S.C. TIWARI, A.M. As common issues are involved in these two appeals, same were argued together by learned Authorised Representative of assessee and learned Departmental Representative. We are deciding these two appeals by this consolidated order for convenience. 2. appeal in ITA 385/Del/2002 has been filed by assessee on 12th Feb., 2002, against order of learned CIT(A)-XXX, New Delhi, dt. 20th Nov., 2001 in case of assessee in relation to orders under ss. 201(1) and 201(1A) of Act, for asst. yrs. 1998-99 and 1999-2000. Later on when assessee realized that there were two assessment years involved, assessee filed one more appeal on 1st Oct., 2004. In these appeals, assessee has disputed being treated assessee in default under s. 201(1) and being charged interest under s. 201(1A) of Act in relation to salary received overseas by assessee s managing director. facts of case, briefly are that assessee is company incorporated in India in which Kinetic Technology International B.V. Netherlands (now Technip Benelux B.V. of Netherlands) had 50 per cent shareholding. One Mr. W.G. Holt joined company as vice president on 3rd Jan., 1988, and later on became managing director of assessee-company on 27th April, 1998. There was survey operation under s. 133A(1) of Act conducted at business premises of assessee-company on 1st Dec., 1999. During course of survey operation, statement of Shri W.G. Holt was recorded. In course of statement, Mr. Holt denied having received any salaries overseas for services rendered in India. However, subsequently, when Mr. Holt s statement was recorded under s. 131 on 6th Dec., 1999, Mr. Holt admitted having received following salary from Kinetic Technology International B.V. Netherlands : Financial year Amount of overseas salary 1998-99 Rs. 40,10,037 1999-2000 Rs. 28,18,824 3 . AO noticed that assessee-company in India was not clubbing salary received by Mr. Holt overseas for purpose of deduction of tax at source. Consequently, no tax was deducted from overseas salary. AO, therefore, proceeded to pass orders under ss. 201(1) and 201(1A) in relation to unpaid tax and interest on such unpaid tax. During course of proceedings under ss. 201(1) and 201(1A) for two asst. yrs. 1998-99 and 1999-2000, assessee agreed to be treated as assessee in default and paid amount of tax as well as interest under s. 201(1A) which was worked out by learned AO in following manner : 1998-99 Tax under s. 201(1) 12,28,680 Interest under s. 201(1A) 2,50,184 1999-2000 Tax under s. 201(1) 9,30,212 Interest under s. 201(1A) 55,812 4 . However, assessee filed appeal before learned CIT(A) against orders under ss. 201(1) and 201(1A) made by AO on 7th Feb., 2000. During course of proceedings before CIT(A), assessee argued that it had no knowledge about salaries paid overseas to Mr. Holt. Mr. Holt never disclosed this fact to principal officer of company incharge of tax deduction at source and, therefore, assessee-company had no occasion or basis to deduct tax at source in relation to salaries received by Mr. Holt from Kinetic Technology International B.V. Netherlands outside India. learned CIT(A) considered this contention of assessee. He found contention of assessee-company in India that it had no knowledge of salaries paid to Mr. Holt overseas to be not correct. Kinetic Technology International B.V., Netherlands, had 50 per cent share in assessee-company and there was commonality of funds, technology and other interests. In fact, it was Kinetic Technology International B.V. Netherlands who had deputed Mr. Holt as vice president and subsequently as managing director of assessee-company. According to learned CIT(A), amount paid to Mr. Holt was as agreed upon between companies. Themodus operandiwas that part of salary of Mr. Holt would be transferred to Netherlands company as part of profit with sole objective of avoiding Indian tax on such salary payments. learned CIT(A) noted that assessee was not alone in this kind of practice. As matter of fact, this practice was being adopted in India by several multinationals so much so that when such facts came to light, CBDT issued three circulars in quick succession being Circular No. 685, dt. 20th June, 1994 [(1994) 119 CTR (St) 61], Circular No. 686, dt. 12th Aug., 1994 [(1994) 120 CTR (St) 25] and Circular No. 6 96 , dt. 16th Dec., 1994 [(1994) 122 CTR (St) 33]. survey under s. 133A was conducted at business premises of assessee- company and similar surveys had been conducted also at business premises of large number of multinational companies operating in India. CIT(A) held that legal position was quite clear. Under provisions of s. 9(1)(ii) of IT Act, 1 96 1, salaries paid overseas to Mr. Holt was chargeable to tax in India under head "Salaries". That being so, there was liability to deduct tax at source not only from salary paid to Mr. Holt in India, but also from salary being paid to Mr. Holt overseas. learned CIT(A), therefore, held that assessee had rightly been treated to be assessee in default in relation to salary paid to Mr. Holt overseas and he accordingly upheld orders of AO under ss. 201(1) and 201(1A) for both financial years 1998-99 and 1999-2000. Still aggrieved, assessee is in appeal before us. 5 . During course of hearing before us, learned Authorised Representative of assessee strongly relied upon decision of Tribunal, Delhi Bench B , New Delhi, dt. 22nd Dec., 2004 in assessee s own case in relation to penalty under s. 271(1)(c) (sic) for asst. yr. 1998-99 in ITA No. 957/Del/2001 [reported asKinetics Technology (India) Ltd. vs. Jt. CIT (2005) 94 TTJ (Del) 1 Ed.]. It was argued that on same facts, Tribunal had already held that assessee had liability to deduct tax at source only in relation to salary paid by it to Mr. Holt in India. In short, assessee argued that it was responsible under provisions of s. 192 for deduction of tax at source only in respect of amount paid by it in India as salaries to Mr. Holt moreso, when Mr. Holt had never brought fact of salaries being paid to him overseas to notice of assessee-company as he was required to do under provisions of s. 192(2) of Act. When pointed attention of assessee was drawn to provisions of Explanation appended to s. 9(1)(ii) and s. 163(1) of Act, learned counsel for assessee argued that order made by AO cannot be justified under those provisions because no notice had been served upon assessee for being treated as "agent" of Kinetic Technology International B.V., Netherlands. 6. learned Departmental Representative argued that assessee had during course of proceedings under ss. 201(1) and 201(1A) before AO admitted its default within meaning of these two provisions and assessee also paid both amount of short-deduction of TDS as well as interest payable thereon. These facts were duly mentioned by AO in his order under ss. 201(1) and 201(1A) for both financial years 1998-99 and 1999-2000. Secondly, learned Departmental Representative argued that it was unbelievable that assessee who had such mutuality of interest and close connection with Kinetic Technology International B.V., Netherlands, would not even be aware of salary being paid overseas to Mr. Holt. learned Departmental Representative emphasized that Mr. Holt was none other than managing director of assessee-company. Hence, salary received by Mr. Holt automatically came to knowledge of assessee-company. On facts of case it was patent that earlier attempt was made to avoid Indian tax on full salary paid to Mr. Holt. assessee-company was party to it. At any rate, for sake of argument without admitting if default was on part of Netherlands company, assessee was to make good default being its agent within meaning of s. 163(1) of Act. 7 . We have carefully considered rival submissions. At outset, we may mention that order of Tribunal, Delhi Bench B , relied upon by assessee has been made under provisions of s. 271(1)(c) (sic) being penalty for concealment of income or for furnishing inaccurate particulars of income. Hence, entire conspectus of that decision is vastly different from proceedings before us. In that case, Tribunal haveinter alia,made following observations : "9. We have carefully considered entire material on record. agreement between M/s Kinetics Technology (India) Ltd. and Mr. W.G. Holt is available at pp. 35 to 39 of paper book and as per this agreement in meeting dt. 23rd July, 1998 of board of directors, Mr. Holt was appointed as managing director of company for three years. As per cl. 2 of this agreement v i d e letter dt. 10th Sept., 1998, Central Government approved appointment of Mr. Holt as managing director on terms and conditions contained in that letter. copy of this letter dt. 10th Sept., 1998 on subject Approval of Central Government under ss. 269, 198/309 and 637AA of Companies Act, has been filed by assessee and is available at pp. 1 to 3 of paper book. As per this letter, salary of Rs. 1,00,000 per month was approved, besides other perquisites as approved by board/members of company. There is no dispute that on payment of salary as approved by Central Government, assessee was deducting tax. So far as other salary earned by Mr. Holt outside India from another company is concerned, there was no legal responsibility on assessee-company which was separate juristic person to deduct tax at source on such salary. It is different matter that in view o f discussion held in meeting with Addl. CIT as per letter dt. 6th March, 2000 on record, assessee-company agreed to bear interest under s. 201(1A), but so far as question of penalty under s. 271(1)(c) is concerned, there was no default on part of assessee-company, because it was not even aware of any salary being paid abroad by KTIB V to Mr. Holt. Therefore, there was no shortcoming in deduction of tax and deposit thereof in respect of salary and perquisite paid to Mr. Holt in India by assessee-company. It may be pointed out that as assessee was not liable to deduct TDS on salary paid abroad to expatriate employee, there was no liability on assessee under s. 192(1) and (2). It may also be pointed out that in show-cause notice issued under s. 271(1)(c), assessee was required to show as to why it failed to deduct tax at source. As there was no liability of assessee to deduct tax, there was no violation as mentioned in notice and on this ground, assessee challenged even validity of notice. 10. On going through provisions contained in s. 192(1), it is found that liability for deducting tax under s. 192(1) is, on any person responsible for paying any income chargeable under head Salary . Thus, person paying or responsible for paying income is liable to deduct tax. Thus, liability to deduct tax on employee is on amount of salary, which such employer pays to employee. But if another employer pays such salary to that employee simultaneously or otherwise, then no liability can be fastened on first mentioned employer to deduct tax on that amount at source. Revenue has not challenged that assessee-company has not correctly deducted tax at source as per provisions of s. 192(1) on amount of salary paid by it. 11. It may be pointed out that in view of s. 192(2) responsibility was on employee who was getting salary from another employer to furnish details. As in this case Mr. Holt had not disclosed details of salary received by him from other company, there was no responsibility on assessee- company to make deductions in relations to such salary. In view of above, fault under s. 271(1)(c) cannot be laid on assessee. 12. Besides above, in our considered view, plea of reasonable cause being on part of assessee in failing to deduct tax also deserves to be allowed on facts and in circumstances of this case and in particular on account of fact that assessee-company was not informed by managing director about receipt of income outside India by him." We need to observe, with respect, provisions of s. 9(1)(ii) and Explanation thereto as well as provisions of s. 163(1) were not brought to notice of Tribunal. Also, fact that Kinetic Technology International B.V., Netherlands, was having at that time 50 per cent shareholding in assessee- company was not brought to their notice. Moreover, decision of Tribunal is based on fact that Mr. Holt had not formally communicated to assessee-company fact of salaries received by it overseas. We, therefore, hold that aforesaid decision of Tribunal rendered in relation to penalty under s. 271(1)(c) (sic) has not adjudicated question of assessee s liability under ss. 201(1) and 201(1A) in dispute before us. 8 . In our opinion, impugned orders under ss. 201(1) and 201(1A) are good orders both in terms of provisions of s. 192 of Act as well as under provisions of Explanation to s. 9(1)(ii) r/w s. 163(1) of Act. We see considerable force in contention of learned Departmental Representative that Mr. W.G. Holt was managing director of assessee-company and, therefore, his having received salary overseas in respect of services rendered by it in India to assessee-company, from Kinetic Technology International B.V., Netherlands, instantaneously came to knowledge of assessee-company. fact that Mr. Holt did not formally communicate it in writing to assessee-company may be considered mitigating circumstance for purposes of penal provisions of Act only. 9. As to provisions of Explanation appended to s. 9(1)(ii), provisions are quite clear. As long as Mr. Holt was paid salaries overseas for services rendered in India, such payments fell under head "Salaries" as income earned in India and chargeable to income-tax. Consequently, provisions of s. 192(1)/192(2) apply. Kinetic Technologies International B.V., Netherlands, was 50 per cent shareholder of assessee-company at relevant time and had considerable interest in business of assessee-company and, therefore, assessee was natural agent of Kinetic Technology International B.V., Netherlands, within meaning of s. 163(1) of Act. During course of hearing before us learned Authorised Representative of assessee argued that assessee-company could not be treated as agent of Netherlands company within meaning of s. 163(1) without having been served notice of learned AO s intention to appoint assessee as agent. Though provisions of s. 163(1) do not make formal notice mandatory, we agree that reasonable opportunity of being heard must be afforded before any person is treated as agent of non-resident within meaning of s. 163(1) of Act. We would have, therefore, restored matter to file of AO to grant assessee such opportunity in first instance and, thereafter pass fresh orders in accordance with law. But we find that during course of proceedings under s. 201(1), assessee-company itself agreed to be treated as assessee in default and has made full payments of demands aggregating to Rs. 24,64,898. There is not even whisper of objection on part of assessee against being treated assessee in default during course of proceedings under ss. 201(1) and 201(1A) conducted by learned AO. These facts have been duly recorded by AO and during course of proceedings either before CIT(A) or before us there is no refuter on part of assessee. Where was question of want of opportunity to assessee when assessee himself conceded issue ? As matter of fact, assessee s appeals are liable to be dismissed on this short ground alone. At any rate, on merits and substance also we find order passed by AO to be good order in accordance with provisions of Act. 10. In result, both these appeals fail and are accordingly dismissed. *** KINETIC TECHNOLOGY (INDIA) LTD. v. INCOME TAX OFFICER