2020 (8) TMI 20 - HC - Income Tax

Reassessment against company not in existence - assessment of income in the year of discontinuance or even after discontinuance - Tribunal remanding back to the file of AO for investigation as to whether the company was in existence at the relevant time by holding that the assessment order passed was nullity - HELD THAT - In the instant case, the assessee filed their Return of Income for the assessment year 2000-01 which assessment was reopened and the assessee fully participated in the reassessment proceedings and thereafter the Assessment Order has been passed. Therefore the reassessment order would take effect and to be effective for the assessment year 2000-01 and the striking off the name of the assessee Company from the Register of Companies on 25.05.2007, can in no manner impact the said assessment. More the question would be whether the Tribunal committed an error in permitting the assessee to raise such a ground for the first time before the Tribunal, especially when it is a factual issue which the assessee never raised before the Assessing Officer in the reassessment proceedings or before the CIT(Appeals) and sought to raise it before the Tribunal for the first time stating that it goes to the root of the matter. We do not agree with the reasoning of the Tribunal in this regard. If the assessee had failed to raise the factual issue before the AO at the first instance and consciously participated in the proceedings, could not have been permitted to canvass such factual issue for the first time before the Tribunal. Tribunal committed an error in not specifying as to what would be the relevant time in the case on hand. Our answer would be, the relevant time would be when the Company was in existence during the assessment year 2000-01, that alone would be the relevant time and the relevant year for the assessee's case. For the sake of arguments, if we are to accept the stand taken by the Tribunal to be correct, that this issue goes to the root of the matter, the Tribunal erred in not considering the provisions of Section 176 and without deciding the said issue, the question of remanding the matter to the Assessing Officer does not arise and consequently the Tribunal committed an error of law on that aspect. - Decided in favour of revenue

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was right in remanding the matter back to the Assessing Officer to investigate the existence of the company during the assessment year?
2. Whether the Tribunal erred in not considering the provisions of Section 176 of the Income Tax Act regarding assessment of income after discontinuance of business?

Analysis:
1. The appeals filed by the Revenue under Section 260A of the Income Tax Act 1961 challenged the order of the Income Tax Appellate Tribunal remanding the matter to the Assessing Officer to investigate the existence of the assessee company during the assessment year 2000-01. The Tribunal allowed the assessee to raise a new ground that the assessment order was null and void as the company's name was struck off from the Register of Companies before the assessment order was passed. The Tribunal remanded the matter without specifying the relevant time for decision. The High Court noted that the company was in existence during the assessment year, the reassessment proceedings were conducted with the company's cooperation, and the company did not inform the Assessing Officer about its name being struck off. The High Court held that the Tribunal erred in permitting the new ground and in not specifying the relevant time, thereby allowing the appeals in favor of the Revenue.

2. The Tribunal's failure to consider the provisions of Section 176 of the Income Tax Act was also a crucial issue. The High Court emphasized that the relevant time for the company's existence was during the assessment year 2000-01. The Tribunal's decision to remand the matter without deciding on the application of Section 176 was deemed erroneous. The High Court highlighted that the Tribunal should have considered the legal provisions before remanding the case. Therefore, the High Court concluded that the Tribunal committed an error of law by not addressing the Section 176 provisions and remanding the matter to the Assessing Officer. As a result, the High Court allowed the Tax Case Appeals and answered the substantial questions of law in favor of the Revenue.

In conclusion, the High Court's judgment focused on the correct application of legal provisions, the company's existence during the assessment year, and the Tribunal's errors in permitting new grounds and not considering relevant statutory provisions. The decision clarified the importance of procedural fairness and legal interpretation in tax assessment matters.