2014 (4) TMI 554 - AT - Income Tax

Validity of proceedings u/s 153C of the Act Assessee Company amalgamated into other Company Assessment of a non-existent Company Held that - CIT(A) rightly held that a company incorporated under the Indian Companies Act is a juristic persons - It takes it berth 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 exists in the eyes of the law - Thus, assessment upon a dissolved company is impressible as there is no provisions in Income Tax Act to make an assessment - assessment on a company which has been dissolved by amalgamation u/s. 391 and 394 of the Companies Act, 1956 is invalid. Assessment upon a dissolved company is impermissible as there is no provision in the I.T. Act to make an assessment upon a non-existent company Relying upon Saraswati Industrial Syndicate Ltd. vs. CIT 1990 (9) TMI 1 - SUPREME Court - The amalgamation is a blending of two or more existing undertaking into one undertaking, and the shareholders of each blending company become substantially the shareholders in the company which is to carry on the blending undertakings thus, no assessment can be framed on a non-existent entity Decided in favour of Assessee.

Issues Involved:
1. Legality of proceedings initiated under section 153C.
2. Issuance of notice under section 153C and consequent assessment order.
3. Assessment on a non-existent company due to amalgamation.
4. Use of statements against the assessee without cross-examination.
5. Rejection of audited books and transactions through banks.
6. Incorrect and excessive charging of interest under sections 234A and 234B.

Issue-Wise Detailed Analysis:

1. Legality of Proceedings Initiated Under Section 153C:
The Assessee contended that the proceedings initiated under section 153C were illegal, bad in law, and without jurisdiction. The Tribunal noted that the assessee company had already amalgamated with another company before the finalization of the assessment. Therefore, any assessment framed on a non-existent entity was considered a nullity. The Tribunal referenced multiple cases, including ACIT vs. Micra India Pvt. Ltd., to support this position, emphasizing that an assessment upon a dissolved company is impermissible as there is no provision in the Income Tax Act to make such an assessment.

2. Issuance of Notice Under Section 153C and Consequent Assessment Order:
The Tribunal observed that the notice under section 153C was issued to the assessee company after it had already amalgamated and ceased to exist. The Tribunal cited the case of CIT vs. Vivid Marketing Servicing Pvt. Ltd., where it was held that an assessment order against a company that had been dissolved was invalid. The Tribunal concluded that the assessment order in the present case was similarly invalid.

3. Assessment on a Non-Existent Company Due to Amalgamation:
The Tribunal highlighted that the assessee had informed the Department about the amalgamation with JPL Hotels and Residences Pvt. Ltd. The Tribunal reiterated that a company, once dissolved through amalgamation, ceases to exist, and any assessment on such a non-existent entity is invalid. The Tribunal referenced the case of Saraswati Industrial Syndicate Ltd. vs. CIT, where it was established that assessment upon a dissolved company is impermissible.

4. Use of Statements Against the Assessee Without Cross-Examination:
The Assessee argued that the AO used statements of various persons against the assessee without providing an opportunity for cross-examination. The Tribunal did not delve deeply into this issue, as the primary ground for allowing the appeal was the invalidity of the assessment on a non-existent entity.

5. Rejection of Audited Books and Transactions Through Banks:
The Tribunal noted that the AO had rejected the audited books and transactions through banks, considering them artificial and not reflective of actual business transactions. However, the Tribunal focused on the primary issue of the invalidity of the assessment due to the non-existence of the assessee company post-amalgamation.

6. Incorrect and Excessive Charging of Interest Under Sections 234A and 234B:
The Assessee contended that interest was wrongly charged under sections 234A and 234B. The Tribunal did not specifically address this issue, as the assessment itself was deemed invalid.

Conclusion:
The Tribunal concluded that the assessment orders were invalid as they were framed on a non-existent entity due to the amalgamation of the assessee company. The Tribunal allowed all six appeals filed by the Assessee, rendering the other grounds of appeal infructuous. The order was pronounced in the Open Court on 11/4/2014.

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