2012 (8) TMI 635 - AT - Income Tax

Validity of notice issued under section 148 Held that - Notice was issued in the name of amalgamating company i.e. M/s.TI Diamond Chain Ltd. Since the said company has merged with M/s.Tube Investments of India Ltd. on 1.4.2004, the amalgamating company ceased to exist from the date of the exist - notice served in the name of a wrong person is no notice in the eye of law and subsequent proceedings arising out of the said notice are void, illegal and totally without jurisdiction and it is a case of no notice to the assessee Reopening proceedings Held that - Assessing Officer has failed to give valid reason for reopening of the assessment as the same has been settled in favour of the assessee in its own case by the Tribunal - issue of notice issued under section 148 is identical to the issue already settled/adjudicated by the Tribunal in the earlier assessment years mentioned - matter has already been decided by the Tribunal and ought to have followed the decision of the Tribunal. Therefore, this ground raised by the assessee is also allowed. Interest under section 234D Held that - Section 234D was inserted by the Finance Act, 2003 with effect from 1.6.2003. Thus the same would be applicable with effect from the assessment year 2004-05 - CIT(A) rightly deleted the interest under section 234D imposed by the Assessing Officer - ground raised by the Revenue is dismissed

Summary

Issues Involved:
1. Validity of reopening of assessment and notice issued under section 148.
2. Dropping of the ground mentioned in the notice for reopening proceedings.
3. Exclusion of 90% of service charges and export benefits under section 80HHC.
4. Deletion of interest under section 234D.

Detailed Analysis:

1. Validity of Reopening of Assessment and Notice Issued Under Section 148:

The assessee contended that the reopening of the assessment was invalid as the notice under section 148 was issued to a company that had ceased to exist due to amalgamation. The notice was issued to M/s. TI Diamond Chain Ltd., which had merged with M/s. Tube Investments of India Ltd. on 1.4.2004. The assessee argued that since the amalgamating company was no longer in existence, the notice was defective and invalid, rendering the entire reopening proceedings void. The Tribunal agreed with the assessee, citing precedents from the Hon'ble Supreme Court and various High Courts, which held that a notice issued to a non-existent entity is invalid and void. The Tribunal concluded that the notice was not valid, and thus, the subsequent proceedings were null and void.

2. Dropping of the Ground Mentioned in the Notice for Reopening Proceedings:

The assessee argued that the reasons stated for reopening the assessment were based on issues already settled in its favor by the Tribunal in earlier assessment years (1993-94 and 1994-95). The Tribunal noted that the issue regarding the inclusion of service charges and insurance claims as profits under section 80HHC had been settled in favor of the assessee by the Tribunal in ITA Nos. 332, 2084 & 2021/Mds/1997. Since the Revenue had not appealed against this order, it had attained finality. The Tribunal held that the Assessing Officer could not reopen the assessment on the same settled issue and that the CIT(A) should have followed the Tribunal's earlier decision. Consequently, this ground raised by the assessee was allowed.

3. Exclusion of 90% of Service Charges and Export Benefits Under Section 80HHC:

The CIT(A) upheld the Assessing Officer's decision to exclude 90% of the service charges from the profits of the business for the purpose of computing the deduction under section 80HHC. The assessee challenged this exclusion, arguing that the amended provisions to section 80HHC introduced by the Taxation Law (2nd Amendment) Bill, 2005, with retrospective effect from 1st April 1998, should not apply to the assessment year 2000-01 as the provisions did not exist at the time of filing the original return. The Tribunal did not provide a separate ruling on this issue in the provided text, focusing instead on the validity of the notice and the reopening proceedings.

4. Deletion of Interest Under Section 234D:

The Revenue appealed against the CIT(A)'s decision to delete the interest levied under section 234D. The CIT(A) had held that interest under section 234D could only be levied prospectively from the assessment year 2004-05, as the provision was inserted by the Finance Act, 2003, with effect from 1.6.2003. The Tribunal upheld the CIT(A)'s decision, noting that section 234D was applicable prospectively and thus could not be applied to the assessment year 2000-01. The Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:

The appeal of the assessee was allowed, and the appeal of the Revenue was dismissed. The Tribunal held that the notice issued under section 148 was invalid due to being addressed to a non-existent entity, and the reopening of the assessment on settled issues was not permissible. Additionally, the deletion of interest under section 234D by the CIT(A) was upheld.