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TMI Blog2019 (11) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee apart from raising the original grounds, had also raised the following additional grounds before us. "Without prejudice to the other grounds of appeal, 1. Whether on facts and circumstances of the case and in law, the assessment order under section 143(3) ought to be held to be bad in law, since on the date the assessment was framed, the company was non-existent having merged with Sprit Textile Pvt. Ltd. w.e.f. 01.10.2012. 2. Whether on facts and circumstances of the case and in law, the entire disallowance under section 14A of the Income-tax Act (hereinafter referred to as "the Act") read with Rule 8D of the Incometax Rules, 1962 (hereinafter referred to as "the Rules") ought to be deleted?" 3. We have heard the rival submissions. We find that additional ground No.1 raised by the assessee is purely legal in nature and it goes to the root of the matter and it does not involve investigation of fresh facts. Hence, placing reliance on the decision of Supreme Court decision on Jute Corporation of India v. CIT [1991] 187 ITR 688 (SC) and NTPC Ltd., reported in 229 ITR 383, we are inclined to admit the additional grounds raised by the assessee and consider the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t u/s.143(3) of the Act on 31/03/2015 in the name of amalgamating company i.e. Churu Trading Company Pvt. Ltd. determining the total income of assessee at Rs. 376,56,43,090/-. The appeal was preferred before the ld. CIT(A) wherein the cause title was clearly mentioned as Churu Trading Company Pvt. Ltd., (Now merged with Sprit Textiles Pvt. Ltd.). However, we find that assessee had not challenged this jurisidictional issue of framing of assessment on a non-existent company by the ld. AO in the grounds of appeal raised before the ld. CIT(A). From the perusal of the appellate order, we also find that no additional ground was even raised by the assessee before the ld. CIT(A) in this regard. Even in the original grounds of appeal, the assessee had not raised this preliminary legal issue before us. This ground has been raised vide additional ground No.1 before us wherein the assessee seeks to challenge the validity of assessment framed by the ld. AO on a non-existent company. We have already held hereinabove that the additional ground raised in this regard by the assessee goes to the root of the matter and does not involve fresh investigation of facts and accordingly the same is admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e existing undertakings into one undertaking, the shareholders of each blending company become substantially the shareholders in the company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. Strictly 'amalgamation' does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See: Halsbury's Laws of England (4th edition volume 7 para 1539). Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity." (iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of M/s Spice which was non existing entity on that day. In such proceedings an assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law. 12. Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act." Following the decision in Spice Entertainment, the Delhi High Court quashed assessment orders which were framed in the name of the amalgamating company in: (i) Dimension Apparels; (ii) Micron Steels; and (iii) Micra India. 21. In Dimension Apparels, a Division Bench of the Delhi High Court affirmed the quashing of an assessment order dated 31 December 2010. The Respondent had amalgamated with another company and thus, ceased to exist from 7 December 2009. The Court rejected the argument of the Revenue that the assessment was in substance and effect in conformity with the Act by reason of the fact that the assessing officer had used correct nomenclature in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Mr Justice Sanjay Kishan Kaul dismissed the Civil Appeals and tagged Special Leave Petitions in terms of the following order : "Delay condoned. Heard the learned Senior Counsel appearing for the parties. We do not find any reason to interfere with the impugned judgment(s) passed by the High Court. In view of this, we find no merit in the appeals and special leave petitions. Accordingly, the appeals and special leave petitions are dismissed." 25. The doctrine of merger results in the settled legal position that the judgment of the Delhi High Court stands affirmed by the above decision in the Civil Appeals. 26. The order of assessment in the case of the respondent for AY 2011-12 was set aside on the same ground. This resulted in a Special Leave Petition by the Principal Commissioner of Income Tax - 6 Delhi. The Special Leave Petition was dismissed by a two judge Bench of this Court consisting of Hon'ble Mr Justice Rohinton Fali Nariman and Hon'ble Ms Justice Indu Malhotra on 16 July 2018 in view of the order dated 2 November 2017 governing Civil Appeal No. 285 of 2014 in Spice Enfotainment and the connected batch of cases. Though, leave was not grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LLP, had taken over on 13 May 2016 and acquired the rights and liabilities of Skylight Hospitality Pvt. Ltd upon conversion under the Limited Liability Partnership Act 2008. It instituted writ proceedings for challenging a notice under Sections 147/148 of the Act 1961 dated 30 March 2017 for AY 2010-2011. The "reasons to believe" made a reference to a tax evasion report received from the investigation unit of the income tax department. The facts were ascertained by the investigation unit. The reasons to believe referred to the assessment order for AY 2013-2014 and the findings recorded in it. Though the notice under Sections 147/148 was issued in the name of Skylight Hospitality Pvt. Ltd. (which had ceased to exist upon conversion into an LLP), there was, as the Delhi High Court held "substantial and affirmative material and evidence on record" to show that the issuance of the notice in the name of the dissolved company was a mistake. The tax evasion report adverted to the conversion of the private limited company into an LLP. Moreover, the reasons to believe recorded by the assessing officer adverted to the approval of the Principal Commissioner. The PAN number of the LLP was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case weighed with this Court in coming to this conclusion that there was only a clerical mistake within the meaning of Section 292B. The decision in Skylight Hospitality LLP has been distinguished by the Delhi, Gujarat and Madras High Courts in: (i) Rajender Kumar Sehgal; (ii) Chandreshbhai Jayantibhai Patel; and (iii) Alamelu Veerappan. 30. There is no conflict between the decisions of this Court in Spice Enfotainment (dated 2 November 2017) and in Skylight Hospitality LLP (dated 6 April 2018). 31. Mr Zoheb Hossain, learned Counsel appearing on behalf of the Revenue urged during the course of his submissions that the notice that was in issue in Skylight Hospitality Pvt. Ltd. was under Sections 147 and 148. Hence, he urged that despite the fact that the notice is of a jurisdictional nature for reopening an assessment, this Court did not find any infirmity in the decision of the Delhi High Court holding that the issuance of a notice to an erstwhile private limited company which had since been dissolved was only a mistake curable under Section 292B. A close reading of the order of this Court dated 6 April 2018, however indicates that what weighed in the dismissal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook place up to the date of succession; (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor, and all the provisions of this Act shall, so far as may be, apply accordingly. (3) When any sum payable under this section in respect of the income of such business or profession for the previous year in which the succession took place up to the date of succession or for the previous year preceding that year, assessed on the predecessor, cannot be recovered from him, the 99[Assessing] Officer shall record a finding to that effect and the sum payable by the predecessor shall thereafter be payable by and recoverable from the successor and the successor shall be entitled to recover from the predecessor any sum so paid. (4) Where any business or profession carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the validity of the notice : the liability to pay tax is founded in the charging sections and not in the machinery provisions to determine the amount of tax. Reliance was also placed on the decision in Maharaja of Patiala v CIT [1943] 11 ITR 202 (Bombay) ("Maharaja of Patiala"). That was a case where two notices were issued after the death of the assessee in his name, requiring him to make a return of income. The notices were served upon the successor Maharaja and the assessment order was passed describing the assessee as "His Highness...late Maharaja of Patiala". The successor appealed against the assessment contending that since the notices were sent in the name of the Maharaja of Patiala and not to him as the legal representative of the Maharaja of Patiala, the assessments were illegal. The Bombay High Court held that the successor Maharaja was a legal representative of the deceased and while it would have been better to so describe him in the notice, the notice was not bad merely because it omitted to state that it was served in that capacity. Following these two decisions, this Court in Jai Prakash Singh held that an omission to serve or any defect in the service of notices pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nificant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. 35. For the above reasons, we find no merit in the appeal. The appeal is accordingly dismissed. There shall be no order as to costs." 3.3. Respectfully following the aforesaid decision, we hold that the ld. AO was wrong in framing the assessment in the hands of the non-existent entity i.e Churu Trading Company Pvt. Ltd. and accordingly, the entire assessment framed thereon, had to be declared as null and void ab initio . In view of this decision, where the entire assessment has been quashed, the observation on various grounds raised by the assessee as well as by the revenue on merits has become infructuous and become academic in nature. We refrain to give our opinion on merits of such additions and they are left open. The ld. AR stated that the cross objection raised by the assessee is only supportive to the order of the ld. CIT(A). 4. In the result, appeal of the assessee is allowed and appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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