TaxTMI 
TaxTMI 
2023 (9) TMI 885
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....TA no. 6126/Mum/2019 are as under:- 1. "On facts and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of Rs. 7,49,50,000/- made by the AO on account of unexplained cash credit u/s. 68 of the I.T. Act, 1961 without appreciating the fact that the assessee received share application money from those entities, who were providing accommodation entries. 2. "On the fact and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of Rs. 7,49,50,000/- made by the AO on account of unexplained cash credit u/s. 68 of the I.T. Act, 1961 without appreciating the fact that the Hon'ble Supreme Court in the case Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) has held genuineness could validity be tested on the ground or principle of preponderance of human possibilities which form a valid ground or parameter for determining the genuineness." 3. Assessee in ITA no. 6402/Mum/2019 on the following grounds:- 1. On facts and circumstances of the case, the assessment order passed u/s. 143(3) r.w.s. 147 of the Act is void ab initio; invalid, bad in law and grossly in violation of principles of natural justice. 2. ....
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....sment order was passed u/s 143 (3) rws 147 of the Act on 29/03/2016 in the name of Bhavna Computers Pvt Limited. Total income was computed at Rs. 15,08,68,860/-. vi. Assessee aggrieved by the assessment order challenged it before the LD CIT (A). vii. After considering the detailed submissions and documents placed on record and various case laws relied upon by the assessee, the ld. CIT(A) partly allowed the appeal by deleting the addition to the tune of Rs. 7,49,50,000/- and confirming the addition to the extent of Rs. 7,59,00,000/- u/s. 68 of the Act. viii. Aggrieved by the decision of the ld. CIT (A), both the parties are in appeal before us. 5. At the very outset, the ld. AR of the appellant argued that i. The assessment order passed u/s. 143(3) r.w.s. 147 of the Act suffers from infirmity, is void ab initio, and therefore needs to be quashed. Accordingly, the ground no. 1 on the validity of the reassessment order may be decided first as it goes to the root of the matter. ii. The ld. AR argued that the notice u/s. 142(1) was served on the appellant without issuing the notice u/s. 148 of the Act. iii. The appellant was not e....
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....d as under:- 6.2. During the course of appellate proceedings the Learned Counsel for the appellant company made the following submissions: 1. "Presently, we are not able to locate the following documents as follows:- a. Copy of reasons recorded for re-opening the case b. Copy of the submission filed objecting the reasons recorded for re-opening the case c. Copy of the Order Disposing the Objections Accordingly, we need some time to make our submission in consideration of above challenging the validity of re-opening of the case." Vide Para no. 6.6, Ld. CIT (A) has also held that "the assessee company had duly participated in the reassessment proceedings through its authorised representative before the AO. Hence, the said contention raised by the Id. AR of the appellant is hereby rejected." Further, on perusal of the assessment order for A.Y. 2008-09, it is also observed that vide Para no. 4 the AO has mentioned that "the case was re-opened by issuing notice u/s. 148 dtd:25.03.2015 by taking prior approval from Addl.CIT Rg. 9, Kolkata." In view of that letters dtd. 27.05.2022 & 14.10.2022 has been sent to the ITO....
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....in para no 6.2 of the Ld. CIT (A) order itself indicates that the assessee had also received reasons for reopening but were not able to locate the same." 7. From the said report of the Assessing Officer and also from the assessment records, the ld. DR has not provided any proof of service / supply of reasons for reopening to the assessee till date. Further, during the course of the hearing on 29.11.2022, the Ld. AR of the appellant had also clarified that there was an apparent error in the ld. CIT(A)'s order dated 30.07.2019 as the ld. CIT(A) had reproduced Para 1 of the appellant's submission made before her from the written submissions made by the appellant in respect of another year i.e. A.Y 2009-10 (and not A.Y. 2008-09) wherein the appellant had stated that it could not locate certain documents viz., the copy of reasons of reopening and the order disposing the objections. No such contention was raised by the appellant in respect of A.Y 2008-09 as can be seen from the copy of written submission before CIT(A) for A.Y. 2008-09 placed at page no. 22 of the Paper Book. A separate rectification application u/s. 154 has also been filed by the appellant in this regard with th....
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....had issued the notice u/s. 148 of the Act for A.Y. 2009-10 in the name of Bhawna Computers LLP on 28.03.2016 i.e. one day before the passing the impugned assessment order in the name of company. This proves that Ld. Ld. AO was not aware about the conversion of company into LLP but also knew what is to be done and had even acted accordingly for the subsequent year i.e. A.Y. 2009-10 before passing the impugned assessment order for A.Y. 2008-09. iii. Referred to the provisions of The Limited Liability Partnership Act, 2008 and more specifically, section 58 regarding the Registration and Effect of Conversion, wherein in clause 4(c) it is stated that on and from the date of registration specified in the certificate of registration issued, the firm or the company, as the case may be, shall be deemed to have dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be. iv. That since the certificate of registration of LLP is issued on 22.03.2016, from such date, the company is no more in existence and therefore, the assessment order passed on 29.03.2016 in the name of a non-existent company is invalid and bad in law. ....
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....ssment order should be quashed. 12. The ld. DR i. relied on the remand report of the Ld. AO to argue that on perusal of CIT (A)'s order at para no. 6.1, it may be noted that the assessee had filed submission on 04.03.2016 to treat the original return of income filed u/s. 139(1) of the Act as return filed in compliance to notice received u/s. 148. Hence, it is clear that the assessee has received notice u/s. 148 of the Act for the relevant A.Y. 2008-09. ii. On the averment of the assessee that reasons recorded have not been supplied, the ld. DR drew our attention to para no. 6.2 of the CIT(A)'s order wherein the submission of the assessee has been reproduced which states that presently, it is not able to locate the reasons recorded and further at para no. 6.6, the ld. CIT(A) has also rightly rejected this argument on the premise that the assessee company had duly participated in the reassessment proceedings through its authorized representative before the Ld. AO. Hence, this contention of the assessee shall also be rejected. iii. As regards the order being issued in the name of a company instead of being converted into LLP at the time of passing....
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.... jurisdiction u/s 153 C of the Act because none of the ingredient mentioned in section 153 C of the Act are fulfilled in this case. Thus, ld AO has information in his possession, in the form of tangible material, therefore correct provision required to be invoked is of reopening of assessment i.e. U/s 147 of the Act, which ld AO has done. Thus there is no infirmity to that extent in assumption of jurisdiction assumed by ld AO in reopening of the assessment u/s 147 of the Act. ii. As regards the argument that notice u/s. 148 was not served to the assessee and that reasons recorded had not been supplied to the assessee, the assessment records were called for. On perusal of the assessment records, in the course of hearing on 17.10.2022, bench pointed out that the assessment records show that at the fag end of reassessment proceedings, the concerned Ld. AO had requested the predecessor Ld. AO at Kolkata (who issued the notice u/s. 148) regarding the objections taken by the assessee of not receiving any notice u/s. 148 and that no reasons of reopening had been supplied to it. Since, we could not find any proof of service of reasons recorded being supplied to the assessee, ld. D....
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....ourse of assessment proceedings vide letter dated 04.03.2016 and 16.03.2016 and even before the ld. CIT(A) in submission dated 11.07.2019. Therefore, in absence of this statutory requirement under the law of providing reasons recorded, the reassessment order passed is bad in law and invalid. In this regard, support is also drawn from the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. IDBI Ltd (Bom.) (ITA no. 494 of 2014) and CIT v. Videsh Sanchar Nigam Ltd. [2012] 21 Taxmann 53 (Bom.). We are also not convinced with the argument of the ld. DR that since the assessee has participated in the reassessment proceedings, no prejudice is caused. In fact, by not providing the reasons recorded, the assessee has been deprived of fundamental right to know and object on the basis of which jurisdiction has been acquired or assumed by the Ld. AO and is completely in dark about the reasons of reopening against which he could not even file any objections. For these reasons, we quash the reassessment order passed by the Ld. AO for A.Y. 2008-09 as bad in law. iii. On the issue of service of notice u/s 148 of the Act, remand report of the LD AO is categorically sayin....
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.... impugned reassessment order is a nullity and bad in law on this count also. 15. In view of the above discussion, since ground no. 1 of the appeal of the assessee in ITA no. 6402/Mum/2019 is allowed in favour of the assessee, we do not adjudicate grounds of appeal. Grounds raised by the revenue in ITA no. 6126/Mum/2019 being on merits of the case are also not adjudicated as the impugned reassessment order is held as invalid and quashed. 16. In the result, the appeal of the assessee is allowed and the appeal of the LD AO is dismissed. A.Y. 2009-10 17. We shall now take up the appeals for A.Y. 2009-10. The grounds of appeal raised by the ld AO in ITA no. 6127/Mum/2019 are as under:- 1. "On facts and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of Rs. 4,87,06,000/- made by the Ld. AO on account of unexplained cash credit u/s. 68 of the I.T. Act, 1961 without appreciating the fact that the assessee received share application money from those entities, who were providing accommodation entries. 2. "On the fact and circumstances of the case, the Learned CIT(A) has erred in deleting the addition of Rs. 4,87,06,000/- made by ....
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....ded on 21/6/2016. Objections were dismissed by order dated19/8/2016. 21. Thereafter ld AO passed assessment u/s 143 (3) rws 147 of the Act determining total income of Rs 92767330/- making an addition u/s 68 of the act of Rs 9,24,06,000/-. Assessee aggrieved, preferred appeal before ld CIT (A) who passed the appellate order partly allowing appeal by deleting the addition to the tune of Rs. 4,87,06,000/- and confirming the addition to the extent of Rs. 4,37,00,000/- u/s. 68 of the Act. Aggrieved by the decision of the ld. CIT (A), both the parties are in appeal before us. 22. At the outset, the ld. AR of the assessee submitted that the reassessment order passed by the Ld. AO is grossly void ab initio and needs to be struck down. Since ground no. 1 raised by the assessee goes to the root of the matter, it is taken up first. 23. The ld. AR submitted that:- i. for the year under consideration i.e. A.Y. 2009-10, the Ld. AO had issued the notice u/s. 148 of the Act dated 28.03.2016 in the name of M/s. Bhawana Computers LLP (Formerly known as Bhawana Computers Pvt. Ltd.) for the reason that the erstwhile company had got converted into LLP on 22.03.2016 and was not in exis....
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....otice under the Act can be issued for initiating the proceedings on a non-existent company apart from the provisions of section 170(2) of the Act, as there is no other provision in the Act to assess a successor otherwise. In this regard, he relied on the decision of the co-ordinate Bench of Delhi Tribunal in the case of Slocum Investment (P) Ltd. v. DCIT [2006-TIOL-300-ITAT-DEL]. x. Thus, reassessment is not valid as it is based on invalid assumption of jurisdiction and is void ab initio. 24. Remand Report of ld AO for this year states as under :- "The case records of A.Y. 2009-10 are presently not traceable. The facts of AY 2009-10 will be intimated as soon as the records are traced. However, on perusal of the Ld. CIT(A) order it is seen that vide Para no. 6.1 Ld. CIT(A) held that "...the assessee had filed submission on 21.04.2016 for treating the return of income filed /s.139(1) of the Act as return filed in compliance to notice received u/s 148." It is clear from the Ld. CIT (A) appeals order that the assessee has received the notice u/s. 148 for the A.Y. 2009-10 and submitted its reply accordingly. Hence, contention of the assessee regarding Notic....
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....ation is 22.03.2016 whereas the reopening proceedings for A.Y. 2009-10 are initiated on 28.03.2016, which is clearly after the date of registration. iv. Hence, the case clearly falls under the ambit of section 170(2) of the Act and since there is no other provision under the Act to go prior to A.Y. 2015-16, the Ld. AO has wrongly acquired jurisdiction to reopen the case for A.Y. 2009-10. v. He therefore requested to quash the whole reopening proceedings and the consequent impugned reassessment order passed by the Ld. AO. 27. We have carefully considered rival contention and perused the orders of the lower authorities. The moot point here is that on account of conversion from the erstwhile company, the assessee LLP came into existence from 22.03.2016 as per the date of registration in the certificate. Notice u/s. 148 of the Act is issued on 28.03.2016 in the name of the assessee LLP only. The questions therefore arises as to - (i) Whether proceedings of Predecessor Company can be initiated in the hands of successor LLP? (ii) Whether the company once converted into LLP can be treated to have ceased to exist? (iii) Whether erstwhile comp....
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....ding anything contained in any other law for the time being in force, on and from the date of registration specified in the certificate of registration issued under the Second Schedule, the Third Schedule or the Fourth Schedule, as the case may be,- (a) there shall be a limited liability partnership by the name specified in the certificate of registration registered under this Act; (b) all tangible (movable or immovable) and intangible property vested in the firm or the company, as the case may be, all assets, interests, rights, privileges, liabilities, obligations relating to the firm or the company, as the case may be, and the whole of the undertaking of the firm or the company, as the case may be, shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed; and (c) the firm or the company, as the case may be, shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be. Third Schedule (See Section 56) : Conversion from private company into Limited Liability Partnership Clause 4: Registration of Conversion ....
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....d liabilities of the erstwhile company that is automatically dissolved and struck from the records of the ROC. iii. As regards, the pending proceedings, clause (8) of Third Schedule provides that all proceedings by or against the company which are pending before the Court, Tribunal or other authority on the date of registration may be continued, completed and enforced by or against the LLP. iv. This indicates that at the time when the company was dissolved, whatever pending proceedings of court or tribunal were pending, the same shall be continued in the hands of LLP. v. In the present case, the facts are such that the company was converted into LLP on 22.03.2016 and therefore whatever proceedings were pending as on 22.03.2016, it shall be continued in the hands of LLP. vi. However, unlike reassessment proceedings for A.Y. 2008-09 which were pending on 22.03.2016, reopening for A.Y. 2009-10 was sought to be initiated on 28.03.2016 which is after 22.03.2016 and therefore for A.Y. 2009-10, it is a case where proceedings are initiated after the date of registration which is 22.03.2016. vii. Therefore, if the proceedings are initiated on the....
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....urvedi & Pithisaria's Income Tax Law (seventh edition) volume 7) page number 10097, comments that :- "The provisions of section 170 (2) override those of section 170 (1) of happening of the prescribed condition Viz that after the succession having been effected, the predecessor cannot be found. In such case (2) provides that the assessment of the previous year in which the succession to place up to the date of succession and assessment of the previous year immediately preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor. The provisions of section 170 (2) cannot be applied where the person succeeded is alive and his whereabouts are known or can be asserted. Where firm was dissolved and one of the erstwhile partners took over its business, the provisions of section 170 (2) could not be applied if the partners were alive and the addresses were known or could be ascertained. (CIT versus National Cycle Importing Company 9 ITR 502, Pt. Deo Sharma versus ITO 84 ITR 633). Thus, if the predecessors could be assessed and was available for assessment, no proceedings could be taken against the succes....
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....ng through the said provisions of section 170 of the Act, it is noted that in sub-section (1) therein, when any business or profession is succeeded, then predecessor shall be assessed in respect of the income of the previous year in which succession took place upto the date of succession and the successor shall be assessed in respect of the income of the previous year after the date of succession. However, in sub-section (2), it refers to the assessment of predecessor who "cannot be found" which is relevant in the case at hand as the erstwhile company is a predecessor which cannot be found when the reassessment proceeding was initiated on 28.03.2016. The sub-section (2) provides that when the predecessor cannot be found, the assessment of the income of the predecessor can be made in the hands of the successor for the following period: (i) Previous year in which succession took place upto the date of succession and; (ii) Previous year preceding that year 38. Applying the said provision to the instant case, the situation that arises is that the successor LLP can be assessed for the income of the predecessor company for A.Y. 2016-17 (upto 22.03.2016 being date of ....