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TMI Blog2021 (9) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... rnika RPG Trust is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B and hence order passed on non-existent entity is a nullity. - Decided in favour of assessee. - ITA Nos. 451, 452 and 453/Del/2021 - - - Dated:- 9-9-2021 - Amit Shukla, Member (J) And Dr. B.R.R. Kumar, Member (A) For the Appellant : Gautam Jain, Adv. For the Respondents : Nidhi Srivastava, CIT, DR ORDER Per Dr. B.R.R. Kumar, Accountant Member The present appeals have been filed by the assessee against the orders of ld. PCIT, Ghaziabad dated 26.03.2021. 2. Since, the issues involved in all the appeals are identical, which were heard together. 3. In ITA No. 451/Del/2021, following grounds have been raised by the assessee: 1. That impugned order dated 26.3.2021 u/s. 263 of the Act by the learned Principal Commissioner of Income Tax made on a non-existent person is illegal, invalid and void-ab-initio and therefore, nullity in the eyes of law. 1.1 That M/s. Varnika RPG Trust was dissolved on 31.3.2016 under the trust, deed dated 16.3.2009 and thus the trust had ceased to exist on the date of impugned order and therefore both the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n disregard of principles of natural justice is a vitiated order. 2.6 That various other adverse findings recorded in the notice u/s. 263 of the Act and, also in impugned order are factually incorrect, vague, legally misconceived and untenable. 2.7 That while passing the order u/s. 263 of the Act the learned Principal Commission of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact the made a basis illegal assume jurisdiction u/s. 263 of the Act. 2.8 That the learned Principal Commissioner of Income Tax has failed to appreciate that section 263 of the Act cannot be invoked to make deeper enquiry. In other words, allegation of proper enquiry or inadequate enquiry cannot be a valid basis to invoke section 263 of the Act. 3. That the learned Principal Commissioner of Income Tax has also erred both in law and on facts in directing to make an addition of ₹ 65,24,465/- representing gain on sale of equity shares through recognized stock exchange and, erroneously held as alleged introducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notice u/s. 143(2) was issued on 16.08.2017 Notice u/s. 142 was issued on 27.08.2018 wherein the assessee was asked to file replies on the issues pertaining to by laws certificate of Varnika RPG Trust (Annexure-Point-1), details of the family trust with regard to the provisions of Section 12AA (Point-11) and the details of the share transactions on or before 04.09.2018. Vide reply dated 29.08.2018, the assessee has attached copy of the Trust deed of the assessee Trust and the details of the share transactions. Vide letter dated 24.10.2018, the Assessing Officer sought further clarification with regard to the Trust deed. The queries are as under: 1. As per the trust deed, the trust got registered on 16-03-2009 in the name of Varnika RPG Trust wherein the settler Ms. Rajbala Gupta and Ms. Benu Gupta created a trust for the sole benefit of her (their) minor granddaughter namely Varnika Gupta which reads as follows: the settler is desirous of creating a Trust for the sole benefit of her minor granddaughter namely Varnika Gupta and in order to effectuate the said desire, the settler has settled fixed sum of ₹ 5000/- mentioned hereinafter in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r editions and accretions to the trust property shall vest with the sole beneficiary namely Vernika Gupta after her attaining 18 years of age or 31.03.2015, whichever is later and subject to clause 11, mentioned hereinafter. Then the term of the trust may expire and all the trust property including all accretions upto the date of expiry of the term shall become the sole property of the beneficiary with all the rights of ownership, use, possession and disposition. From the above clause it is clear that the term of the assessee trust were-to expire when the beneficiary attains the age of 18 years or on 31st of March, 2015 whichever is later. The date of birth of the beneficiary of the assessee trust namely, Ms. Varnika Gupta, is 3rd September, 1997, therefore she has completed the age of 18 years on 3 September, 2015 i.e. after 31 March, 2015 and within the year under consideration. The beneficiary of the assessee trust namely, Ms. Varnika Gupta, is presently assessed to tax at PAN BWTPG7821F. Photocopy of her PAN card is enclosed herewith as Annexure 1 in support of her date of birth. Therefore, the observation of your good-self that the assessee trust stands liquidated on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s evident from her PAN card enclosed herewith as annexure 1. The beneficiary of the assessee trust is not related to any of the directors of the companies whose shares have been sold during the relevant year. The list showing the name of the other companies and the relation of the beneficiary of the assessee trust with its directors is as under: Name of company Relation with the directors Holy Commercial Pvt. Ltd. Grandmother of the beneficiary. Parker Construction Pvt. Ltd. No relation with any director. RPG Industrial Product (P) Ltd. Father of the beneficiary. h) As stated herein above at serial number a), the beneficiary of the assessee trust did not attain maturity as on 31 March, 2015. Hence no shares were transferred to her or any sale proceeds of the same were received in her bank account. This fact is also apparent from the bank statement of the assessee trust which has already been filed along-with our reply dated 29 August, 2018, wherein the sale proceeds of the shares sold during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the facts of the case and the ITR computation of income as filed before your good-self. In view of the above, no adverse inference is required to be drawn on this issue as there is no inconsistency between the facts of the case and the assessee's reply. j) The deemed contradiction in your query number 5 of the notice dated 27th August, 2018 and the assessee's reply at point number 5 of its reply dated 29th August, 2018 stands explained at Point No. i), hereinabove. At point number i) it has been explained in detail the difference between the amount debited in the P L account and claim of expenditure made in the computation of income. From the said explanation it is clear that the assessee has not claimed any deduction of self-assessment tax as expenses in its computation of income hence there is no contradiction in the reply of the assessee and query raised by your good-self. In case your good-self finds any claim of such expenses as the assessee's ITR, the same may kindly be disallowed. k) As submitted hereinabove, it is clear that the assessee trust was very well in existence during the year under reference. The long term capital gain was ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,465/- on STT paid sale of listed equity shares of M/s. CCL International Ltd. The details of the same are as under: The assessee had purchased 25,000 equity shares of M/s. CCL International Ltd., for ₹ 10,00,000/-, on 07.05.2013. Copy of the Bill of the same providing details of the seller is enclosed herewith as Annexure 7 along-with the confirmation from the seller of shares. The payment of the said purchase was made through proper banking channels. Copy of the relevant extract of the bank statement of the assessee showing the said payment is enclosed herewith as Annexure 8. The said equity shares were sold in dematerialized form on Bombay Stock Exchange, on various dates during the months of April, 2015 to June 2015 i.e. during the year under consideration, for a total consideration of ₹ 75,24,465/- on which it had earned a exempt long term capital gain of ₹ 65,24,465/-. Copy of the statement of D-mat Account of the assessee maintained by it with M/s. Kotak Securities Ltd. is enclosed herewith as Annexure 9. Further, the contract notes showing details of said sale transactions are enclosed hereinabove at Sl. No. c) as Annexure 2. From the above docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved, is not hit by the proviso to section 58 of the Indian Trusts Act. Section 8 of the Indian Trusts Act, which provides that the subject-matter of a trust must not be merely beneficial interest under a subsisting trust, is attracted only when the trust, which is created, is a private trust. That provision is not attracted in the case of an educational trust as the provisions of the Indian Trusts Act are not applicable to educational trusts. No provision of law was brought to our notice, which invalidated the transfer of Smt. Usha Devi's interest in the trust property in favour of the educational trust. As regards transfer of an interest by a remainderman, it is not hit by section 6(a) of the Transfer of Property Act, as that provision is attracted only in the case of a bare or naked possibility and not in the case of a possibility coupled with an interest such as that of a remainderman. The interest of remainderman, in the instant case, could however, be validly transferred only after obtaining permission from the Court under section 8 of the Hindu Minority Guardianship Act, 1956, as the remaindermen were minors at the material time. The requisite permission was accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited was amalgamated with M/s. Maruti Suzuki India Limited by the order of Hon'ble High Court w.e.f. 1st April, 2012 vide order dated 29th January, 2013. The AO was informed on 2nd April, 2013. AO still issued notice to the erstwhile company, Suzuki Powertrain India Limited and below it mentioned now known as M/s. Maruti Suzuki India Ltd. and final assessment order was passed in the name of M/s. Suzuki Powertrain India Limited (amalgamated with Maruti Suzuki India Limited). 11. Accordingly, we find that in the instant case also, the revenue has been duly informed about the dissolution of the trust and still chose to continue the proceeding on the dissoluted entity which was no more in existence. Hence, following the aforesaid ratio and principle laid down by the Hon'ble High Court and the Hon'ble Apex Court, we hold that impugned order passed by the Pr. CIT in the name of Varnika RPG Trust is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B and hence order passed on non-existent entity is a nullity. Accordingly, impugned order u/s. 263 is quashed at the outset on the jurisdictional issue. 12. In the result, all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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