TaxTMI 
TaxTMI 
2021 (7) TMI 659
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....pany and accordingly, the said company took over the business of the firm along all the assets and liabilities w.e.f. 19.3.2010. All the partners of the firm became shareholders and some of them became the directors. The certificate of incorporation of the company was granted on 19.3.2010 and commencement of business was granted on 26.3.2010. The firm and its business were therefore discontinued and the firm ceased to exist from 18.03.2010. 2.1. The partners, after the firm ceased to exist, filed the return of income of the firm M/s. Eastern Mineral & Trading Agency for the period 1.4.2009 to 18.3.2010 i.e. for assessment year 2010-11. Search u/s. 132 of the Act was conducted in the case of the Firm on 15.1.2009. Assessments for AY 2007-08 to 2009-10 were completed by the Assessing Officer u/s. 143(3)/153A vide order dated 31.12.2010. For the assessment year 2010-11 assessment was completed in the name of the Firm M/s. Eastern Mineral & Trading Agency u/s. 143(3) vide order dated 14.12.2012 after the Firm's closure. 2.2. The Company M/s. Emta Coal Ltd. filed its return for the assessment year 2010-11 for the income from 19.3.2010 to 31.3.2010 on 20.3.2012 and the returned inc....
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..../s. 148 of the Act dated 30.3.2017 for the AY 2010-11 in the name of 'Eastern Mineral and Trading Agency' under PAN no. of the erstwhile Firm i.e. AAAFE7051M. It was stated that the notice was sent on the mail id. The AO further claimed that, he had sent the notice to the company, M/s. Emta Coal Ltd. by speed post on 3.4.2017. Subsequently the AO also handed over copy of the said notice u/s. 148 to Shri Avijit Sarkar, Senior Manager (F & A) of the Company on 24.4.2017. It was thus pointed out by the ld. AR of the assessee that, the notice issued in the name of the non-existent Firm, M/s. Eastern Mineral & Trading Agency u/s. 148 of the Act dated 30.03.2017 was served on an employee of the Company, M/s. Emta Coal Ltd. on 24.04.2017. 2.5. The AO sent a letter dated 5.12.2017 stating that notice/s 148 was in fact issued to the company under their PAN and that the reasons were also recorded for reopening of the assessment of the company. The AO states that although the notice was inadvertently generated in the name and address under the PAN data base of M/s. Eastern Mineral and Trading Agency, the Firm with the PAN No. of the Firm, but it was issued and served on the company b....
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....) thus rejected the submissions of the assessee both on the legal validity of the proceedings and also the merits of the addition, and confirmed the order of the AO. 3. Further aggrieved the assessee is in appeal before us. 4. The ld. Counsel for the assessee, Shri S.M. Surana, Advocate, submitted that the reopening of assessment in this case is bad in law on various legal grounds. He submitted that, in this case, the firm discontinued its business and the company only took over the business of the firm on 18/03/2010 and consequent thereto, the firm got dissolved. The firm had filed its return of income for AY 2010-11 and the assessment for the said AY was completed at the same sum as returned by it. The ld. Counsel clarified that there was no merger/amalgamation of the Firm with the company. Instead it was a case of taking over of the business of the Firm on going concern basis. It is for this reason that the company never filed any return of income of the firm as its successor. He thus pointed out that, in this case, the action of the AO assessing the income of the non-existent Firm in the hands of the assessee company as its successor, was incorrect and unsustainable in law. ....
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.... contended that the impugned order was bad in law. For this proposition he relied on the following judgments: i. Motor Sales Vs. CIT 230 ITR 44 (All) ii. Mangatram Hazarimal Kuthiala 125 ITR 91 iii. City Mill Distributors P Ltd. 291 ITR 1 (SC) f) The ld. counsel alternatively submitted that, the reopening is bad in law for the reason that the original assessment was completed u/s. 143(3) of the Act and the reopening u/s. 147 of the Act being initiated beyond a period of four years from the end of the AY 2010-11, the AO was required to first comply with the condition precedent in first proviso to Section 147 of the Act to validly reopen the assessment. He pointed out that there was not even a whisper in the recorded reasons that there was failure on part of the assessee to fully and truly disclose all the material facts required for assessment and for that reason the act of reopening the assessment u/s. 148 is bad in law. For this proposition, he relied on the following case-law:- i) Oracle System Corporation (Delhi) WP 1873/2013 ii) Johnson & Johnson P. ltd., ITA No. 4912/Mum/2013 dated 10.08.2020 iii) M/s. Cygnus Investments & Finance Pvt. ltd. ITA No. 117/Kol/2018 ....
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.... the issuance & service of notice viz., (i) the notice was sent by e-mail to the non-existing address of the firm and thereafter the notice u/s. 148 of the Act, was sent by speed post. He pointed out that the reasons recorded as well as approval was in the name of the company. He submitted that there is no whisper anywhere in the notice or in the reasons recorded, that the Assessing Officer was treating the assessee company as the successor of the erstwhile firm, or gave any valid reason for doing so. These facts reveal non-application of mind by AO while issuing notice u/s. 148 of the Act. 5. The Ld. CIT DR Shri Vijay Shankar submitted that, in the grounds of appeal the assessee has not taken specific grounds relating to the several legal issues raised by the ld. counsel challenging the validity of reopening of assessment as bad in law, other than challenging the validity of the notice u/s. 148 of the Act as well as the approval of the Ld. PCIT and therefore he contended all other arguments pertaining to the legality or validity of the reopening of the assessment raised by the ld. counsel for the assessee ought not be adjudicated. The Ld. CIT DR contended that, these other argume....
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.... for A.Y. 2010-11 u/s. 147/148 of the Act, he gave his approval to do so and therefore the requirement of law has been fully satisfied. The Ld. CIT DR argued that in this case, it cannot be said that there was non-application of mind by the Ld. PCIT while giving the approval to reopen the assessment u/s. 147/148 of the Act. Therefore, according to him, this ground of appeal of the assessee is devoid of merits and need to be dismissed. 8. Further, countering the arguments of the Ld.AR that since partnership firm was taken over by the company on 19.03.2010, Section 189 of the Act will apply and therefore, the notices should have been issued to the partners of the dissolved Firm; and since in this case no notices has been issued to the partners makes the action of AO illegal, the Ld. CITDR contended that Section 189 of the Act is in respect of firm which is dissolved or which has discontinued its business and is not applicable in the facts of this case, since the company has been taken over by the firm as a going concern. According to Ld. CITDR, the contentions of assessee regarding the legal issue raised are devoid of merits and need to be dismissed. He further submitted that the as....
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....f the lower authorities, is identical to the argument taken by the Revenue before the Hon'ble Supreme Court in the case of CIT vs. Maruti Suzuki India Limited reported in 416 ITR 613 wherein the case law cited by Ld CIT DR in M/s. Skylight Hospitality Ltd. Vs. Asst. CIT (supra) was considered and the contention raised by Revenue are as follows: "17. Mr. Zoheb Hossain, learned Counsel appearing on behalf of the appellant submitted that: (i) The High Court was not justified in quashing the final assessment order under section 143(3) only on the ground that the assessment was framed in the name of the amalgamating company, which was not in existence, ignoring the fact that the names of both the amalgamated company and the amalgamating company were mentioned in the assessment order; (ii) Even on the hypothesis that the assessment order was framed incorrectly in the name of the amalgamating company, it would amount to a "mistake, defect or omission" which is curable under section 292B when the assessment is, "in substance and effect, in conformity with or according to the intent and purpose" of the Act; (iii) During the assessment proceedings and the subsequent proceedings i....
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....d undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. Strictly 'amalgamation' does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See: Halsbury's Laws of England (4th edition volume 7 para 1539). Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity." (iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded as a person under section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed; (v) Fifthly, a notice under section 143(2) was issued on 26 September 2013 to the amalgamating company, SPIL, which was followed by a no....
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....een (Rs. 25,414/-) as per Form 26AS. It was noticed that no return had been filed and the source of the aforesaid deposits and receipts remained unexplained and had escaped assessment. Accordingly, the case of Mr. Mohinder Paul Kapila was selected under section 147/148 of the Act 1961, after recording of reasons and approval of PCIT-15, Delhi on 28th March, 2019. 3. However, late Shri Mohinder Paul Kapila (hereinafter referred to as "deceased-assessee") had already expired on 21st December, 2018. The deceased assessee is survived by two sons and two daughters. 4. Notice dated 31st March, 2019 under section 148 of the Act 1961 for A.Y. 2012-2013 was issued, i.e. on the last date of limitation, in the name of deceased assessee Shri Mohinder Paul Kapila with PAN: ASXPK1666P and sent at his last known address known to the Income-tax Department i.e. Flat No. 286, 1st Floor, D Flats, Sector 9, Pkt-1, Dwarka, New Delhi 110075. The impugned notice could not and was never served upon Late Shri Mohinder Paul Kapila. Thereafter ACIT, Circle 43(1), Delhi (hereinafter referred to as "Assessing Officer") issued notices dated 22nd August, 2019, 27th August, 2019 & 18th September, 2019 to the ....
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....fide curable defect under section 292B of the Act, 1961. 18. The Hon'ble High Court however answered the question in favour of the assessee, by observing as under: 32. This Court is of the view that in the absence of a statutory provision it is difficult to cast a duty upon the legal representatives to intimate the factum of death of an assessee to the income tax department. After all, there may be cases where the legal representatives are estranged from the deceased assessee or the deceased assessee may have bequeathed his entire wealth to a charity. Consequently, whether PAN record was updated or not or whether the Department was made aware by the legal representatives or not is irrelevant. In Alamelu Veerappan (supra) it has been held "nothing has been placed before this Court by the Revenue to show that there is a statutory obligation on the part of the legal representatives of the deceased assessee to immediately intimate the death of the assessee or take steps to cancel the PAN registration." 33. The judgment in Pr. Commissioner of Income-tax v. Maruti Suzuki India Limited (supra) offers no assistance to the respondents. In Pr. Commissioner of Income-tax v. Maruti Su....
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....e issued under section 148 of the Act, cannot be cured at this length of time. 13. The Hon'ble Apex Court in the case of Maruthi Suzuki Ltd. supra, has categorically observed thus; "In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Entertainment on 2 November 2017. The decision in Spice Entertainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-12. In doing so, this Court has relied on the decision in Spice Entertainment." While arriving at such a decision, the Hon'ble Apex Court has ta....
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....en by AO and confirmed by the Ld CIT(A) are null and void. 21. It is also noted that, the reopening of assessment was beyond the period of four years and the original assessment was completed u/s. 143(3) of the Act. Under these circumstances, it was incumbent upon the AO to satisfy the condition precedent in the proviso to section 147 of the Act and it was mandatory for him to speak through his recorded reasons that the assessment is being reopened consequent to failure on the part of the assessee to truly and fully disclosed material facts necessary for assessment. Perusal of the recorded reasons however shows that there is no allegation that, there is failure on the part of the assessee in truly and fully disclosing material facts necessary for assessment. This bench of the ITAT in the case of Haldia Petrochemicals Ltd. Vs. ACIT, ITA No. 2455/Kol/2019 order dated 24.03.2021 after considering a number of judgments on this identical issue had held as follows: "4.1. Admittedly, the re-opening of assessment is after the expiry of four years from the end of assessment year 2008-09 and hence the proviso to Section 147 of the Act comes into play. A reading of the reasons recorded for....
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....sequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147." 4.7. The Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. v. Commissioner of Income-Tax and Anor. reported in [2009] 308 ITR 38 (Delhi) has held as follows: "26. Viewed in this light, the proviso to section 147 of the said Act, carves out an exception from the main provisions of section 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of section 147 of the said Act would not be material. Once the exception carved out by the proviso came into play, the case would fall outside the ambit of section 147. 27. Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied: (a) an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and (b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee: (i) ....
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....four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd. (supra) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania (supra) that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated 29.03.2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 02.03.2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above. 4.8. Applying the propositions laid down in the above case law to the facts to this case, we have to necessarily hold that the re-opening of the assessment proceedings is not valid that there is not even a whisper in the reasons recorded for the reopening of the assessment that there is a fail....