AI Drafter 
TaxTMI 
TaxTMI 
2022 (10) TMI 1263
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....e facts and in the circumstances of the case and in 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 ....
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....y as system would not accept the return in name of new company). 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.....
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....n be filed u/s 153A of the IT Act, 1961. Without prejudice to the above, we would also like to state that 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 initi....
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....the Act on 23.05.2019, wherein the assessee specifically took the plea that the notice had been issued in the name of an entity which 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 natur....
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....way of carried forward loss, etc. are allowed to the transferee. Unlike winding up, there is no end to the enterprise with the entity and the enterprise in the case 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....
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....ssor) has been succeeded therein by any other person (hereinafter in this section referred to as the successor) who continues to carry on that business or profession,- (a) the predecessor 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. Sect....
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.... transferee company continued to occupy the premises which had been let out to the transferor company. The landlord initiated proceedings for the eviction on the ground of unauthorized sub-letting of the premises by the transferor company. The transferee company 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 insu....
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....om tax liability claimed by the appellant-assessee was chargeable to tax under section 41(1) of the Act. The High Court held that, on the amalgamation of the two companies, neither of them ceased to exist; instead both the amalgamating and amalgamated companies continued their entities in a blended 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 arrange....
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....Apex Court support the view that after the amalgamation, the amalgamating company loses its identity and cannot be assessed as per the provisions of the Income Tax act, 1961. Spice Entertainment Ltd vs. CST 2012 (280) ELT 43 (Del) [affirmed by SC] 19. Thereafter, the Division bench of Delhi High Court in the case of Spice dealt 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 ord....
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.... issued/ assessment framed against an amalgamating/ non-existent entity post amalgamation is valid was decided by the Hon'ble Supreme Court in the landmark judgment of Maruti Suzuki (Supra). The facts of the said case were as follows: a) Assessee - Suzuki Power-train India Limited (SPIL), was a joint venture between Suzuki Motor Corporation (SMC) and Maruti Suzuki India Ltd (MSIL). 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,....
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....hurana Engineering Ltd. vs. Dy. CIT [2014] 364 ITR 600 (Guj), Takshashila Realties (P.) Ltd. vs. Dy. CIT [2017] 77 taxmann.com 160 (Guj.), Alamelu Veerappan vs. ITO 257 Taxman 72 (Mad.). e) The order passed by the TPO in the name of SPIL, a nonexistent entity was invalid in the eyes of the law; f) SPIL ceased to be an "eligible assessee", in terms of section 144C(15) (b) of the Act. Consequently, there was no requirement to pass a draft assessment order/reference to DRPetc.; g) The final assessment order dated 31 October 2016 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 d....
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....t in the case of Maruti Suzuki Ltd (Supra). The relevant facts of the case are as under:- i. The original return of MRPL was filed under Section 139(1) on 30.06.2006. ii. The order of amalgamation was dated 11.05.2007 - but made effective from 01.04.2006. It contained a condition - Clause 220-whereby MRPL's liabilities devolved on MIPL. iii. The original return of income was not revised even though the assessment proceedings were pending. The last date for filing the revised return was 31.03.2008, after the amalgamation order came into operation. iv. A search and seizure proceeding was conducted in respect of the 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 warran....
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....un Realtors(P) Ltd., R/o...". FINDINGS OF THE COURT i. Amalgamation is not like the winding up of a corporate entity. In the case of amalgamation, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues - enfolded within the new or the existing transferee entity. ii. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. It is, therefore, essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action 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 Se....
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.... present case the assessment order dated 11.08.2011 mentions the name of both the amalgamating (MRPL) and amalgamated (MIPL) companies. vi. Secondly, in the cases relied upon, the amalgamated companies had participated in the proceedings before the department and the courts held that the participation by the amalgamated company will not be regarded as estoppel. However, in the present case, the participation in proceedings was by MRPL which held out itself as MRPL. vii. What is overwhelmingly evident- is that the amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group. A return was filed, pursuant to notice, which suppressed 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 ....
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....ng in the proceedings which were specifically in respect of erstwhile MRPL for the year ending 31.03.2006, for the first time before the ITAT in cross objection in the appeal filed by the Revenue, additional ground was urged that the assessment order was nullity because MRPL was not in existence. The assessment order was issued in the name of MRPL (representative of MIPL) and even in the first appeal before the Id. CIT (A) and cross objection before the ITAT, it was mentioned as "MRPL represented by MIPL". At no point of time, even at the time of search and subsequently on receipt of the notice, it was stated that MRPL was not in existence and its business of the erstwhile MRPL was taken over by MIPL. Even in the counter affidavit filed before the Hon'ble Apex Court, it has been affirmed by Shri Amit Jain, 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) t....
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.... of the case, the conduct of the assessee, commencing from the date the search took place, and before all forums, reflects that it consistently held itself out as the assessee. Thus, the assessment order passed in the name of MRPL was held to be valid. 27. Further, the Court distinguished the judgments passed in the case of Maruti Suzuki (Supra) and Spice on the following grounds: a) The legislative amendment by way of introduction of section 2(1A), defining "amalgamation", was not taken into account by the Apex Court in earlier decisions. Further, the tax treatment in case of amalgamation under various provisions (such as in section 72A, 80IA, etc.) of the Act were not brought to the notice of the Apex Court, in the earlier decisions; b) In the relied upon cases, the assessee had duly informed the tax authorities about the fact of the merger of companies and yet the assessment order was passed 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 ....
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....t, in the form of set-off, deductions (in proportion to the period the transferee was in existence, vis-à-vis the transfer to the transferee company); carry forward of loss, depreciation, all bear out that under the Act, (a) the business-including the rights, assets and liabilities of the transferor company do not cease, but continue as that of the transferor company; (b) by deeming fiction- through several provisions of the Act, the treatment of various issues, is such that the transferee is deemed to carry on the enterprise as that of the transferor. d) Combined effect 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 transferor or amalgamating 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. e) Whether corporate dea....