TaxTMI 
TaxTMI 
2022 (10) TMI 1263
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....n law, the Ld. CIT (A) is justified in holding that the assessment order u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 is invalid without appreciating that the facts and circumstances of this case are distinguishable from Supreme Court judgment in the case of Pr. CIT, New Delhi Vs. Maruti Suzuki India Limited?" 3. Whereas the assessee in both the appeals has raised the issue, firstly, on merits of the addition on account of unsecured loan added u/s 68; and secondly, the additions are not based on any incriminating materials found during the course of search, therefore the same are beyond the scope of assessment u/s 153A. 4. At the outset, it has been brought to our notice that the assessee's appeal is barred by limitation for 111 days. The reasons given by the assessee is that the appellate order was received by the assessee on 29.10.2021, which was passed during the course of Covid-19 pandemic. When the Covid-19 situation was under control, and the offices started its regular course; immediately thereafter assessee filed the appeal on 18.04.2022. Ld. Counsel submitted that the Hon'ble Supreme Court, in Miscellaneous Application(C) No. 21 of 2022 dated 10th January....
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....any). It was without prejudice to its earlier claim which was intimated to the Ld. AO vide letter dated 24.06.2019. Further, the AO issued notice u/s 143(2) again in the name of non-existing company on 26.09.2019 and also issued notice u/s 142(1). Finally the assessment order has been passed in the name of non-existing entity which is as under:- "M/s Bhadrawati Ispat & Energy Ltd. (merged with M/s. Reliable Record Keepers Pvt. Ltd. which is now known as M/s. Candor Renewable Energy Private Limited)" 8. This fact has also been captured by the Ld. CIT (A) in his order which for the sake of convenience, are reproduced hereunder:- 5.3 It is noted that a scheme of amalgamation was filed in Bombay High Court having an appointed date of 1.4.2015 wherein Bhadrawati Ispat & Energy Limited and Demand Trading India Limited, being amalgamating companies, sought to merge with Reliable Record Keepers Private limited, being the amalgamated company. The scheme was approved by the High Court vide their order dated 12th August 2016. With the approval of the scheme on 12.8.2016, the amalgamating companies ceased to exist. The search and seizure action was conducted on the assessee's premise....
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....hat in response to the notice received u/s 153A, the assesses has duly filed its return of income on 22.06.2019. Copy of ITR acknowledgement is enclosed herewith four your honours kind perusal and record." 5.6 There does not seem to be any acknowledgement from the AO on the above letters filed by the assessee. This is because the next notice, u/s 143(2) of the Act has been issued on 28.09.2019 once again in the name of Bhadrawati lspat & Energy Limited. A notice under section 142(1) of the Act has been issued by the AO on 14.12.2019 once again in the name of Bhadrawati lspat & Energy Limited (now merged with Candor Renewable Energy Private Limited). The final assessment order has been passed by the AO on 30.12.2019 and the demand notice has been issued again in the name of Bhadrawati Ispat & Energy Limited, (merged with Reliable Record Keepers Pvt Ltd which is now merged with Candor Renewable Energy Private Limited). 5.7 The assessee has vehemently argued that the assessment order, having been framed on a non-existent entity, was a nullity and hence, void ab initio. It has also been claimed that the various notices issued in the name of the non-existent entity were illegal and ba....
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.... did not exist and hence, no return could be filed by the said entity u/s 153A of the Act. In fact, in spite of reiteration of the above position by the assessee, the AO has proceeded to continue to issue notices in the name of the non-existent entity and has finally passed the assessment order in the name of the nonexistent company. Passing of the assessment order in the name of the non-existent company has been unanimously held to be an illegality which cannot be condoned u/s. 292B of the Act. 5.30 In my view, the facts of the present case are identical with the facts in the case of Maruti Suzuki (supra). None of the ameliorating circumstances mentioned and taken note of by the various High Courts are present in this case. The AO has not proceeded to modify / correct the name on subsequent notices or the assessment order on receipt of specific information with reference to the scheme of amalgamation effected in the case. While dealing with the issue in the Maruti Suzuki case, the Hon'ble Supreme Court has elaborated on the binding nature? of its order by observing that: "26..........The law declared would attract the applicability of Article 141 of the Constitution. For....
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.... of amalgamation continues. Thus, here in this case, the assessment pertains to A.Y. 2013-14 and 2014-15, when erstwhile company M/s Bhadrawati Ispat & Energy Ltd. was in existence and post search, the assessment which has been done and additions have been made and the demand has been raised upon the present assessee, therefore the assessment order is valid. He thus submitted that assessment cannot be quashed. In any case it was a mistake which is curable u/s 292BB. 11. On the other hand, Ld. Counsel for the assessee strongly referred and relied on the decision of Ld. CIT (A) and also the judgment of Hon'ble Apex Court in the case of Maruti Suzuki India Ltd. (supra) and tried to distinguish the judgment of Mahagun Realtors (P) Ltd. (supra). 12. We have heard the rival submissions and perused the relevant findings given in the impugned order as well as material placed on record. In so far as the facts as discussed above, the same are not in dispute. Now the only question is, whether the entire assessment proceedings u/s 153A which was commenced after the date of search on 30.06.2017, when M/s Bhadrawati Ispat & Energy Ltd. had ceased to exist and was merged with M/s Reliable Recor....
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....essor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession. (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of succession and of the previous year 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, and all the provisions of this Act shall, so far as may be, apply accordingly..." 15. Thus, Section 170 specifically provides that if a person carrying on a business is succeeded by another person, then the predecessor shall be liable for assessment till the date of succession and successor shall be assessed in respect of the income after the date of succession. Section 170(2) starts with a non-obstante clause which provides that in case if the predecessor in case of succession is not found then the successor shall be assessed in the place of predecessor for the year....
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....mpany set up a defense that by amalgamation of the two companies under the order of the Bombay High Court all interest, rights including leasehold and tenancy rights held by the transferor company blended with the transferee company, therefore, the transferee company was legal tenant and there was no question of any sub-letting. * The Hon'ble Apex Court held that under the order of amalgamation made on the basis of the High Court's order, the transferor company ceased to be in existence in the eye of law and it effected itself for all practical purposes. United Kingdom Court in the case of M.H. Smith (Plant Hire) Ltd. Vs. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342 (CA), in the context of dissolution of a company that "once a company is dissolved it becomes a nonexistent party and therefore no action can be brought in its name. Thus an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter had been dissolved". 18. The aforesaid principle laid down in General Radio & Appliances Co. Ltd. (supra) was affirmed by the Hon'ble Apex Court in the case of ....
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....form. It further held that the amalgamated company was a successor-in-interest of the amalgamating company and since the assets of both the companies were merged and blended to constitute a new company, the liabilities attaching thereto must, therefore, be on the amalgamated company. On these findings, the High Court held that the amalgamated company, namely, the assessee, was liable to pay tax on Rs. 58,735. * The Apex court considered the question whether, on the amalgamation of the Indian Sugar Company with the appellantcompany, the Indian Sugar Company continued to have its identity and was alive for the purposes of section 41(1) of the Act. The Apex court observed as under :- "Generally, where only one company is involved in a change and the rights of the shareholders and creditors are varied, it amounts to reconstruction or reorganization or scheme of arrangement In an amalgamation, two or more companies are fused into one by merger or by one over the other. Reconstruction or amalgamation has no precise legal meaning. Amalgamation is a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company become substantially th....
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....ealt with the question as to whether an assessment in the name of an amalgamating company which has been amalgamated and has been dissolved is null and void or whether the framing of an assessment in the name of such company is merely a procedural defect which can be cured. The Hon'ble Delhi High Court held as follows: (a) Spice (amalgamating company) got amalgamated with MCorp Put Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of Delhi High Court which was duly sanctioned vide orders dated 11th February, 2004. With amalgamation made effective from 1st July, 2003, Spice ceased to exist. That is the plain and simple effect in law. (b) The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, Spice also stood dissolved by specific order of Delhi High Court. With the dissolution of the amalgamating company, its name was struck off from the rolls of Companies maintained by the Registrar of Companies. (c) A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per th....
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.... b) SPIL filed return declaring certain taxable income, which was processed u/s 143(1). c) Subsequently, SPIL (Amalgamating Company) was amalgamated with 'MSIL' (Amalgamated Company) with effect from 1-4-2012 under Court orders on 29.01.2013. d) MSIL intimated to the AO on 2.04.2013. e) Notice under section 143(2) dated 26.09.2013 was issued to SPIL, non-existent entity. f) Thereafter, MSIL participated in assessment proceedings of SPIL. g) The assessment order under section 143(3), read with section 144C (1) of the Act was passed in the name of "SPIL (amalgamated with MSIL)". * The assessee argued before the tax/ appellate authorities that an assessment order passed in the name of a non-existent entity was void ab initio, since after amalgamation, the amalgamating company ceases to exist. Tax Department was of the view that since name of both the entities were mentioned in the order, the assessment order cannot be declared as invalid. * Before the Apex Court, the main contentions of the Revenue were as follows: (a) Names of both amalgamating and amalgamated company was mentioned in the assessment order; (b) Even otherwise, the mistake is curable u/s 292....
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.... is beyond limitation in terms of Section 153(1) read with Section 153 (4) of the Act. h) The assessment framed in the name of the amalgamating Company is invalid [refer: Spice Entertainment vs. CIT, CIT v. Dimension Apparels (P.) Ltd. [2015] 370 ITR 288 (Delhi); affirmed by Hon'ble Apex Court vide Civil Appeal No. 3125 of 2015, CIT v. Micron Steels (P.) Ltd. 372 ITR 386 (Delhi), CIT v. Micra India (P) Ltd. 231 Taxman 809 (Delhi)]. i) Assessment framed in the case of a non-existent entity is non-est in the eyes of law [refer: Pr. CIT vs. BMA Capfin Ltd. [2018] 100 taxmann.com 329 (Delhi) (Revenue's SLP dismissed against the same in Pr. CIT vs. BMA Capfin Ltd. [2018] 100 taxmann.com 330/[2019] 260 Taxman 89 (SC)] * The Apex Court after taking into consideration submissions of both sides held as follows: a) Under the approved scheme of amalgamation, the transferee assumed the liabilities of the transferor company, including tax liabilities; b) The consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist by relying on the judgment of Saraswati Industrial Syndicate Ltd vs. CIT ....
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....Mahagun group, including the MRPL and other companies. v. When search and seizure of the Mahagun group took place, no indication was given about the amalgamation. vi. A statement made on 20.03.2007 by Mr. Amit Jain, MRPL's managing director, during statutory survey proceedings under Section 133A, unearthed discrepancies in the books of account, in relation to amounts of money in MRPL's account. The specific amount admitted was 5.072 crores, in the course of the statement recorded. vii. The warrant was in the name of MRPL. The directors of MRPL and MIPL made a combined statement under Section 132 of the Act, on 27.08.2008. viii. A total of Rs. 30 crores cash, which was seized- was surrendered in relation to MRPL and other transferor companies, as well as MIPL, on 27.08.2008 in the course of the search operation, when a statement of Mr. Amit Jain was recorded under Section 132 (4) of the Act. ix. Upon being issued with a notice to file returns, a return was filed in the name of MRPL on 28.05.2010. Before that, on two dates, i.e., 22/27.07.2010, letters were written on behalf of MRPL, intimating about the amalgamation, but this was for AY 2007-08 (for which sepa....
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....tion or the complaint does not per se cease - depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall. iii. The combined effect, therefore, of Section 394 (2) of the Companies Act, 1956, Section 2 (1A) and various other provisions of the Income Tax Act, is that despite amalgamation, the business, enterprise and undertaking of the transferee or amalgamated company- which ceases to exist, after amalgamation, is treated as a continuing one, and any benefits, by way of carry forward of losses (of the transferor company), depreciation, etc., are allowed to the transferee. Therefore, unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation, continues. iv. There is no doubt that MRPL amalgamated with MIPL had ceased to exist thereafter; this is an established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to cont....
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....d the fact of amalgamation; on the contrary, the return was of MRPL. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT. Even the affidavit before this court is on behalf of the director of MRPL. Furthermore, the assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special auditor's report, brings specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of MRPL (as the assessee) - but represented by the transferee, MIPL. All these clearly indicate that the order adopted a particular method of expressing the tax liability. The AO, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home Decor Pvt. Ltd.). viii. The mere choice of the AO in issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it. Right from the time it was issued, and at all stages of various pr....
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.... who has been described in the affidavit as Director of M/s. Mahagun Realtors (P) Ltd.. It was in this background, the Hon'ble Court in para 33 observed as under - "33. There is no doubt that MRPL amalgamated with MIPL and ceased to exist thereafter; this is an established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to contend that the notice issued in the name of the amalgamating company is void and illegal. The facts of present case, however, can be distinguished from the facts in Spice and Maruti Suzuki on the following bases." 26. Therefore, the Supreme Court merely distinguished the facts in Spice and Maruti, while continuing to agree with the fundamental principle that on amalgamation, the amalgamating entity ceases to exist. Thereafter, the Court in paras 34 onwards, held as under: a) No intimation was given to the AO for A.Y 2006-07 [refer para 34]; b) Return filed, pursuant to notice, suppressed the fact of amalgamation. The return was filed in the name of MRPL. Further in Business Reorganization' column it was mentioned "not applicable" [refer para 34, 40]. c) Name of both the companies were mentioned in the....
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....in the name of the non-existent entity. However, in the present case, the assessee failed to inform the assessing officer about the amalgamation for assessment year 2006-07 (year in dispute), though disclosure was made for subsequent years (AYs 2007-08 and 2008-09). The return of income filed on 28.05.2010 (post amalgamation) pursuant to notice under section 153A was filed in the name of MRPL and the fact of business reorganization was mentioned as 'not applicable" in the return form. c) In relied upon cases, the amalgamated companies participated in the assessment proceedings before the tax department in their own capacity, due to which the Apex Court affirmed that participation of amalgamated company shall not be regarded as estoppel against law. In the present facts, the participation in the assessment proceedings was by MRPL which held itself as MRPL. d) The relied upon judgment of Saraswati Syndicate (Supra) was decided in relation to assessment issues when the amalgamation was not separately defined under the Act. Specific definition of 'amalgamation" has been incorporated in section 2(1 A) of the Act by way of amendment in 1967. 28. Other relevant observations m....
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....ny), depreciation, etc., are allowed to the transferee. Therefore, unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation continues. e) Whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act) but would depend on the terms of the amalgamation and the facts of each case. 29. The Apex Court with the aforesaid observations, quashed the order of the High Court which held that the assessment order passed in the name of non-existent entity is invalid, and restored the revenue's appeal along with assessee's cross objections to the file of the Hon'ble Tribunal to decide the issues on merits other than nullity of assessment order. 30. The aforesaid judgment of Hon'ble Supreme Court in the case of Mahagun Realtors Pvt. Ltd. (supra) in our humble opinion, nowhere disagrees with the principles laid down by the Hon'ble Apex Court in the case of Maruti Suzuki India Ltd. (supra) and Spice Entertainment Ltd. (supra) of Hon'ble Delhi High Court , for the reaso....