2023 (9) TMI 885 - AT - Income Tax

Reopening of assessment u/s 147 - Conversion of company into LLP - notice in hands of Successor company, i.e. in the hands of assessee LLP - AO Jurisdiction to assess the income of the predecessor company - new proceedings in the name of the successor LLP after the date of conversion / registration - DR submitted that although the company ceased to exist, the Ld. AO had rightly issued the notice to the successor LLP only - HELD THAT - The situation that arises is that the successor LLP can be assessed for the income of the predecessor company for A.Y. 2016-17 (upto 22.03.2016 being date of succession) and a year preceding to the year of succession which is A.Y. 2015-16 in the case at hand. It was stated that that there is no other year, which can be assessed in the hands of successor for the income of the predecessor, and there is no other section which was brought over notice in the Act too, which permits any other year for assessing income of the predecessor. On carefully considering the provisions of section 170(2), years which can be assessed for the income of the predecessor can be the year of succession (upto the date of succession) and the immediately preceding previous year and no other years can be assessed in the hands of the successor. Therefore, in the present case at hand, we are of the view that the Ld. AO could not have acquired jurisdiction to assess the income of the predecessor company for the years prior to A.Y. 2015-16. We hold that the Ld. AO lacks jurisdiction in reopening and assessing the case of the predecessor company for A.Y. 2009-10 in the hands of assessee LLP. We quash the reassessment order passed by the Ld. AO for A.Y. 2009-10 and therefore, ground no. 1 of the appeal of the assessee is allowed.

Issues Involved:
1. Validity of reassessment order under section 143(3) read with section 147 of the Income Tax Act.
2. Service of notice under section 148 of the Income Tax Act.
3. Assessment of a non-existent entity due to conversion from a company to LLP.
4. Applicability of section 153C versus section 147 of the Income Tax Act.

Summary:

A.Y. 2008-09:

1. Validity of Reassessment Order:
- The assessee argued that the reassessment order passed under section 143(3) read with section 147 of the Act is void ab initio due to non-service of notice under section 148 and non-provision of reasons for reopening. The Tribunal found that despite several requests and submissions by the assessee, there was no proof of service of reasons recorded for reopening. Consequently, the reassessment order was quashed as bad in law.

2. Service of Notice under Section 148:
- The Tribunal noted that the revenue failed to provide proof of service of notice under section 148. Despite participation in assessment proceedings by the assessee, the Tribunal did not adjudicate this issue due to lack of records.

3. Assessment of Non-Existent Entity:
- The Tribunal found that the assessment order was passed in the name of a non-existent company, despite the AO being aware of its conversion to LLP. Citing various judicial precedents, the Tribunal held that the assessment order passed in the name of a non-existent entity is null and void.

4. Applicability of Section 153C vs. Section 147:
- The Tribunal held that the information received from a search on a third party did not contain any material pertaining to the assessee, and thus, section 153C was not applicable. The correct provision invoked was section 147 for reopening the assessment.

A.Y. 2009-10:

1. Validity of Reassessment Order:
- The Tribunal held that the reassessment order for A.Y. 2009-10 was void ab initio as the proceedings were initiated after the date of conversion of the company into LLP. The Tribunal noted that as per section 170(2), only the year of succession and the immediately preceding year can be assessed in the hands of the successor LLP. Therefore, the AO lacked jurisdiction to reopen and assess the case for A.Y. 2009-10.

2. Service of Notice under Section 148:
- Similar to A.Y. 2008-09, the Tribunal found no proof of service of notice under section 148 for A.Y. 2009-10. The Tribunal quashed the reassessment order on this ground as well.

3. Assessment of Non-Existent Entity:
- The Tribunal reiterated that the assessment order passed in the name of a non-existent company (after conversion to LLP) is invalid and quashed the reassessment order on this ground.

Final Decision:
- For A.Y. 2008-09, the appeal of the assessee was allowed, and the appeal of the revenue was dismissed.
- For A.Y. 2009-10, the appeal of the assessee was partly allowed, and the appeal of the revenue was dismissed.

Order Pronounced: 14.09.2023

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