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TMI Blog2019 (4) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted any prima facie enquiry as is contemplated u/s 170 of the 1961 Act read with Order 22 Rule 10 of CPC to bring on record successor in interest, despite several intimations given by the assessee to the AO as to the amalgamation of „UTV Tele Talkies Limited’ with its ultimate holding company ‘UTV Software Communications Limited’ during assessment proceedings. The non conducting of prima-facie enquiry by the AO to bring on record successor in interest as is contemplated u/s 170 read with Order 22 Rule 10 of CPC and framing of an assessment on a non existent entity is fatal keeping in view factual matrix of the case as discussed by us in preceding para’s of this order. In the instant case based on factual matrix before us, we are afraid that an assessment order passed by the AO dated 01.02.2016 u/s 143(3) of the 1961 Act is suffering from a legal infirmity as an assessment is framed by the AO against a non existent entity despite being informed vide several communications and a complete failure by the AO to bring on record successor in interest, thus in our considered view assessment order dated 01.02.2016 passed by the AO u/s 143(3) is not sustainable in the eyes of the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and in law, the AO erred in disallowing adhoc ₹ 15,02,716/-on an assumption of an element of personal expenses. 5. Without prejudice to Ground 1 above, on the facts and in the circumstances of the case and in law, the AO erred in adding of ₹ 45,15,489/- to the income of the Appellant being unreconciled amount of Form 26 AS. 6. Each of the above grounds are without prejudice to the other. The Appellant craves leave to add, to alter, to amend or to delete any ground of appeal, at or prior to hearing of the appeal as may be required to enable the Hon'ble Appellate Authority to decide this appeal in accordance with law." 3. The brief facts of the case are that the assessee company is producing and selling contents for Television channel. The assessee in its appeal before tribunal vide Ground of appeal No.1 has raised an jurisdictional legal issue which goes to the root of the matter that an assessment was framed by the AO on non existent entity namely 'UTV Tele Talkies Limited' vide assessment order dated 01.02.2016 passed by the AO u/s 143(3) of the 1961 Act and hence the assessment framed by the AO is liable to be quashed. As we will see later in this order, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 'UTV Software Communications Ltd.' w.e.f. 01.04.2013 vide several communications but despite being brought to the notice of the AO about the amalgamation of the assessee company namely 'UTV Tele Talkies Limited' with its ultimate holding company namely 'UTV Software Communications Limited' w.e.f. 01.04.2013, the AO passed an assessment order dated 01.02.2016 u/s 143(3) of the 1961 Act in favour of a non-existent entity namely 'UTV Tele Talkies Ltd.'. Our attention was drawn to factual paper book filed by the assessee with the tribunal carrying 137 pages. We have carefully gone through the entire paper book. Our attention was also drawn by learned counsel for the assessee to letter dated 31.07.2014 filed by the assessee with AO on 06.08.2014 wherein AO was duly intimated about merger of the assessee with UTV Software Communications Limited under scheme of amalgamation approved by Hon'ble Bombay High Court with effect from 01st April 2013. The copy of scheme of amalgamation approved by Hon'ble Bombay High Court was enclosed with the said intimation dated 31.07.2014 filed with the AO with request to cancel the PAN wherein original PAN card as held by the assessee was surrendered. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 during the assessment proceedings before the AO, which is placed in paper book/page 106-107). In this reply dated 03.11.2015 (page 106/pb), the assessee submitted a note on scheme of amalgamation before the AO during assessment proceedings, which is reproduced hereunder: "(d) Note on scheme of arrangement: Pursuant to the Scheme of Arrangement under Section 291 to 394 and other applicable provisions of the Companies Act, 1956 sanctioned by the Honourable Bombay High Court on April, 2011 , the entire assets and business of UTV TV Content Limited, UTV Tele Talkies Limited , RB Entertainement Limited UTV Sunlit Content Limited, Screenshot Television Limited and First Future Agri & Developers Limited were transferred and vested in UTV Software Communications Limited with effect from the appointed date i.e. 1st April, 2013 . However, the High Court order had been filed with Registrar of Companies, Mumbai on 23.05.2014 which has become effective from that date. We further draw attention to para 2.2 where 100% subsidiary have merged into parent company, the share capital of subsidiary (including assessee's) is cancelled and no share need to be allotted. Copy of high court order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rite off and also asked to furnish the explanation/details of written off expenses in respect of cost pertaining to serial "Anandam", In response the A.R. of the assesses company vide letter dtd.29.4.2015 & 19th November, 2015 staled that "Due to management decision to close the business and merge the Company with UTV Software Communications Limited, pending production of all the serials was completed. Further, ₹ 23 lakhs of cost pertaining to a serial 'Anandarn' was written off as the same was abandoned due to non-feasibility in mew of the management". 4.3 I have gone through the submission of the AR of the assessee company. I do not find any merits in his submission for the reasons discussed below. a. Pursuant to the Scheme of Arrangement under Section 391 to 394 and other applicable provisions of the Companies Act, 1956 sanctioned by the Bombay High Court of M/s UTV Teletalkies Ltd. with M/s UTV Software Communications Ltd. with effect from 1st April 2013, all assets, liabilities & reserves of the Transferor Companies shall be recorded in the books of Transferee Company at their respective book values. There is no reason for written off the said expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent framed by the AO keeping in view factual matrix of the case before us. The landmark judgment of Hon'ble Delhi High Court in the case of Hon'ble Delhi High Court in the case of Yapi Kredi Bank (Deutchland) AG v. Ashok K. Chauhan & Ors. In FAO(OS) 511/2007, CM Appl. 14878/2008 & 3645/2012 dated 17.01.2013 is an authority which has considered entire law on the subject. 3.5 It is also claimed that first appeal was filed before learned CIT(A) and an additional ground was raised before learned CIT(A) to quash the assessment on the grounds that the AO had framed an assessment against non-existent entity viz. the assessee, wherein following contentions were raised before Ld. CIT(A) as are recorded in the appellate order dated 24.03.2017 passed by learned CIT(A), as under:- "Additional Ground of appeal Assessment completed in a non-existent assessee The Learned Assessing Officer (AO) has erred in completing the assessment on a non-existent assessee which was already merged as on the dale of passing theorder, with UTV Software Communications Limited (USCL). Hence, the order is void abinitio and bad in law. The AO ought to have followed jurisdictional judicial precedent and not passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/8/2014 informing him about this fact and also enclosing the scheme of amalgamation as approved by the High Court of Bombay, as well as letter dated 5 August, 2014 filed on 6/8/2014 for surrender of PAN Number. The primary facts necessary for its assessment were therefore disclosed fully and truly. 8.5 The appellant had again, vide reply dated on 29/04/2015 in response to assessment, questionnaire, informed the AO of the merger. In response to specific requirement of AO ,the Appellant had again filed a copy of High Court Order for merger and copy of financial statements of merged entity as well as a note on the scheme of arrangement sanctioned by the Hon'ble High Court. 8.6 Thus, not only was the AO made aware repeatedly by Appellant, he has also captured the fact in Paras. 4.2 and para 4.3 .a. of his Order. 8.7 The Appellant submits 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 ceases to exist in the eyes of the law. 8.8 The appellant submits that the assessment order is bad in law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect". Section 481 of the Companies Act provides for dissolution of the company. The Company Judge in the High Court can. order dissolution of a company on the grounds staled therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. Smith (Plant Hire) Ltd. Vs. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342 (CA) that "once a company is dissolved it becomes a non-existent party and therefore no action can be brought in its name. Thus an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter had been dissolved". * In Spice Infotainment Vs CIT 247 CTR 500 (Del) the Delhi High Court held that "After the sanction of the scheme on 11th April, 2004, Spice ceases to exit w.e.f. 1st July, 2003. Even if Spice had filed the, returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamation had not taken place. ii) Notice for assessment was issued to UTV Tele Talkies Limited for this *'Un-amalgamation period" iii) The assessee has issued a letter of Authority as "We M/s UTV Tele Talkies Limited, (PAN: AABCU0934H), hereby authorize under Section 288 of the Income Tax, 1961" to appear before the A.O. in the case of M/s UTV Tele Talkies Ltd. (copy enclosed). iv) Thus, the assessee has allowed itself to be represented as " M/s UTV Tele Talkies Limited" v) During the course of assessment proceedings the assessee has not objected to the proceedings being carried out in the name of M/s UTV Tele Talkies Ltd. 3. Further, the A.Rs of the assessee during the assessment proceedings informed that the company has amalgamated. Further the notices u/s 143(2) and 142(1) has also been received by the present company and has been duly complied with by it, and, therefore, the present amalgamated company was fully aware about the assessment proceedings being taken up in respect of the assessment of amalgamating company, viz. M/s UTV Tele Talkies Ltd. for the period prior to the amalgamation, and therefore, mere because in the body of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany in the body of assessment is a mere procedural defect covered by Section 292B of the Act, Section 292B provides that no return of income, assessment, notice, summons or other proceedings, furnished "or made or issued or taken or purported to have been furnished or made or taken in pursuance to any of the provisions of the Act, shall be invalid or shall he deemed to be invalid merely by raising of any mistake, defect, or omission of such return of income, assessment, notice, omission or other proceedings is in-substance and effect in conformity with or according to the intent and purpose of the Act. The moot question is in whose name should the assessment order be made ? 3.1. This issue may gain significance if the assessee has operated in its original name during a part of the year and has amalgamated thereafter. However, in this case, for the entire financial year (AY. 2012-13} the assessee has operated in its original name itself. Therefore, there should be no scope for any confusion on this account. 3.2 Furthermore, and without prejudice to the above it may also be stated that even in cases where the assessee has operated in its original name for a part of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Singh reported in 219 ITR 737 held that '"an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions, Any such omission or defect may render the order irregular-depending upon the nature of the provision not complied with but certainly not void or illegal", 6. The question before the Hon'ble Delhi High Court, in the case of CIT vs. Roshan Lal reported in 134 1TR 145 was whether the assessment made by the ITO was invalid as framing assessment against a dead person and the directions of the ACIT for reassessment of the assessee was correct. The Hon'ble High Court has observed that" if proceedings had already been started they can be continued against the legal representatives and even if they had not started against the person can be started against the legal representatives and therefore, if the legal representative or some other person continue to appear or chooses to appear the proceedings become irregular and can. be remanded by direction that they should be properly continued". 7. Similar view was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amalgamated company in terms of sanction accorded by the company court under Section 394 of the Companies Act, the striking out of the name of the amalgamating company from the register does not wipe out the obligation to comply with an order made by the Income-tax Officer under Section. 104, and the order is capable of being enforced against the amalgamated company.'" 10. The Hon'ble ITAT, Delhi Bench "E" in the case of Addl. CIT, Rg.2. Ghaziabad vs. M/s M. Corp. Global Pvt. Ltd. (in the case of Spice Corpn. Ltd. which stands amalgamated with M. Corp Global Pvt. Ltd.) ITA No. 2024/Del. of 2008, A.Y. 2002-03 held that the amalgamated company was well aware about the assessment proceedings being made in respect of the assessment of an income of amalgamating company for the period prior to its acquisition. The A.O. has complied all the provisions of the Act, and mere because the name of amalgamated company is not mentioned in the body of the assessment order made by the A.O., that would not vitiate the assessment as a whole so as to render the assessment as null and void. The omission to mention the name of the amalgamated company in the body of assessment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of Section 170 provides that if the predecessor cannot be found then the income shall be assessed on the successor. It is difficult to conceive as to how the highlighted phrase can be read as „Income shall be assessed in the name of the successor'. The purpose of this sub-section is to have the machinery in place for realization of taxes in case predecessor cannot be found. Sub-section (3) complements it by providing for cases where predecessor can be found and has been assessed but tax cannot be realized from him. Mentioning the name of predecessor/transferor in the assessment order does not cause any prejudice to anyone in so far as the successor transferee has been given due opportunity of being heard and the assessment is otherwise in conformity with Section 170. The issue that requires deliberation is whether the. income of the transferor company, earned during the period prior to effective date of amalgamation, can be held to be „of transferee company'. The effect of Section 170 is to enable collection of tax from the transferee in case of succession. It does not seem to have the effect of deeming the income earned by predecessor (transferor) as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon large number of judicial precedents before learned CIT(A) to contend that an assessment order is bad in law liable to be quashed and the defect in assessment order by way of framing of an non existent entity is not a curable defect and the assessment is bad in law liable to be quashed. 3.8 The learned CIT(A) rejected the aforesaid contentions of the assessee with respect to the legal jurisdictional issue as to framing of an assessment on non existent company , by holding as under vide appellate order dated 24.03.2017 :- "Additional Ground During the course of appellate proceedings the appellant raised additional ground. In the said ground it is contended that the assessment completed on a non-existent assessee is bad in law. The same ground was sent to the Assessing Officer for remand report. On perusal of the said remand report I find that the notice of assessment was issued for period prior to amalgamation. Moreover, the Assessing Officer also contended that the appellant also issued the letter of authority in the name of M/s. UTV Teletalkies Ltd which was duly accepted by the AR. I have considered the rival submissions and find that the appellant has participated in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bench has filed following documents in connection with compliances made by it in pursuance of directions issued by Hon'ble Bombay High Court in its order dated 11.04.2014 vide para 18 to 20, which are placed in file : a) Copy of documents for lodging a copy of the order of Hon'ble Bombay High Court and an approved scheme of amalgamation with Stamp Authorities on 16.05.2014 and copy of acknowledgement of stamp duty paid on 15-05-2014. b) Form No. INC -28 filed electronically on 22.05.2014 by 'UTV Tele Talkies Limited' with Ministry of Corporate affairs with copy of filing fee of ₹ 500/- paid to MCA . c) Form No. INC -28 filed electronically on 23.05.2014 by 'UTV Software Communications Limited' with Ministry of Corporate affairs along with copy of filing fee of ₹ 600/- paid to MCA. d) Copy of documents acknowledging physical filings of Hon'ble Bombay High Court order dated 11.04.2014 sanctioning scheme of amalgamation with ROC on 28.05.2014. e) Acknowledgement of payment of ₹ 60,000/- to Regional Director, Western Region, Mumbai towards costs of the Petition to the Regional Director (Rs. 10000/- cost was pertaining to the assessee as other companies al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2007 and its name was struck off from the records of Registrar of Companies on 05.02.2008. The assessee has rightly relied upon the aforesaid judgments of Hon'ble Courts/tribunal. 3.12 As we have extensively seen in the preceding para's of this order that voluminous evidences are filed by the assessee as to communication of its merger with its ultimate holding company 'UTV Software Communication Limited' which was approved under a scheme of arrangement approved by Hon'ble Bombay High Court u/s 391 to 394 of the Companies Act, 1956 , vide order dated 11.04.2014 w.e.f. 01.04.2013, during the course of assessment proceedings. The assessee on direction of the Bench has also filed copies of several compliances made by the assessee as were directed by Hon'ble Bombay High Court vide para 18 to 20 of its order dated 11.04.2014 sanctioning scheme of amalgamation of the assessee with its ultimate holding company 'UTV Software Communications Limited' w.e.f. 01.04.2013. The details of all these compliances as were done by the assessee to give effect to Hon'ble Bombay High Court directions are detailed in para 3.10 of this order. We have carefully gone through these evidences which are now pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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