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TMI Blog2020 (9) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... issued notice u/s 153A of the Act in the name of the assessee for filing return of income and opposed issuance of notice on non-existing entity. Although the assessee has filed return in response to notice issued u/s 153A of the Act, but such return has been filed under protest in order to comply with statutory provisions of the Act. Therefore, we are of the considered view that the firm was not in existence and was ceased to exist on the date of search and mere holding a PAN does not alter the legal position that the firm was not in existence and accordingly, the assessment framed u/s 143(3) r.w.s. 153A of the Act is void and ab initio. CIT(A) after considering the relevant facts has rightly quashed assessment order passed by the A.O. as null and void. We do not find any error or infirmity in the order of the CIT(A) and hence, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the revenue. - ITA Nos.903, 905 & 906/Bang/2018, C.O. Nos.55, 57 & 58/Bang/2018 (Arising out of ITA Nos.903, 905 & 906/Bang/2018) - - - Dated:- 31-8-2020 - Shri G. Manjunatha, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case, the Ld. CIT(A) erred in quashing the assessment placing reliance on the judicial decision in the case of Nahar Enterprises (ITAT Mumbai Bench) in ITA No.2583 to 2855/Mum/2015 wherein the facts of the case ai'e that the warrant of authorization of search was issued only on the predecessor firm and the Mumbai ITAT held that the warrant should have been issued in the name of the successor company only, Whereas in the present case, the warrant of authorization of search was issued both in the predecessor and successor's names? 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact the provisions of section 170 of the Income Tax Act, 1961 are squarely applicable in the case? 6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in quashing the assessment which has been passed by the Assessing Officer as per the provisions of section 153A wherein, provisions of section 153A mandates that if there should be a search conducted u/ s 132, in that case the AO has to invariably assess or reassess the total income for the 6 AYs prior to the year in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commission purported to be payable to M/s. Tirumalas. Therefore, the Ld. A.O. came to the conclusion that entire purchases made from M/s. Tirumalas of ₹ 1,99,81,344/- is bogus. However, the assessee firm represented before the Ld. A.O. that the purchases made from M/s. Tirumalas was genuine and is supported by necessary bills and also the payments had been made through proper banking channels. The assessee further claimed that the scrutiny of the cash book will reveal that the assessee firm had meticulously recorded cash sales and cash deposits in the bank are supported by the cash withdrawal, therefore, merely on the basis of the information received from investigation wing, which is supported by the statement of third party, no adverse inference can be drawn against the assessee without providing the copies of statements relied upon by the A.O. and the opportunity of cross examining the person who gave the statement. The A.O. was not convinced with the arguments of the assessee and according to him, the purchases claimed to have been made from M/s. Tirumalas is bogus in nature and accordingly completed the assessment u/s 143(3)r.w.s. 153A of the Act, on 27.3.2015 and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e search is conducted against a non-existing firm would be in accordance with the provisions of section 132 of the Act or not, but there is sufficient clarity on the legal issue relating to the assessment order being framed on a non-existing entity and several judgments have been cited by the assessee on this point is very clear on the issue as per which framing of an assessment of a non-existing entity or a person is not a procedural irregularity but a jurisdictional defect, which goes to the root and hence, is invalid and void abinitio . He had taken support from the decision of Hon ble Delhi High Court in the case of Spice Infotainment Ltd. Vs. CIT 247 CTR 500 and the decision of Hon ble Karnataka High Court in the case of Intel Technology India Pvt. Ltd. 380 ITR 272 to come to the conclusion that assessment order in the name of non-existing entity/dead person is void and ab-initio and further it is not a procedural irregularity which can be cured by invoking provisions of section 292B of the Act. Accordingly, he had quashed the assessment order passed by the A.O. for assessment year 2008-09. The relevant findings of the CIT(A) are as under: 5.5 I have considered the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and an incorporated company and was in existence when it filed the returns in respect of two assessment years in question. However, before the case could be selected for scrutiny and assessment proceedings could be initiated, S got amalgamated with MC Ltd. It was the result of the scheme of the amalgamation filed before the Company judge of this court which was duly sanctioned vide orders dt. 11th Feb, 204. With this amalgamation made effective from 1st July, 2003, Seased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequences, 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 from the rolls of the companies maintained by the RoC. A company incorporated under the Indian 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 of law, it is difficult to digest the circuitous route adopted by the Tribunal that the assessment was in fact in the name of amalgamated company and there was only a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 5.9 I am fortified in the aforesaid view taken by a recent decision of the Hon'ble ITAT, Mumbai Bench, in the case of NAHAR ENTERPRISES in ITA No.2853 to 2855/Mum/2015 dated 07/04/2017, wherein a similar issue was involved. It is seen that the judgements rendered by the Hon'ble High Court of Delhi in the case of SPICE INFOTAINMENT [supra] and the Hon'ble jurisdictional High Court in the case of INTEL TECHNOLOGY INDIA PVT. LTD., [supra] was in the context of the assessment order passed after the amalgamation of company on the erstwhi le company, which was not inexistence. The Hon ble ITAT, Mumbai Bench in the case of Nahar Enterprises [supra] has applied the ratio of the aforesaid judgements in the context of search action conducted against a partnership firm that was not in existence when the search action was conducted by the department. It has been held by the Tribunal in the case of Nahar Enterprise [supra] as under :- 12. Now, the issue before us for adjudication is as to whether the search warrant was issued in the name of dissolved entity or the existing company and whether the consequent assessments were void ab-initio and non-est. It is an admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copies of both these Panachnamas and the copy of warrant no 9302 and 9303 are enclosed for your reference and record. Thus there is no basis to your allegation and the same is therefore not acceptable and is rejected. 13. The Id. CIT(A) confirmed the stand of the AO for the reason that both the names of the entities are mentioned on Punchanama, and therefore, the proceedings are valid. We further find that the Panchanama prepared on 27.3.2012 with reference to warrant No.9302, the warrant was issued in the name of Nahar Enterprises and we do not see any mention of Nahar Builders Ltd. However, in the Panchanama prepared on 28.3.2012 with reference to warrant No.9302, there is a mention of assessee firm name Nahar Enterprises (Now Known as Nahar Builders Ltd). We further find that the PAN of Nahar Enterprises is AAAFN1599D and the PAN of Nahar Builders Ltd is AADCN8065A. The assessments were completed on Nahar Enterprises with PAN AAAFN1599D. 14. In our opinion, the search action is a strict action taken against the privacy of any person by the investigating and searching the premises of any person with extreme powers bestowed on the department. Search action u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clerical mistake. 5.10 Observing thus, the Hon'ble ITAT has quashed the assessments made in the aforesaid case by following the judgements of the Hon'ble High Court rendered in the context of the validity of assessment orders passed on the erstwhile company after amalgamation. Respectfully following the aforesaid judicial pronouncements, including the judgment of the Hon'ble Karnataka High Court in the case of INTEL TECHNOLOGY INDIA PVT LTD [supra], I am inclined to hold that the assessment order passed in the name of R.R. GOLD PALACE, a non-existent entity is a nullity. Hence, I have no option but to quash the assessment orders passed and it is ordered accordingly. These additional grounds of appeal so raised by the appellant are therefore allowed. 5.11 Since, I have cancelled the assessment order on the technical issue I do not propose to deal with the other grounds raised by the appellant, which will only be an academic exercise now. 7. The Ld. D.R. submitted that the Ld. CIT(A) has erred in quashed assessment order passed by the AO u/s 143(3) r.w.s. 153A of the Act, without appreciating the fact that the partnership firm M/s. R.R. Gold Palace was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and void-ab-initio. The Ld. A.R. for the assessee further submitted that the partnership firm was came into existence in the year 2005 and the same was subsequently converted to a private limited company on 25.10.2011 as a going concern and all assets and liabilities including business of the erstwhile partnership firm was taken over by a successor limited company with the same trade name. This fact was known to the department prior to the issuance of notice u/s 153A of the Act and in connection with the course of proceedings for release of seized stock in trade of the successor private limited company, which was found in the premises of its promoter, who incidentally was also a partner of the erstwhile respondent firm prior to take over and hence the very search action conducted by the department in the case of all the erstwhile respondent firm is opposed to law and not in accordance with the provisions of section 132 of the Act, especially with regard to the requirements of section 132(i)(a)(i)(b)(i)(c) of the Act and in the absence of a valid initiation and execution of the search action and issue of a valid notice, the consequential assessment made on the assessee erstwhile fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a going concern at the same premises. The assets and liabilities of the erstwhile firm have been taken over by the newly incorporated private limited company. A search action u/s 132 of the Act was conducted on 8.2.2013 and the warrant of authorization dated 7.2.2013 was executed in the name of M/s. R.R. Gold Palace/M/s. R.R. Gold Palace Pvt. Ltd. The punchanamas were drawn on various dates in the name of M/s. R.R. Gold Palace M/s. R.R. Gold Palace Pvt. Ltd. From the above facts, it is very clear that the department has issued warrant of authorisation on 7-2-2013 in the name of non-existent firm and also conducted search on non-existent person. It was further clear that as on the date of issue of warrant of authorization or date of search on 8.2.2013 and or on the date of issue of notice u/s 153A of the Act dated 21.9.2014, the firm was ceased to exist and the new company came into existence in the same premises. Further, the assessee continued to file return of income from the date of conversion of partnership firm into a private limited company in the name of Successor Company and this fact was very much available with the department at the time of search proceedings. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Spice Infotainment Ltd. (supra) had taken similar view where it was held that 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. The framing of an assessment against a non-existing entity/person goes to the root of the matter, which is not a procedural irregularity, but a jurisdictional defect as there cannot be any assessment against a dead person. A similar view has been expressed by the Hon ble Karnataka High Court in the case of Intel Technology India Pvt. Ltd. (supra), where it was held that framing of an assessment on a non-existing entity or a person is not a procedural irregularity but a jurisdictional defect, which cannot be cured by invoking the provisions of section 292B of the Act. In this case, there is no doubt of whatsoever with regard to the fact that the firm M/s. R.R. Gold Palace was not existent at the time of search and even at the time of framing assessment u/s 143(3) r.w.s. 153A of the Act. The assessee has informed the A.O. the fact of non-existence of the firm by way of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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