2019 (7) TMI 735 - AT - Income Tax

Reopening of assessment - reasons recorded on a non-existent company - scheme of amalgamation conceived - reasons recorded after almost six years from the date of amalgamation and also mentioned the PAN number of erstwhile company which had ceased to exist - even after intimation to AO that company had merged with another company, the assessment order was passed on the same PAN number of amalgamating company - HELD THAT - Assessment order passed by Assessing Officer is null and void as the reasons has been recorded on a non-existent assessee and that too when the fact of amalgamation was in the knowledge of department - Decided in favour of assessee

Issues Involved:
1. Non-service of notices under Section 143(2) of the Act.
2. Application of mind by the Assessing Officer in the reassessment proceedings.
3. Issuance of notice and recording of reasons for reassessment on a non-existent entity due to amalgamation.

Issue-wise Detailed Analysis:

1. Non-service of Notices under Section 143(2) of the Act:
The appellant did not press this ground, and it was dismissed as not pressed.

2. Application of Mind by the Assessing Officer in the Reassessment Proceedings:
The appellant argued that the Assessing Officer (AO) initiated reassessment proceedings without proper application of mind to the material provided by the investigation wing. The AO incorrectly noted that the appellant had not filed a return of income, despite having acknowledged it in a note. This discrepancy indicated a lack of application of mind. Additionally, the AO's assessment mentioned different brokers and figures for contrived losses and shifted profits, further highlighting the casual approach and lack of thorough examination of the investigation report. The appellant cited the judgment of Shamshad Khan Vs ACIT (2017) 395 ITR 265 to support the argument that the AO did not apply his mind properly. The appellant also pointed out that the AO cited Section 147(b) of the Act, which had been deleted from the statutes, indicating non-application of mind by both the AO and the approving authorities under Section 151 of the Act. Furthermore, the appellant argued that the reasons recorded were void ab initio as they were based on a non-existent entity due to amalgamation.

3. Issuance of Notice and Recording of Reasons for Reassessment on a Non-existent Entity Due to Amalgamation:
The appellant company had amalgamated with another company effective from 01.04.2010, as per an order dated 20.12.2011 by the Hon'ble High Court of Delhi. Despite this, the AO recorded reasons for reassessment on 29.03.2017, almost six years after the amalgamation, using the PAN of the erstwhile company. The AO was aware of the amalgamation, as evidenced by a letter from the appellant and an order from the CIT(A) annulling the assessment for the assessment year 2006-07 on similar grounds. The appellant argued that the initiation of reassessment proceedings was void ab initio as they were carried out on a non-existent company. The Departmental Representative contended that the reassessment was based on tangible material received from DRI and that the sufficiency of material is not to be considered at the initiation stage. However, the tribunal found that the AO recorded reasons in the name of a non-existent entity, and this fact was known to the department. Citing the judgment of the Hon'ble Supreme Court in the case of Skylight Hospitality LLP Vs ACIT, the tribunal noted that the case law did not apply here as the AO had not mentioned the amalgamation in the reasons recorded. The tribunal also referenced the Delhi Tribunal's order in the case of Sindhu Trade Links Ltd., which distinguished the Skylight Hospitality LLP judgment and annulled reassessment proceedings under similar facts.

Conclusion:
The tribunal held that the assessment order was null and void as the reasons were recorded for a non-existent entity, and the fact of amalgamation was known to the department. Consequently, the jurisdictional issue was decided in favor of the appellant, and the appeal was partly allowed. Ground No. 1 was dismissed as not pressed, and the grounds on merits were also dismissed as they were not argued.

(Order pronounced in the Court on 30th day of May, 2019, at New Delhi)

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