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TMI Blog2019 (11) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... d order is a nullity and, therefore, we are inclined to quash all the impugned orders as shown in the captioned appeals. - Decided in favour of assessee - I.TA No.1408 to 1412/Kol/2019 - - - Dated:- 22-11-2019 - Shri A. T. Varkey, JM And Dr. (Shri) Arjun Lal Saini, AM For the Appellant/Assessee : S/Shri S.K. Tulsian, Sr. Advocate And Puja Somani, Advocate, ld.ARs For the Respondent : Shri Radhey Shyam, CIT, ld. Sr.DR ORDER PER SHRI A.T. VARKEY, JM All the aforesaid appeals are preferred by different assessee s ( as captioned in the cause list above ) are against the separate orders of Ld. PrCIT, Kolkata-4, dated 12-03-2019, 14-03-2019 for the assessment year 2012-13. 2. Main grievances of the assessee s/ corporate legal entities are that the impugned revisional order passed under section 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) by the ld. Pr.CIT, Kolkata against them are non est in the eye of law, since they were not existing in the eyes of law by virtue of being merged with other legal entities as per the Hon ble National compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may Pvt. Ltd.) vide show cause notice dated 31.12.2018. He passed order u/s. 263 of the Act dated 12.03.2019 and directed the A.O. to pass a fresh assessment order. 8. 3l.0l.2019 Assessee intimated the learned AO, ITO Ward - 11(2) that the assessee company has been amalgamated with M/s. Nihon Impex Pvt. Ltd. w.e.f. 0l.04.2017. Amalgamation order copy was enclosed. 9. 12.03.2019 The learned Pr.CIT passed order u/s. 263 of the Act dated 12.03.2019 in the name of non-existing entity, Durja Vinimay Pvt. Ltd. wherein the A.O. was directed to pass a fresh assessment order. 10. 07-06-2019 Appeal filed before the Hon'ble ITAT, Kolkata on 07-06-2019 ITA No. 1409/Kol/2019 A.Y 2012-13 M/s. Gyan Mandir Pvt. Ltd [ Merged with Nihon Impex Pvt. Ltd on 21-10- 2018 Sr. No. Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06-2019 Appeal filed before the Hon'ble ITAT, Kolkata on 07-06-2019 ITA No. 1410/Kol/2019 A.Y 2012-13 M/s. Paramtma Vinimay Pvt. Ltd [ Merged with Warner Dealcom Pvt. Ltd on 25-10-2018] Sr. No. Date Facts 1. 17-09-2012 ROI filed on 17-09-2012 declaring income of ₹ 550/- 2. 25.03.2015 Assessment of the company for A.Y. 2012-13 was completed vide order u/s. 143(3) of the Act dated 25.03.2015 determining the total income of ₹ 25.67 cr. 3. 27-07-2016 Notice u/s 263 of the Act was issued on the assessee 4. 17-10-2016 The assessment order dated 25-03-2015 was set aside vide order u/s. 263 of the Act dated 27.10.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Y. 2012-13 was completed vide order u/s. 143(3) of the Act dated 20.03.2015 determining the total income of ₹ 21,89,00,340/-. 3. 03-06-2016 The assessment order dated 20-03-2015 was set aside vide order u/s. 263 of the Act dated 03-06-.2016 for de novo assessment after detailed enquiry on the issue of share allotment by the appellant- company. 4. 14-07-2016 In pursuance of the said order passed u/s. 263 of the Act, the Ld. A.O. passed assessment order u/s. 263/143(3) on 14-07-2016 determining total income of ₹ 340/-. 5. 23.10.2018 By virtue of order of Hon'ble NCLT, Kolkata Bench dated 23-10-2018, the company M/s. Aditi Vintrade Pvt. Ltd. stood amalgamated with M/s. Utkarsh Dealer Pvt. Ltd. w.e.f. 01.04.2017 and formed part of RoC records 6. 30-01-2019 The Ld. Pr. C.I.T., Kolkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By virtue of order of Hon'ble NCLT, Kolkata Bench dated 17.12.2018, the company M/s. Lighthouse Merchants Pvt. Ltd. stood amalgamated with M/s. Hipoline Commerce Pvt. Ltd. w.e.f. 01.04.2017 and formed part of RoC records 6. 30-01-2019 The Ld. Pr. C.I.T., Kolkata-4 thereafter again initiated proceeding u/s. 263 for the second time on the nonexisting entity (Lighthouse Merchants Pvt. Ltd.) 7. 08-03-2019 Intimation to the learned AO, ITO Ward-11(2) that the assessee company has been amalgamated with M/s. Hipoline Commerce Pvt. Ltd. W.e.f 01.04.2017. 8. 12-03-2019 The learned Pr.CIT passed order u/s. 263 of the Act dated 12.03.2019 in the name of non-existing entity, Lighthouse Merchants Pvt. Ltd. wherein the A.O. was directed to pass a fresh assessment order. 9. 07-06-2019 Appeal filed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which the assessee s/company(ies) had merged with the other corporate entities as shown in the above mentioned chart (supra). Thus, we find that all the assessee s before us had already merged with other corporate entities by virtue of Hon ble NCLT orders prior to the notice issued by the Pr. CIT proposing revisional jurisdiction u/s. 263 of the Act for the AY 2012-13 and the impugned orders have been passed by the Ld. Pr. CIT on non-existing assessee s which had ceased to exist in the eyes of law. Since facts are similar for adjudicating the legal issue, we take up the lead case as that of M/s. Durga Vinimay Pvt. Ltd. [ ITA No. 1408/Kol/2019] for A.Y 2012-13 for the purpose of adjudicating the legal issue raised before us. Since facts are similar, the result in respect of other cases will follow the result of the lead case. 5. Brief facts of the case of M/s. Durja Vinimay P.Ltd which merged with M/s. Nihon Impacts P. Ltd on 21-12-2018, w.e.f 01.04.2017 are given below: 6. In the present case, we note that the assessee company filed its return of income for the assessment year 2012-13 on 17-09-2012 declaring total income at ₹ 560/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eased not to make addition of ₹ 22,36,50,000/- u/s.68 of the Act which was earlier made in the original assessment order dated 25-03-2015. Thus, the AO, while carrying out the de novo re-assessment pursuant to the order of Ld. CIT u/s. 263 of the Act was pleased to accept the explanation furnished by the assessee in respect of capital infused in the form of shares and share premium to the tune of ₹ 22,36,50,000/- and order u/s.263/143(3) of the Act was passed by AO on 28-10-2016 wherein the total income of the assessee was assessed at ₹ 14,960/-. In the said order, a fresh addition of ₹ 14,400/- was made u/s. 14A of the Act. Subsequently, by virtue of order of Hon ble National Company Law Tribunal, Kolkata Bench dated 21.12.2018, the assessee company M/s. Durja Vinimay Pvt Ltd. stood amalgamated with M/s. Nihon Impex Pvt. Ltd. w.e.f. 01.04.2017 and which fact was incorporated in the RoC records. Assessee intimated this fact to the AO, ITO Ward - 11(2) on 31-01-2019 that the assessee company has been amalgamated with M/s. Nihon Impex Pvt. Ltd. w.e.f. 01.04.2017. Meanwhile, with regard to the order passed by AO u/s. 263/143(3) of the Act on 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thereafter, the assessee also duly intimated the AO, ITO Ward - 11(2) on 31-01-2019 that the assessee company had been amalgamated with M/s. Nihon Impex Pvt. Ltd. w.e.f. 01.04.2017 by virtue of the order of, Hon'ble National Company Law Tribunal, Kolkata Bench dated 21.12.2018. However, it was pointed out by the Ld. AR that despite the said communication, the impugned order u/s. 263 of the Act was passed on 12-03-2019 in the name of the non-existent company, M/s Durja Vinimay Pvt. Ltd., which makes the order bad in the eyes of law. 8. According to the Ld. AR, since the impugned order u/s. 263 of the Act was passed in the name of M/s.Durja Vinimay Pvt Ltd. which had been amalgamated with M/s. Nihon Impex Private Limited under an approved scheme of amalgamation w.e.f 01-04-2017 and was not in existence at the time the section 263 order was passed dated 12-03-2019, the said order is a nullity. According to Ld. AR, it is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. According to him, the said proposition of the assessee gets fortified by the recent decision of the Hon ble Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme of the amalgamation filed before the Company Judge of this Court which was duly sanctioned vide orders dt. 11th Feb., 2004. With this amalgamation made effective from 1st July, 2003, S ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, S was also stood dissolved by specific order of this Court. With the dissolution of this company, its name was struck off from the rolls of companies maintained by the RoC. A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. In view of the aforesaid clinching position in law, it is difficult to digest the circuitious route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect. After the sanction of the scheme on 11th Feb., 2004, S ceased to exist w. e.f 1st July, 2003. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act dated 12-03-2019 was passed in the name of the amalgamating company, M/s Durja Vinimay Pvt Ltd which was indisputably not in existence at the time when the section 263 order was passed and as such, the impugned order passed u/s 263 of the Act is a nullity in law and prayed that the impugned orders be quashed. 12. Per contra ld. CIT DR supporting the impugned order of Ld. Pr. CIT, drew our attention to chart drawn in the case of M/s. Light House Merchants pvt. Ltd i.e. ITA No. 1412/Kol/2019 for the A.Y 2012-13 and pointed out that the assessee only intimated the AO about the fact of amalgamation on 08-03-2019 whereas on 17-12- 2018 the assessee company was merged with M/s. Hipoline Pvt. Ltd. And it was pointed out by the ld. CIT DR that the impugned order was passed on 12-03-2019 u/s. 263 of the Act. Therefore, it was contended that effectively the Ld. Pr. CIT got prior notice of only four days about the fact that the assessee merged with another legal entity. According to him, the ld Pr CIT has passed the impugned order by only setting aside the re-assessment order and remanded it back to AO for framing of de- novo assessment, which in no case is going t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with Boards Circular, and office memorandum dated 07.11.2014 of CBDT in respect of steps towards a non adversarial tax regime. Then the AO records the fact that notice u/s. 142(1) dated 07.10.2016 was issued and served upon the assessee through speed post and fixing date of hearing on 17.10.2016 and in response to the notice u/s. 142(1) dated 17.10.2016, Shri Mukesh Kr. Jhyawar, FCA, the authorised representative (hereinafter referred to as AR) of the assessee appeared and filed power of attorney, the details of directors name and address along with PAN, Date of appointment and produced the books of accounts for the AY 2012-13 relevant to FY 2011-12; and the AO acknowledges that the details of 2nd source of fund and also produced the details of bank statement of the assessee company which is maintained from 01.04.2011 to 31.03.2012 and the AO finds that all the transactions were duly reflected in the bank statement and that all the relevant documents were verified by him on test check basis and that there was no adverse inference need to be drawn against the assessee. 15. Thereafter, the AO records that summons u/s. 131 of the Act was issued on 24.10.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as stated above financial transactions related to relevant previous year as claimed by Assessee Company appears legally in order. Reports of transactions and parties involved in it are already in the notice of Revenue. All share holder files their returns regularly. In view of the facts as stated above it appears that Assessee Company discharged the burden of proof. All transactions are already in the notice of Revenue. During the course of re-examination of case and inquiry, in consideration of aforesaid facts, no adverse inference could be drawn. Total income, on verification of accounts, inquiries and after providing sufficient opportunity to assessee Company, is considered as under. And thereafter, the AO computed the total income on 28.10.2016 at ₹ 14,960/-. 17. After the AO has given effect on 28.10.2016 (supra) and framed the reassessment order in the light of the Ld Pr. CIT order dated 27.07.2016, the assessee company got amalgamated with M/s. Nihon Impex Private Ltd. We note that it was the result of the scheme of amalgamation filed before the Hon ble NCLT which was duly sanctioned vide order dated 21.12.2018. With this amalgamation made effectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Paramatma Vinimay P. Ltd. (merged with M/s. Warner Dealcom P. Ltd.) 25.10.2018 15.01.2019 12.03.2019 4. M/s. Aditi Vintrade P. Ltd. (merged with M/s. Utkarsh Deler P. Ltd.) 23.10.2018 15.01.2019 14.03.2019 5. M/s. Light House Merchants P. Ltd. (merged with M/. HIpoline Commerce P. Ltd.) 17.12.2018 08.03.2019 12.03.2019 So, when the department was aware of the dissolution of assessee s companies, it was incumbent upon the Ld. Pr. CIT to take notice of this fact and substitute the successor company while passing the impugned order, after giving opportunity of hearing to amalgamated company as envisaged under section 263 of the Act. And since the aforesaid action has not been admittedly done by the Ld. Pr. CIT, the impugned order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has to be kept in mind that u/s. 263 giving an opportunity to assessee before passing order u/s. 263 of the Act is a necessity and failure to give opportunity to assessee before passing the order u/s. 263 of the Act will make the order passed under section 263 fragile for violation of natural justice and thus illegal. Moreover, according to us the action of the Pr CIT to have passed the impugned order under section 263 in the name of non-existent/amalgamating companies is bad in law and therefore, these two decisions cited by the Ld. CIT, DR do not come to the aid of the department and since we have already taken note that the ratio decidendi of the Hon ble Delhi High court in M/s. Skylight Hospitality LLP Vs. ACIT is distinguishable on the facts of these cases and the Hon ble supreme Court has distinguished the order of the Hon ble Delhi High court in M/s. Skylight Hospitality LLP vis-a-vis that of the Hon ble Delhi High court decision in Spice Infotainment Ltd. We note that the facts of cases decided in M/s Maruti Suzuki and M/s Spice Infotainment are squarely applicable to the facts of the present cases before us. We note that in both Maruti Suzuki and Spice Infotainment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was selected for scrutiny by the issuance of a notice under Section 143(2) on 26 September 2013, followed by a notice under Section 142(1) to the amalgamating company. 9 On 22 January 2016, the Transfer Pricing Officer8 passed an order under Section 92CA (3) determining the Arm s Length Price of royalty at 3 per cent and making an adjustment of ₹ 78.97 crores in respect of royalty paid by the assessee for the relevant previous year. 10 On 11 March 2016, a draft assessment order was passed in the name of Suzuki Powertrain India Limited (amalgamated with Maruti Suzuki India Limited). The draft assessment order sought to increase the total income of the assessee by ₹ 78.97 crores in accordance with the order of the TPO in order to ensure that the international transactions with regard to the payment of royalty to the Associated Enterprises is at Arm s Length. 11 MSIL participated in the assessment proceedings of the erstwhile amalgamating entity, SPIL, through its authorized representatives and officers. This is evident from the copies of the order sheets of the assessment proceedings before the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of a non-existent entity by the assessing officer. The decision of the Tribunal was affirmed in an appeal under Section 260A by the Delhi High Court on 9 January 2018 following its earlier decision in the case of the assessee for AY 2011-12. That has given rise to the present appeal. 20. The revenue s contention has been noted by the Hon ble Supreme court in para 17 of the order which is as under: (i) The High Court was not justified in quashing the final assessment order under Section 143 (3) only on the ground that the assessment was framed in the name of the amalgamating company, which was not in existence, ignoring the fact that the names of both the amalgamated company and the amalgamating company were mentioned in the assessment order; (ii) Even on the hypothesis that the assessment order was framed incorrectly in the name of the amalgamating company, it would amount to a mistake, defect or omission which is curable under Section 292B when the assessment is, in substance and effect, in conformity with or according to the intent and purpose of the Act; (iii) During the assessment proceedings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant Commissioner of Income Tax, Circle-28(1), New Delhi 12 ( Skylight Hospitality LLP ), which was confirmed by this Court on 6 April 201813 dealt with a situation where a notice under Section 148 was issued in the name of a non-existent private limited company. The Court held that the defect in recording the name of a non-existent company in a notice under Section 148 was a procedural defect or mistake curable under Section 292B, since no prejudice was caused to the assessee. The Delhi High Court distinguished the decision in Spice Entertainment on the ground that in that case even the final assessment order was in the name of a non-existent company; (vii) In the present case, both the draft assessment order and the final assessment order contained the names of the amalgamated and amalgamating companies and hence it cannot be held that the final order is in the name of a non-existent company. The order of the TPO is not the subject of a challenge by the assessee before any forum. The directions of the TPO were implemented by the assessing officer in the draft assessment order in accordance with Section 144C(1) which was then challenged by the assessee bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... malgamation two or more companies are fused into one by merger or by taking over by another. Reconstruction or amalgamation has no precise legal meaning. The amalgamation is a blending of two or more 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this Court indicated its agreement that the wrong name given in the notice was merely a clerical error, capable of being corrected under Section 292B. The peculiar facts of Skylight Hospitality emerge from the decision of the Delhi High Court34. Skylight Hospitality, an 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 200835. 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 dissol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act. Order was in the name of non-existing person and hence void and illegal. From a reading of the order of this Court dated 6 April 2018 in the Special Leave Petition filed by Skylight Hospitality LLP against the judgment of the Delhi High Court rejecting its challenge, it is evident that the peculiar facts 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. 23. The Hon ble Supreme court in this case after taking note of the provisions of section 292B of the Act in para 31 held that In this case, the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B. Thereafter, the Hon ble Supreme Court concluded the order by holding as under: In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved ..... X X X X Extracts X X X X X X X X Extracts X X X X
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