumstances of this case, the assessment made on the assessee as agents to Messrs. Jamal Ramji & Co. is valid in law ?'
3. Mr. Mehta appearing for the assessee frankly stated that in view of the earlier decision of this court, he would not press the assessee's contention that mere absence of notice under section 43 would invalidate an assessment. It is, however, his contention that the Tribunal was in error in holding that the assessee had waived notice under section 43. According to him, the mere fact that the assessee had filed a return under sub-section (2) of section 22 was not sufficient to infer that the assessee had waived the notice. According to Mr. Mehta, the filing of the return was not a voluntary act. The assessee was served with a notice under sub-section (2) of section 22. If he had not filed the return, penal provisions of section 23 would have been resorted to by the income-tax authorities in making the assessment. It is under the legal compulsion that the assessee had filed a return and from such a course of conduct on the part of the assessee, waiver could not be inferred. Referring us to a decision in Jadavji Narshindas & Co. v. Commissioner of Income-tax, Mr. Mehta argued that had the case been a case of filing a return voluntarily then a waiver could have been inferred but filing a return in response to a notice under sub-section 22 cannot lead to such an inference. He also placed reliance in support of his contention on the case in Commissioner Income-tax v. Maharaj P. S. Bahadur.
4. We are unable to accept these contentions of Mr. Mehta. Now, the argument advanced by Mr. Mehta presupposes that the inference drawn by the Tribunal is founded merely on the fact that the assessee had filed a return. The Tribunal has taken into account the course of conduct of the assessee for the previous number of years : the fact of filing the return by the assessee without any protest and a further fact that the return was filed by the assessee in its capacity as agents. Taking all these facts cumulatively, the Tribunal has inferred that the assessee had waived notice under section 43. Assuming for a moment that the conduct of the assessee in the previous years was not relevant, the two facts that the assessee filed a return in response to a notice under sub-section (2) of section 22 without any protest and in the return admitting its capacity as an agent, taken together, are sufficient to raise an inference in the instant case that the assessee had waived notice. It is true that to draw an inference of waiver relating to any fact, it must be established that a person waiving his right was conscious of his right. In the present case, having regard to the facts of the case, it cannot be said that the assessee was not aware that he was entitled to a notice under section 43 of the Act. In fact, he had in the earlier two years received such notices. In our opinion, therefore, the Tribunal had sufficient material before it on which the inference of waiver could be well-founded.
5. It is true that the facts in Jadavji Narshindas & Co. v. Commissioner of Income-tax show that the assessee had filed a voluntary return and on that basis it has been held that the assessee had waived notice. But it is not possible for us to infer from this decision that in no case filing of a return in response to a notice under sub-section (2) of section 22 would amount to a waiver. The other decision is distinguishable on facts. Firstly, the decision has no relevance in considering the question of waiver of a notice under section 43. The facts of that case were that on 8th of August, 1948, the Income-tax Officer issued notices under section 34 without complying with the conditions laid down in the proviso to section 34 as re-enacted on 8th September, 1948, for taking action under that section. The assessee submitted a return under protest. During the course of the proceedings, the assessee raised a contention that the notice issued was bad in law, inasmuch as the Income-tax Officer neither recorded reasons for issuance of that notice, nor obtained the previous approval of the Commissioner therefor. This contention of the assessee has been upheld throughout. It appears, it was also contended by the revenue that, on the facts of that case, it should be taken that the assessee had waived notice, notice, because he had filed a return in response to a notice under section 34. On these facts, Mr. Mehta argued that in that case the assessee filed a return in response to a notice under section 34, whereas, in the present case, the assessee filed a return in response to a notice under sub-section (2) of section 22. There is a material difference in these two cases, which has been overlooked. In that case the assessee had filed a return under protest and that indicated that he was not submitting to the jurisdiction of the authorities. In the instant case not only there was a return filed without protest but the assessee has therein also accepted its status as agent of Jamal Ramji & Co.
6. For these reasons our answer to the question referred to us is in the affirmative. Assessee shall pay the costs of the department.
7. Question answered in the affirmative.