2013 (3) TMI 436 - AT - Income Tax

Notice issued u/s. 153C - CIT (A) upheld the assessment on a company which has been dissolved / amalgamated under section 391 and 394 of the Companies Act, 1956 as invalid - CIT (A) deleted the addition made on account of unexplained purchase u/s. 69C & addition on account of expenses and depreciation - Held that - Fully accepting the finding of the CIT (A) that a company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with incorporation and it dies with the dissolution as per the provision of the Companies Act. On amalgamation, the company seizes to exist in the yes of the law. Thus, assessment upon a dissolved company is impermissible as there is no provisions in Income Tax Act to make an assessment thereupon. CIT(A) has rightly held that assessment on a company which has been dissolved by amalgamation u/s. 391 and 394 of the Companies Act, 1956 is invalid as admittedly, assessee company in the present case stood dissolved on 19.9.2010 on amalgamation with M/s Lakhanpal Infrastructure Pvt. Ltd. and the assessment order in the present case was framed on 31.12.2010 - in favour of assessee.

Issues:
1. Validity of assessment on a dissolved company post amalgamation under Companies Act, 1956.
2. Legality of notice issued under section 153C and assessment order passed under section 153C/143(C).
3. Ownership of documents found during search proceedings.
4. Compliance with statutory provisions of Section 153C r/w section 153A of the Act.
5. Validity of assessment and additions made on seized documents handed over to Assessing Officer.
6. Abatement of assessment proceedings under section 153C due to non-pendency of assessment for the year under appeal.

Analysis:

Issue 1:
The first issue revolved around the validity of the assessment on a company that had been dissolved post-amalgamation under sections 391 and 394 of the Companies Act, 1956. The Revenue challenged the first appellate order on various grounds, including the validity of the assessment. The Commissioner of Income Tax (A) found that the company had indeed been dissolved on amalgamation with another company. Relying on legal precedents, the Commissioner held that there was no provision in the Income Tax Act to assess a dissolved company. The Tribunal concurred with this finding, emphasizing that a dissolved company ceases to exist in the eyes of the law, making any assessment on it impermissible.

Issue 2:
The second issue pertained to the legality of the notice issued under section 153C and the subsequent assessment order. The assessee contended that the notice and assessment were illegal, without jurisdiction, and time-barred. The Commissioner examined the facts and noted that no seized documents related to the relevant assessment year were found during the search proceedings. The Tribunal upheld the Commissioner's decision, emphasizing that the assessment order on a dissolved company was a nullity, rendering the other grounds of appeal and cross objections moot.

Issue 3:
Regarding the ownership of documents found during search proceedings, the assessee argued that the documents did not belong to them but were part of another individual's working papers. The Tribunal found that no seized documents related to the relevant assessment year were discovered during the search, and the seized papers were duly reflected in the regular books of account, leading to the conclusion that the notice issued under section 153C was illegal and without jurisdiction.

Issue 4:
The compliance with statutory provisions of Section 153C r/w section 153A of the Act was also questioned. The assessee contended that the assessment was not framed in conformity with these provisions. However, the Tribunal's decision on the nullity of the assessment order made this issue irrelevant for adjudication.

Issue 5:
The validity of the assessment and additions made on seized documents handed over to the Assessing Officer was challenged by the assessee. The Tribunal's decision on the nullity of the assessment order rendered this issue moot as well.

Issue 6:
Lastly, the abatement of assessment proceedings under section 153C due to the non-pendency of assessment for the year under appeal was raised. The Tribunal's reliance on a previous order in a similar case supported the decision that the assessment order was a nullity, leading to the dismissal of the appeals filed by the Revenue and the cross objections filed by the assessee.

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