2018 (5) TMI 897 - AT - Income Tax

Tax Tribunal: Invalid assessment against defunct entity post-amalgamation. Precedents support CIT(A)'s decision.

DCIT Central Circle II Kanpur Versus M/s Chandak Housing Pvt. Ltd.

DCIT Central Circle II Kanpur Versus M/s Chandak Housing Pvt. Ltd. - [2018] 63 ITR (Trib) 13 Issues Involved:1. Jurisdiction of proceedings initiated under section 147/148 of the Income Tax Act.2. Validity of assessment orders passed on a non-existent entity due to amalgamation.Issue-Wise Detailed Analysis:1. Jurisdiction of proceedings initiated under section 147/148 of the Income Tax Act:The primary issue revolves around whether the proceedings initiated under section 147/148 of the Income Tax Act on 31/3/2015 were valid, considering that the assessee-company had merged with another company and ceased to exist. The brief facts indicate that a search and seizure operation under section 132 was conducted in the Kamal Chandak group of cases on 24/10/2013, leading to the reopening of the case under section 147 based on certain incriminating documents. A notice under section 148 was issued on 23/3/2015.The respondent challenged the proceedings before the CIT(A), arguing that the company had already merged with another entity as of 1/4/2012, as per the Allahabad High Court's order dated 6/11/2012. The CIT(A) agreed, noting that once a company is amalgamated, it loses its existence from the effective date. This position is supported by the Hon'ble Apex Court in the case of Saraswati Industrial Syndicate Ltd. vs. CIT, which held that an amalgamated company ceases to exist and cannot be subject to assessment.2. Validity of assessment orders passed on a non-existent entity due to amalgamation:The CIT(A) further held that since the company ceased to exist from the effective date of amalgamation, any action taken under section 147/148 and any consequential assessment under section 143(3) would be void ab initio. This view is reinforced by several judicial precedents, including:- Modi Corpn. Ltd. vs. Jt. CIT: It was held that completing an assessment in the name of an amalgamating company after its amalgamation is void ab initio.- Rustagi Engineering Udyog (P) Ltd. vs. DCIT: Notices issued to a non-existent amalgamating company were set aside.- General Radio and Appliances Co. Ltd. vs. M.A. Khader: The court held that once a company is dissolved, it becomes a non-existent party, and no action can be brought in its name.The Tribunal upheld the CIT(A)'s decision, emphasizing that the legal position is clear on the fact that an amalgamated company loses its entity and cannot be assessed. The Tribunal found no infirmity in the CIT(A)'s findings and dismissed the Revenue's appeal.Conclusion:The Tribunal concluded that the proceedings initiated under section 147/148 and the subsequent assessment orders were void ab initio, as they were directed against a non-existent entity. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 9/01/2018.