TaxTMI 
TaxTMI 
2023 (11) TMI 437
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....ssee was reopened u/s. 147 of the Act on the basis of information received from Investigation Wing that assessee is beneficiary of Rs. 4,95,00,000/- received from four entities and accordingly, the income has escaped assessment. The assessment was framed u/s. 144/147 of the Act vide order dated 27.12.2017 assessing the total income at nil. The AO examined the issue and came to the conclusion that the information pertained to FY 2010-11 relevant to AY 2011-12 and not to the instant assessment for AY 2010-11 and, therefore, no disallowance was made. Thereafter, the AO reopened the assessment for AY 2011-12 u/s. 147 of the Act by issuing notice u/s. 148 of the Act dated 29.03.2018 and after looking into the matter, AO noted that transactions were duly recorded in the books of account and there was no undisclosed income and accordingly assessed them at nilvide order dated 20.11.2018. Thereafter, the assessee received a notice u/s. 154 of the Act dated 14.01.2019 in which the AO pointed out the mistake in applying provisions of section 68 of the Act which was replied on 18.03.2019 in which it was pointed out that the information did not pertain to AY 2010-11 but to AY 11-12. It was also....
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....ers Pvt. Ltd. and in response the appellant filed detailed objections/explanation vide letter dated 07.03.20222 submitting therein as under: "Notice u/s 148 of the Act dated 29.03.2017 was never validly served upon the assessee and therefore the impugned reopening of assessment and consequent order dated 27.12.2017 was ab initio void. As a consequence, the revisionary action u/s 263 of the Act stands rendered non-est in the eyes of law as well. Notice u/s 148 of the Act dated 29.03.2017 was issued by the AO without the approval of Jt./Addl. CIT and therefore the reassessment proceedings stood vitiated in law. Hence, as the reassessment order was rendered void, the consequent action u/s. 263 of the Act also deserves to be quashed as being bad in law. The reasons recorded for reopening of assessment was done in a mechanical manner without application of mind in as much as the concerned information also did not pertain to the relevant year. Hence, since the recorded reasons were invalid, the consequent order dated 27.12.2017 was ab initio void. As a consequence, the revisionary action u/s.263 of the Act stands rendered non-est in the eyes of law as well. ....
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....llateral proceeding in the second round as well. The Ld. AR, therefore, prayed that the impugned order u/s. 263 of the Act dated 23.03.2022 pursuant to the said illegal and invalid original revisionary or u/s. 263 dated 13.03.2020 deserved to be quashed by relying on the decision of Hon'ble Gujarat High Court in the case of P B. Doshi Vs. CIT 11 ITR 22 (Guj). 8. The Ld. AR on his second limb of argument submitted that reassessment order u/s. 144 read with section 147 of the Act dated 27.12.1970 itself suffered from the fundamental infirmity and jurisdiction defect thereby rendering all the consequential action and proceeding including revisionary order u/s. 263 as nonest in the eyes of law. The Ld. AR submitted that in an appeal against the order of 263 of the Act which ceased to revise the order u/s. 147 of the Act, the assessee has a legal right legitimately conferred by the law to challenge the validity of the order so passed u/s. 147 of the Act as well as initiation of proceeding u/s. 147 of the Act. The Ld. AR contended that the original proceeding u/s. 147 were null and void for want of proper jurisdiction and as such the validity can be challenged in the collateral procee....
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.... and 35 of the paper book filed by the AO in terms of section 150(1) of the Act. It is noted that no approval was accorded nor reasons were recorded or signed by Addl./Joint CIT, Range-4, Kolkata and consequently, the notice dated 28.03.2017 issued u/s. 148 as well as the order dated 27.12.2017 passed u/s. 144/147 of the Act were rendered null and void. The Ld. AR stated that consequent thereto the present proceeding also stand initiated by the said non-obtaining of approval from a competent authority. 11. On the third limb of argument, the Ld. AR stated that reasons were recorded by the AO on complete non-application of mind and in a mechanical manner by simply following the dictate of Investigation Wing and for realizing that the information supplied by the Investigation Wing did not pertain to relevant AY 2010-11 but AY 2011-12. The Ld. AR further stated that the AO has recorded the reasons that income chargeable to tax has escaped assessment after independent application of mind to the material and information which comes in his possession. Accordingly, reopening at the dictate of higher authority or on borrowed satisfaction or based on information forwarded by the Investiga....
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....ct from 13th April, 2015 meaning thereby that the assessee-company stood wound up and is no more in existence. We note that the assessee has intimated the said fact to the ld. Assessing Officer vide letter dated 02.04.2018 through Registered Post. We note that the revisionary proceedings under section 263 of the Act were initiated by the ld. Pr. CIT, Kolkata vide order-sheet entry dated 03.04.2019 and notice under section 263 was issued on 07.01.2020 and the revisionary order was framed on 13.03.2020 which were in the name of non-existent entity despite the fact having been brought to the knowledge of the ld. Assessing Officer as stated hereinabove and the fact was very much available in the assessment records. Therefore, the original revisionary order passed under section 263 of the Act was itself void ab initio and invalid and consequently notice issued under section 263 of the Act dated 15.02.2022 in the set aside proceedings as well as the impugned order dated 23.03.2022 were also rendered invalid and void regardless of the fact that revisionary order dated 13.03.2020 was restored to the Pr. CIT by the tribunal. The case of the assessee finds support from the decision of the Co....
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....2-13 relevant to FY 2011-12; and the AO acknowledges that the details of 2nd source of fund and also produced the details of bank statement of the assessee company which is maintained from 01.04.2011 to 31.03.2012 and the AO finds that all the transactions were duly reflected in the bank statement and that all the relevant documents were verified by him on test check basis and that there was no adverse inference need to be drawn against the assessee. 15. Thereafter, the AO records that summons u/s. 131 of the Act was issued on 24.10.2016 to the director of the assessee company fixing the date of hearing on 27.07.2016. And pursuant to the summons, the Director Shri Rajeev Kumar appeared with photo identity proof, and his statement was recorded by the AO and placed in the records. According to AO (which he records in the reassessment order dated 28.10.2016), that during the course of assessment proceedings u/s 143(3)/263 the following features he noted which are as stated below:- [ Reproduced from reassessment order dated 28.10.2016] A. Discharge of onus of liability by M/s. Durja Vinimay Pvt. Ltd., as under: i) Assessee Company furnished all documents as r....
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....fect on 28.10.2016 (supra) and framed the reassessment order in the light of the Ld Pr. CIT order dated 27.07.2016, the assessee company got amalgamated with M/s. Nihon Impex Private Ltd. We note that it was the result of the scheme of amalgamation filed before the Hon'ble NCLT which was duly sanctioned vide order dated 21.12.2018. With this amalgamation made effective from 01.04.2017, the assessee company [M/s. Durja Vinimay Pvt. Ltd.] ceased to exist. That is the plain and simple effect in law as held by the Hon'ble Delhi High Court in M/s. Spice Infotainment Lt.ds Vs. CIT (supra). It is noted that the scheme of amalgamation itself provided for this consequences, in as much as simultaneous with the sanctioning of the scheme, the assessee M/s. Durja Vinimay Pvt. Ltd. stood dissolved by specific order of Hon'ble NCLT. With the dissolution of M/s. Durja Vinimay its name was struck off from the rolls of the companies maintained by the ROC. The Hon'ble Delhi High court in M/s. Spice Infotainment has explained the effect of dissolution of a company "A company incorporated under the Indian companies Act is a juristic person. It takes its birth and gets life with the incorporation. It di....
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....se. We note that in this present cases/appeals, the ratio of Hon'ble Delhi High Court in M/s. Spice Infotainment is applicable, which order of Hon'ble Delhi High Court has been upheld by the Hon'ble Supreme Court by order dated 02.11.2017 reported in 247 CTR 500 (SC) wherein we note that the Hon'ble Supreme Court has distinguished the case of M/s. Sky Light Hospitality LLP (supra) in PCIT V. Maruti Suzuki India Ltd. [Civil Appeal No. 5409 of 2019] order dated 25.07.2019. 19. On behalf of the revenue, reliance has been placed on the decision of Hon'ble Supreme Court in the case of Gita Devi Aggarwal Vs. CIT (1970) 76 ITR 496 (SC). That was a case wherein the assessee had challenged that she did not receive the notice issued by the Commissioner while exercising his revisionary power u/s. 33B of 1922 Act (as per 1961 Act it is Sec. 263) and had filed a Writ Petition before the Hon'ble Calcutta High court which has been dismissed by the Hon'ble High court. And the same was challenged before the Hon'ble Supreme Court wherein their Lordship confirmed the order of the Hon'ble Calcutta High Court by observing that section 33B of 1922 Act does not in express terms require ....
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....me Court in the case of Maruti Suzuki India Ltd. was adjudicating a judgment of the Division Bench of the Hon'ble Delhi High Court which upheld the decision of the Income Tax Appellate Tribunal. The Tribunal held that the assessment made in the name of M/s. Suzuki Powertrain India Ltd. for the AY 2012-13 is a nullity since the entity has been amalgamated with M/s. Maruti Suzuki India Ltd. under an approved scheme of amalgamation and was not in existence. The Hon'ble Supreme Court noted the facts of the case as under: "5.The assessee was a joint venture between M/s. Suzuki Motor Corporation and Maruti Suzuki India Ltd. The shareholding of the two companies in the assessee was 70% and 30%. The assessee was known upon incorporation as Suzuki Metal India Limited. Subsequently, with effect from 8 June 2005, its name was changed to SPIL. 6. On 28 November 2012, the assessee filed its return of income declaring an income of Rs. 212,51,51,156/-. The return of income was filed in the name of SPIL (no amalgamation having taken place on the relevant date). 7. On 29 January 2013, a scheme for amalgamation of SPIL and MSIL was approved by the High Court with effect fr....
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....nformation in the course of the assessment for AY 2012-13. The communication was addressed to: "The Principal Officer M/s Suzuki Power Train India Limited (Now known as M/s Maruti Suzuki India Limited)." 12 On 8 October 2015, a communication was addressed by the DGM (Finance) for MSIL in response to the notice under Section 142 (1) adverting to the case of SPIL for AY 2012-13. 13. On 12 April 2016, MSIL filed its appeal before the Dispute Resolution Panel9 as successor in interest of the erstwhile SPIL, since amalgamated. Form 35A was verified by Mr Kenichi Ayukawa, Managing Director & CEO of MSIL. The grounds of appeal before the DRP did not allude to the objection that the draft assessment order was passed in the name of SPIL (amalgamated with MSIL) or that this defect would render the assessment proceedings invalid. 14 On 14 October 2016, the DRP issued its order in the name of MSIL (as successor in interest of erstwhile SPIL since amalgamated). 15 The final assessment order was passed on 31 October 2016 in the name of SPIL (amalgamated with MSIL) making an addition of Rs. 78.97 crores to the total income of the asse....
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....ion, in the present case, in both the draft and the final assessment orders, the names of both the amalgamating and amalgamated companies were mentioned; (v) In paragraph 11 of the decision of the Delhi High Court in Spice Entertainment, it was held that: "11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exist w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said 'dead person'. When notice under Section 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s Spice which was non existing entity on that day. In such proceedings and assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law." From the above extract, it would emerge that if an assessment order had been passed on....
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....resent assessee for AY 2011-12 and the earlier order dated 2 November 2017 in CIT, New Delhi v Spice Enfotainment Ltd.^15 ("Spice Enfotainment Ltd"), there appears to be a direct conflict of views on the principle whether a notice issued to a non-existent company would suffer from a jurisdictional error or whether it is a mere defect or mistake which would be governed by Section 292B." 21. After hearing the Ld. Counsel for the assessee, the Hon'ble Supreme Court has adverted to certain significant facets of the present case (Maruti suzuki's case) (i) Firstly, the income which is sought to be subjected to the charge of tax for AY 2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of Rs. 78.97 crores; (ii) Secondly, under the approved scheme of amalgamation, the transferee has assumed the liabilities of the transferor company, including tax liabilities; (iii) Thirdly, the consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist. In Saraswati Industrial Syndicate Ltd., the principle has bee....
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...., the amalgamated company MSIL had addressed a communication to the assessing officer intimating the fact of amalgamation. In the above conspectus of the facts, the initiation of assessment proceedings against an entity which had ceased to exist was void ab initio." 22. Thereafter, the Hon'ble Supreme court has distinguished the Hon'ble Delhi High Court decision in skylight Hospitality LLP which was affirmed by the Hon'ble supreme court on 6th April, 2018 by observing as under: "The submission however which has been urged on behalf of the Revenue is that a contrary position emerges from the decision of the Delhi High Court in Skylight Hospitality LLP which was affirmed on 6 April 2018 by a two judge Bench of this Court consisting of Hon'ble Mr Justice A K Sikri and Hon'ble Mr Justice Ashok Bhushan33. In assessing the merits of the above submission, it is necessary to extract the order dated 6 April 2018 of this Court: "In the peculiar facts of this case, we are convinced that wrong name given in the notice was merely a clerical error which could be corrected under Section 292B of the Income Tax Act. The special leave petition is dismissed. ....
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....e, that the notice was for them. It was replied and dealt with by them. The fact that notice was addressed to M/s. Skylight Hospitality Pvt. Ltd., a company which had been dissolved, was an error and technical lapse on the part of the respondent. No prejudice was caused." 28 The decision in Spice Entertainment was distinguished with the following observations: "19. Petitioner relies on Spice Infotainment Ltd. v. Commissioner of Service Tax, (2012) 247 CTR 500.Spice Corp. Ltd., the company that had filed the return, had amalgamated with another company. After notice under Section 147/148 of the Act was issued and received in the name of Spice Corp. Ltd., the Assessing Officer was informed about amalgamation but the Assessment Order was passed in the name of the amalgamated company and not in the name of amalgamating company. In the said situation, the amalgamating company had filed an appeal and issue of validity of Assessment Order was raised and examined. It was held that the assessment order was invalid. This was not a case wherein notice under Section 147/148 of the Act was declared to be void and invalid but a case in which assessment order was passed in the n....
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.... 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable." 24. In the light of the aforesaid discussions and relying on the decision of the Hon'ble Apex court in Maruti Suzuki (Supra) and Spice Infotainment Ltd.(supra), we note that the impugned order passed under section 263 0f the Act by the Ld. Pr. CIT against the amalgamating companies which were not in existence on the date of the impugned order is a nullity and, therefore, we are inclined to quash all the impugned orders as shown in the captioned appeals 13.1. When the original revisionary order was itself illegal and without jurisdiction, the same cannot be give rise any valid collateral proceedings in the second round as well. Therefore, the impugned order passed under section 263 dated 23.03.2022 pursuant to such illegal and invalid original revisionary order dated 13.03.2020 d....
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....e assessment. Even the relevant sub-section of section 147 under which the assessment was sought to be reopened was not mentioned. These facts, prima facie, disclosed that the reasons came to the notice of the assessee for the first time when the AAC perused this order sheet and brought this fact to the notice of the assessee. Even on that ground, therefore, there could be no question of any waiver on the facts of the instant case. Even the alternative ground of finality of this order of the Tribunal suffered from the same infirmity, as the Tribunal had failed to notice this material distinction between a mere procedural provision which could be waived and such jurisdictional provision or a mandatory provision enacted in public interest which could not be waived, because by consent no jurisdiction could be conferred on the authority unless the conditions precedent were first fulfilled. The Tribunal's view was clearly erroneous that the matter became final when the Tribunal passed the earlier remand order so that this point of jurisdiction got finally settled, which could not be agitated unless the assessee had come in the reference to the High Court at this stage. The Tribunal'....