2022 (10) TMI 391 - AT - Income Tax

Tribunal overturns reassessment order citing errors in notice issuance & lack of fair hearing

3i Infotech Consultancy Services Limited Versus Assistant Commissioner of Income-tax-11 (3) (1), Mumbai

The Tribunal allowed the appeal filed by the assessee, primarily focusing on the validity of the reassessment order passed under section 143(3) r.w.s 147 ... Validity of reopening notice u/s 148 issued in the name of the non existing company - merger procedures concluded - notice in the name of company amalgamating - HELD THAT:- Respectfully following the above decision of the Hon’ble Apex Court in the case of Maruti Suzuki Limited[2019 (7) TMI 1449 - SUPREME COURT] we consider the fact that the jurisdiction invoked under section 148 of the Act was against the legal principle as the amalgamating entity ceases to exist on merger by way of the approved scheme of the Hon’ble High Court. Assessing Officer has failed to consider the judicial precedents laid down by the Hon’ble Supreme Court and has also not considered the submission of the assessee in spite of the fact that it was within the knowledge of the assessing officer. The Ld.CIT(A) has also failed to consider that the notice ought to have been issued in the name of the assessee company pursuant to the merger. Appeal filed by the assessee is allowed Issues:1. Validity of reassessment order passed under section 143(3) r.w.s 147 of the Act.2. Addition of Rs.2,57,97,885/- as bogus purchases.3. Granting TDS credit discrepancy.Issue 1: Validity of reassessment order passed under section 143(3) r.w.s 147 of the Act:The appeal challenges the re-assessment order issued under section 143(3) r.w.s 147 on a non-existing company, Delta Services (India) Pvt Ltd. The Assessing Officer issued a notice under section 148 to the merged company post the amalgamation with the appellant, overlooking the merger's legal effect. The appellant contended that the notice should have been issued in the name of the appellant post-merger, citing legal precedents. The Tribunal, relying on judicial decisions, including one by the Hon'ble Supreme Court, held that the notice issued in the name of the non-existing company was against legal principles as the amalgamating entity ceases to exist post-merger. Consequently, the Tribunal quashed the assessment order, emphasizing the Assessing Officer's failure to consider the legal implications of the merger.Issue 2: Addition of Rs.2,57,97,885/- as bogus purchases:The Assessing Officer made an addition of Rs.2,57,97,885/- as bogus purchases based on information that the merged company received accommodation entry from another entity. The appellant contested this addition, arguing that proper opportunity for a hearing was not provided, violating principles of natural justice. The Tribunal noted the appellant's argument and found that the Assessing Officer failed to provide a fair opportunity for the appellant to present its case. The Tribunal, therefore, concluded that making the addition without a proper hearing was against the principles of natural justice and quashed the addition.Issue 3: Granting TDS credit discrepancy:The appellant raised a discrepancy in the TDS credit granted by the Assessing Officer, contending that the credit was short of the amount claimed in the revised return. The Tribunal, however, did not delve into this issue due to its decision on the first ground, which rendered the other grounds academic. Consequently, the Tribunal allowed the appeal filed by the assessee based on the findings related to the validity of the reassessment order, making the other issues moot in light of the decision on the primary issue.In conclusion, the Tribunal allowed the appeal filed by the assessee, primarily focusing on the validity of the reassessment order passed under section 143(3) r.w.s 147 of the Act. The Tribunal quashed the assessment order due to the incorrect issuance of notice to a non-existing company post-merger, emphasizing the legal implications of the merger. The Tribunal also highlighted the failure to provide a fair hearing before making additions, underscoring the importance of adhering to principles of natural justice in tax assessments.