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TMI Blog2023 (6) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... ountant Member: The present appeals have been filed by the Revenue against the orders of ld. CIT(A)-24, New Delhi dated 31.01.2020. 2. Since, the issue involved in all these appeals are similar they were heard together and being adjudicated by a common order. 3. In ITA No. 42/Del/2022, the Revenue has raised the following grounds of appeal: 1. That Ld.CIT(A) erred in law in holding that the six assessment years for which assessments have to be made in accordance with the provisions of section 153C of I. T. Act are to be reckoned with reference to the Assessment Year relevant to the previous year in which the satisfaction u/s 153C is recorded and not the one in which the search is conducted or requisition is made. 2. That Ld.CIT(A) erred in law is not taking note of the amendment in u/s 153C of the I.T. Act which had already been made w.e.f. 01.04.2017, clarifying that the assessments are to be made for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. 3. The Ld. CIT(A) failed to appreciate that, if his reasoning is applied, it would lead to the peculiar situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (I) Ltd. Further, the assessee company was dissolved on 09.10.2010 as per Department of Economic Development, Isle of Man. Therefore, the current assessment is being framed on the hands of M/s. BJN Holdings (I) Ltd. 2. The Ld. CIT(A) has followed the judgment of Hon'ble Supreme Court in the case of Maruti Suzuki India Ltd. (supra) and findings of Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. Vs CIT (247 CTR 500)(Delhi) and held that the assessment framed in the name of dissolved company B.J.N. Holdings Ltd. are illegal, void ab-initio and bad in law. Therefore, the Assessment Orders passed for A.Y. 2006-07 to A.Y. 2010-11 were quashed and all additions made in all the five years are hereby deleted. 3. The Ld. CIT(A) has erred in law and facts in quashing the assessment order holding that the assessment order is framed in the name of BJN Holdings Ltd. and overlooked the fact that the assessment order was passed in the name of M/s. BJN Holdings (I) Ltd. (the successor company) which is clearly mentioned in the assessment order. 4. The Ld. CIT(A) has also ignored the fact that such winding up of the company was never brought to notice of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and before all forums, reflects that it consistently held itself out as the assessee. The approach and order of the AO is, in this court's opinion in consonance with the decision in Marshall Sons (supra), which had held that: an assessment can always be made and is supposed to be made on the Transferee Company taking into account the income of both the Transferor and Transferee Company. 5. Before concluding, this Court notes and holds that whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case. 6. In the present case, the decision rendered in the above case will squarely apply and not the judgment in Maruti Suzuki Ltd. relied upon the Ld. CIT(A) as the assessee himself has been responding to notices of the AO and has also profiled a writ petition W.P. (C) No. 1708/2014 before the Hon'ble Delhi High Court against the assessment proceedings u/s 153C of the I.T. Act under the name of M/s. BJN Holdings Ltd. alth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order only referred to the name of the erstwhile entity which was non-existent and there was no reference to the resulting company. In distinction, in the present case, in both the draft and the final assessment orders, the names of both the amalgamating and amalgamated companies were mentioned; (v) In paragraph 11 of the decision of the Delhi High Court in Spice Entertainment, it was held that: 11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exist 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 'dead person'. When notice under Section 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s. Spice which was non existing entity on that day. In such proceedings and 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 wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by this Court on 6 April 2018 in Skylight Hospitality LLP on the one hand and the order dated 16 July 2018 in the case of the present assessee for AY 2011-12 and the earlier order dated 2 November 2017 in CIT, New Delhi v Spice Enfotainment Ltd. ( Spice Enfotainment Ltd ), there appears to be a direct conflict of views on the principle whether a notice issued to a non-existent company would suffer from a jurisdictional error or whether it is a mere defect or mistake which would be governed by Section 292B. 18. On the other hand, Mr. Ajay Vohra, learned Senior Counsel appearing on behalf of the respondents submitted that: (i) Upon a scheme of amalgamation being sanctioned, the amalgamated company is dissolved without winding up, in terms of Section 394 of the Companies Act 1956. The amalgamating company ceases to exist in the eyes of law [Saraswati Industrial Syndicate Ltd. v CIT16 ( Saraswati Industrial Syndicate Ltd. )]; (ii) The amalgamating company cannot thereafter be regarded as a person in terms of Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated and an assessment order passed; (iii) The jurisdictional notice under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainment, the Delhi High Court quashed assessment orders which were framed in the name of an amalgamating company, recording also the name of the amalgamated company, in the following cases: -CIT v Dimension Apparels Pvt. Ltd. ( Dimension Apparels ); affirmed by this Hon'ble Court vide Civil Appeal No. 3125 of 2015; -CIT v Micron Steels P. Ltd. ( Micron Steels ) and -CIT v Micra India (P) Ltd. ( Micra India ) The aforesaid judgments of the Delhi High Court have been approved by this Court in Civil Appeal No. 285 of 2014 ( other connected matters). Thus applying the doctrine of merger, the law laid down by the Delhi High Court has become a precedent under Article 141. (vi) The Respondent's case is squarely covered by the decision of this Court in its own case for the immediately preceding year: The Delhi High Court by its judgment reported in Maruti Suzuki held in favour of the Respondent by following the judgment in the case of Spice Entertainment. Further, the Revenue's SLP was dismissed by this Court on 16 July 2018 in SLP(C) D. No. 14106/2018, following the judgment in Spice Entertainment. Relying on the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of Rs. 78.97 crores; (ii) Secondly, under the approved scheme of amalgamation, the transferee has assumed the liabilities of the transferor company, including tax liabilities; (iii) Thirdly, the consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist. In Saraswati Industrial Syndicate Ltd., the principle has been formulated by this Court in the following observations: 5. Generally, where only one company is involved in change and the rights of the shareholders and creditors are varied, it amounts to reconstruction or reorganisation of scheme of arrangement. In amalgamation 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad brought the fact of the amalgamation to the notice of the assessing officer. Despite this, the assessing officer did not substitute the name of the amalgamated company and proceeded to make an assessment in the name of a non-existent company which renders it void. This, in the view of the High Court, was not merely a procedural defect. Moreover, the participation by the amalgamated company would have no effect since there could be no estoppel against law: 11. After the sanction of the scheme on 11th April, 2004, the 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 dead person . When notice under Section 143 (2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the 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 defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessee by the Revenue after the fact of amalgamation had been communicated to it. The Court noted that though the assessee had participated in the assessment, the original assessee was no longer in existence and the assessment officer did not the take the remedial measure of transposing the transferee as the company which had to be assessed. Instead, the original assessee was described as one in existence and the order mentioned the transferee's name below that of the original assessee. The Division Bench adverted to the judgment in Dimension Apparels wherein the High Court had discussed the ruling in Spice Entertainment. It was held that this was a case where the assessment was contrary to law, having been completed against a non-existent company. 24. A batch of Civil Appeals was filed before this Court against the decisions of the Delhi High Court, the lead appeal being Spice Enfotainment. On 2 November 2017, a Bench of this Court consisting of Hon'ble Mr. Justice Rohinton Fali Nariman and Hon'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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the Revenue is that a contrary position emerges from the decision of the Delhi High Court in Skylight Hospitality LLP which was affirmed on 6 April 2018 by a two judge Bench of this Court consisting of Hon'ble Mr. Justice A K Sikri and Hon'ble Mr. Justice Ashok Bhushan. In assessing the merits of the above submission, it is necessary to extract the order dated 6 April 2018 of this Court: In the peculiar facts of this case, we are convinced that wrong name given in the notice was merely a clerical error which could be corrected under Section 292B of the Income Tax Act. The special leave petition is dismissed. Pending applications stand disposed of. Now, it is evident from the above extract that it was in the peculiar facts of the case that 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 Court. 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 Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. After notice under Section 147/148 of the Act was issued and received in the name of Spice Corp. Ltd., the Assessing Officer was informed about amalgamation but the Assessment Order was passed in the name of the amalgamated company and not in the name of amalgamating company. In the said situation, the amalgamating company had filed an appeal and issue of validity of Assessment Order was raised and examined. It was held that the assessment order was invalid. This was not a case wherein notice under Section 147/148 of the Act was declared to be void and invalid but a case in which assessment order was passed in the name of and against a juristic person which had ceased to exist and stood dissolved as per provisions of the Companies Act. Order was in the name of non-existing person and hence void and illegal. 29. 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 Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. 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. In this context, it is necessary to advert to the provisions of Section 170 which deal with succession to business otherwise than on death. Section 170 provides as follows: 170. (1) Where a person carrying on any business or profession (such person hereinafter in this section being referred to as the predecessor) has been succeeded therein by any other person (hereinafter in this section referred to as the successor) who continues to carry on that business or profession,- (a) the predecessor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment. 32. On behalf of the Revenue, reliance has been placed on the decision of this Court in Commissioner of Income Tax, Shillong v Jai Prakash Singh ( Jai Prakash Singh ). That was a case where the assessee did not file a return for three assessment years and died in the meantime. His son who was one of the legal representatives filed returns upon which the assessing officer issued notices under Section 142 (1) and Section 143 (2). These were complied with and no objections were raised to the assessment proceedings. The assessment order mentioned the names of all the legal representatives and the assessment was made in the status of an individual. In appeal, it was contended that the assessment proceedings were void as all the legal representatives were not given notice. In this backdrop, a two judge Bench of this Court held that the assessment proceedings were not null and void, and at the worst, that they were defective. In this context, reliance was placed on the decision of the Federal Court in Chatturam v CIT holding that the jurisdiction to assess and the liability to pay tax are not conditional on the validity of the notice: the liability to pay tax is founded in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment. 34. We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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