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TMI Blog2023 (7) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... law and an order passed which is not proper and non-est, the same order cannot be the subject matter of the revision u/s. 263 of the Act. Respectfully following the decision of Westlife Development Ltd. [ 2016 (6) TMI 1208 - ITAT MUMBAI] we are inclined to quash the revision order passed u/s. 263 of the Act and accordingly, ground raised by the assessee - ITA NO.662/MUM/2022 - - - Dated:- 1-12-2022 - SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND MS KAVITHA RAJAGOPAL, HON'BLE JUDICIAL MEMBER For the Appellant : Shri J. D. Mistry, Shri Madhur Aggarwal and Shri Ninad Patade For the Respondent : Shri Achal Sharma ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against the order of the Learned Principal Commissioner of Income Tax, Mumbai-5 [hereinafter in short Ld. Pr.CIT ] dated 26.03.2022 for the A.Y.2017-18 passed u/s. 263 of the Income-tax Act, 1961 (in short Act ). 2. Brief facts of the case are, assessee M/s. Aditya Birla Telecom Limited (erstwhile name of the assessee) filed its return of income on 28.09.2017 declaring total income of ₹. 127,63,86,997/-. The case was selected for scrutiny through CASS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive Income but has not related the same in its profit and loss account, arisen due to the sale of the said shares. 4. Therefore, it is clear that the assessment order passed u/s. 143(3) dated 05. 12.2019 is erroneous in so far as it is prejudicial to the interest of revenue, within the meaning of Sec 263 of the Act. Hence, it is proposed to revise the aforesaid order u/s 263 of the Act. In this connection, we wish to submit our detailed submission in response to your Notice as under: - 1. Background 1. The brief facts in respect of the above issues are outlined below 1.1 The Assessee is the successor of the erstwhile Aditya Birla Telecom Limited which got merged into Vodafone Idea Limited vide Ahmedabad NCLT order dated 13 November 2018 with appointed date as 01 April 2018. The assessee has intimated to the Learned Assistant Commissioner of Income Tax - 5(2)(2) the details relating to amalgamation of ABT into VIL vide letter dated 04 February 2019 1.2 The Assessee filled its return of income for AY 2017- 18 on 28.09 2017 declaring a total income of IN 127,63 86,997/ The case was selected for scrutiny under CASS and the assessment was completed u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by P5 under a Court approved scheme for capital reduction and distributed thereof (i) 57,794 equity shares of Indus (representing 4.85% equity stake in Indus) to P5 on 31 January 2017; and (i) INR 455 crore to PS on 1 February 2017. A copy of the Court Scheme is attached herewith in Annexure 4. The overall movement for investments in Indus is tabulated below. 1.6.1. Further, the overall movement in the investments in Indus were also shared as part of the submission dated 11 November 2019. 1.1.1 A copy of the Bombay High Court order dated 14 December 2016 approving the Capital reduction Scheme was also enclosed as Annexure 4 to the submission dated 11 November2019 (copy enclosed as Annexure 7). 1.1. Post considering the detailed submission on the capital reduction and the details submitted during the course of proceedings, the learned AO passed an assessment order dated 05 December 2019 1. Our detailed submissions B.1 The proposed proceedings under section 263 of the Act needs to be dropped in view of the following 1.8 As indicated above, during the course of assessment proceedings, the learned AO has done a detailed examination of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Further, it is alleged that the assessee company has shown the above amount of IN 1380 crores as Other Comprehensive Income but has not related the same in its profit and loss account, arisen due to the sale of the said shares. 4. In this regard, the assessee refers to the detailed submissions filed during the course of assessment proceedings and submits that it has not undertaken any transaction for sale of shares held in Indus as alleged in the notice During FY 2016- 17, it had distributed 4 85% shares held in Indus to P5 under a Bombay High Court approved scheme of capital reduction. 5. The rationale for the scheme was to facilitate direct equity holding by P5 in Indus, instead of the indirect holding held presently through the assessee which is also evidence from the fact that ABTL was a holding company holding investments only in Indus and thus derived its value entirely from investments in Indus 5.1 Without prejudice to our submission in para B 1 on the validity of the proceedings, with regard to the alleged contention of sale of shares held in Indus and the capital gains tax implications on distribution of Indus shares under the court approved capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not capital gains tax implications arises for the distributing company 5.1.6 Attention at this juncture is invited to the jurisdictional Bombay High Court ruling in the case of Commissioner of Gift-tax v. CawasyJehangir Co. (P) Ltd. (1977) 106 ITR 390 (Bombay). wherein the Bombay High Court relied on the Apex Court decision in the case of Madurai Mills (supra) and held that distribution of its assets by a company to its shareholders upon reduction of its capital cannot amount to transfer The relevant extract of the decision is reproduced as under It is true that a company is, in law, a separate legal entity from its shareholders, but when the assets of the company are distributed amongst its shareholder, either on a reduction of capital or in the course of the winding-up of that company, new rights are not created so as to amount to a transfer of property, an ingredient which is implicit in the very concept of transfer, as clearly appears. from the decision of the Supreme Court in Madurai Mills' case. What happens on a reduction of the share capital of a company is much the same as what happens in the case of the winding-up of a company, as in Madura Mills' cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation, there is no consideration in monetary terms which the Assessee company has received on reduction of its capital. Hence, it is submitted that same cannot be termed as 'sale. Therefore, it is submitted that the assessee has not undertaken any transaction for sale of Indus shares during AY 2017-18 Similar, principle has been upheld by courts in the following rulings CIT v. Dewas Cine Corp (1968) 68 ITR 240 (SC) Calcutta Electric Supply Corporation Ltd v. CIT (1951) 19 IT 406 (CAL) B.2.3 In any case, the computation mechanism fails as there is no consideration accruingor receivable by the Assessee Company on capital reduction 5.1.9 In any case, even where the distribution to a shareholder is to be considered as a transfer under section 2(47) of the Act, in order to attract the charge of tax as capital gains under section 45 of the Act read with section 48 of the Act consideration must be received or must accrue to the assessee as a result of such transfer. There must be an element of consideration for the transfer and then only would it be considered as transfer eligible to capital gains tax Without prejudice to our submission above that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise as under. The revisionary proceedings proposed u/s 263 of the Act for AY 2017-18 is badin law and requires to be dropped as: 1. Twin conditions of assessment order being erroneous so far as it is prejudicial to the interest of the revenue is not satisfied in the present case, 2. Assessment Order in the present case cannot be regarded as erroneous, since the learned AO had done detailed inquiries on the issues sought to be revised u's 263 of the Act and there was a proper application of mind on the part of AO 3. The fact that the Order does not discuss this specific issue does not necessarily lead to the conclusion that the Order was passed without making any inquiries or verification as such; and 4. Assessment order in the present case cannot be deemed to be erroneous as the same does not even fall within the purview of Explanation 2 to section 263 of the Act. 7 In any case, the distribution of shares by the Company to its shareholder pursuant to court approved scheme of capital reduction cannot be regarded as transfer or (sale) under section 2(47) of the Act and hence, such distribution does not result in levy of capital gains tax in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction has been valued. The Valuation Report has not been furnished during the 263 proceedings and it was not furnished before the Hon'ble High Court also while seeking the approval of the 'Scheme of Arrangement'. 7. With the above observation, Ld. Pr.CIT held that the Assessing Officer has not conducted any inquiry regarding taxability of the capital gain and hence, the assessment is erroneous and also prejudicial to the interest of revenue. Further, he observed that as per amended law, Explanation 2 clause (a) under section 263(1) of the Act, any assessment made without conducting requisite enquiry and verification by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of revenue. Accordingly, he directed the Assessing Officer to reframe the assessment order denovo after conducting necessary enquiry and verification as warranted on facts of the case and also after giving due opportunity of being heard to assessee before passing the Assessment Order. 8. Aggrieved, assessee preferred appeal before us raising initially various grounds of appeal. However, subsequently assessee has filed revised grounds of appeal which are reproduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down. 1:4 The impugned Order dated 26 March 2022 passed by the PCIT u/s. 263 of the Act is bad in law since it seeks to revise the Order dated 05 December 2019 passed u/s. 143(3) of the Act which Order being passed on a non-existent entity is therefore bad in law, invalid and non-est. 1:5 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject, the Order dated 05 December 2019 passed by the AO u/s. 143(3) of the Act was invalid and non-est and hence the same could not be revised u/s. 263 of the Act. The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal. 9. At the time of hearing, Ld. AR of the assessee briefly explained the facts in the present case and pressed the grounds raised in revised grounds of appeal No. 1.4 and 1.5 before us and with regard to other grounds of appeal, he briefly explained the issues involved, however, has not pressed these grounds at this stage. He vehemently submitted that the Assessment Order passed by the Assessing Officer u/s. 143(3) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, he brought to our notice Page No. 62 of the Paper Book in which assessee replied to the Assessing Officer dated 11.11.2019 in which assessee has specifically submitted a detailed note on the scheme of amalgamation along with the change of name. 12. With the above submissions, Ld. AR submitted that the Assessing Officer has passed the Assessment Order in the erstwhile name which is not in existence and passed the Assessment Order in the name of the non-existing company even though he is aware of the fact. Therefore, the decision of the Hon'ble Supreme Court in the case of Pr.CIT v. Maruti Suzuki India Limited [2019] 416 ITR 613 is squarely covered. Ld.AR submitted that the facts in the present appeal is similar to the facts in the Maruti Suzuki case (supra) and it clearly indicates that order passed by the Assessing Officer is illegal in terms of its jurisdiction and null and void in the eyes of law. 13. Further, he submitted that the appeal filed by the assessee is against the order passed u/s. 263 of the Act and Ld. Pr.CIT has invoked the provisions of section 263 of the Act in order to revise the Void and non-est order and the assessee can challenge the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) in which assessee itself filed the appeal in Form No. 35 using the erstwhile name. Therefore, it clearly indicates that assessee is aware of the fact and preferred appeal in the old name of the erstwhile name of the assessee before the Ld.CIT(A). Further, he submitted that assessee also did not surrender the PAN. Therefore, assessee cannot take a hyper-technical issue in the appellate proceedings. 17. Further, Ld DR submitted that the assessee relied in the case of Pr.CIT v. Maruti Suzuki India Limited (supra). However, he submitted that several developments happened subsequently. Therefore, he relied on the following case laws in the form of paper book: - S. No. Particulars of the document filed Page Nos 1. Copy of Judgment of Hon ble Madras High Court in the case of M/S Mando Automotive India Pvt. Ltd. in w.p. No. 2779 of 2017 1 to 10 2. Copy of Judgment of Hon ble Supreme Court in the case of PCIT vs. Mahagun Realtors (P) Ltd. - 443 ITR 194 (SC) 11 to 31 3 Copy of Judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e body of the notice issued by the Assessing Officer wherein Assessing Officer himself raised several issues about the merger. Therefore, the argument of the Ld. DR is not as per the facts on record. Further, he objected to the submissions of the Ld.DR that assessee itself has filed the appeal before the Ld.CIT(A) in the erstwhile name, in this regard he submitted that, the appeal proceedings before the First Appellate Authority is designed by the revenue such a way that assessee can file the appeal only in the name of the assessee and PAN mentioned in the Assessment Order. Therefore, the department has to properly modify the systems then only assessee will be able to initiate the appeal proceedings properly before First Appellate Authority and it is the revenue which has to modify the system which is not as per the Act. Further, he brought to our notice Page No. 20 of the Paper Book wherein assessee also filed an annexure to the Form No 35 wherein assessee has mentioned proper name of the assessee and addressed the same issue before the Ld.CIT(A). Therefore, assessee has properly complied with the formalities. 20. With regard to the case law relied by the Ld. DR, he submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited (supra). However, he submitted that the facts in the Pr.CIT v. Maruti Suzuki India Limited (supra) are identical to the facts in the present case. Therefore, he relied on the submissions made by him that the order passed in the erstwhile name of the company is bad in law and the revision order passed by the Ld PrCIT is equally bad in law. 23. Considered the rival submissions and material placed on record, we observe from the submissions of both the parties that the Assessing Officer has passed the final Assessment Order in the name of the M/s. Aditya Birla Telecom Limited (erstwhile name) even though the Assessing Officer was well aware of the fact the erstwhile company was merged with the assessee company w.e.f 30th November, 2018 with the appointed date of merger was April 1st, 2018. It is brought to our knowledge that Assessing Officer has issued several notices and enquired about the merger and discussed in detail about the merger in the various notices issued by him as well as in the assessment order. However, at the same time it is also brought to our notice that annexure to the above said notices in which Assessing Officer himself has used the existing name of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no more res integra. All the arguments made by the Ld. CIT-DR have already been addressed by many Courts. The judgements relied upon by Ld. Counsel are directly on this issue and squarely covers these issues. 9.6. In addition to that, it is noted that interestingly, Hon'ble Bombay High Court recently decided identical issue in its judgment in the case of Jitendra Chandralal Navlani Anr vs UOI in writ petition No. 1069 of 2016 vide order 8th June, 2016 as under: On receipt of the reopening notice, the Chartered Accountant of the erstwhile M/s. Addler Security Systems Pvt. Ltd., had originally accepted the some but immediately thereafter by letter dated 5th May, 2015 pointed out that the company M/s. Addier Security Systems Pvt. Ltd. is no longer in existence as it has been dissolved. Consequent thereto, the Assessing Officer has also issued a notice under Section 142(1) of the Act to one of the petitioner who was the Director of erstwhile M/s. Addler Security Systems Pvt. Ltd. (since dissolved). In response, the Director of the erstwhile M/s. Addler Security Systems Pvt. Ltd., pointed out that the company has already been dissolved and it is no longer in existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be collected without the authority of law, as has been clearly laid down in Article 265 of our constitution. 4.9. It is noted by us that all these issues and arguments have already been dealt with and this entire controversy has already been put to rest by various courts in their judgments. Hon'ble Delhi High Court in the case of Spice Infotainment Ltd (Supra) has analysed this entire controversy in detail and held that assessment order passed under such circumstances would be nullity in the eyes of law. The relevant observations of the Hon'ble High Court in the said case are very useful to deal with this controversy and the same are reproduced hereunder for the sake of ready reference: 6. On the aforesaid reasoning and analysis, the Tribunal summed up the position in para 14 of its order which reads as under:- In the light of the discussions made above, we, therefore, hold that the assessment made by the AO, in substance and effect, is not against the non-existent amalgamating company. However, we do agree with the proposition or ration decided in the various cases relied upon by the learned counsel for the assessee that the assessment made against non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question is whether on the amalgamation of the Indian Sugar Company with the appellant Company, the Indian Sugar Company continued to have its entity and was alive for the purposes of Section 41(1) of the Act. The amalgamation of the two companies was effected under the order of the High Court in proceedings under Section 391 read with Section 394 of the Companies Act. The Saraswati Industrial Syndicate, the trans free Company was a subsidiary of the Indian Sugar Company, namely, the transferor Company. Under the scheme of amalgamation the Indian Sugar Company stood dissolved on 29th October, 1962 and it ceased to be in existence thereafter. Though the scheme provided that the transferee Company the Saraswati Industrial Syndicate Ltd. undertook to meet any liability of the Indian Sugar Company which that Company incurred or it could incur, any liability, before the dissolution or not thereafter. Generally, where only one Company is involved in change and the rights of the share holders and creditors are varied, it amounts to reconstruction or reorganisation or scheme of arrangement. In amalgamation two or more companies are fused into one by merger or by taking over by anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities 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 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. Section 292B of the Act reads as under:- 292B. No return of income assessment, notice, summons or other proceedings furnished or made or issue or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be treated as invalid, if the same in substance and effect is in conformity with or according to the intent and purpose of this Act . Insofar as the return under reference is concerned, in terms of Section 140 of the 1961 Act, the same cannot be treated to be even a return filed by the respondent assessee, as the same does not even bear her signatures and had not even been verified by her. In the aforesaid view of the matter, it is not possible for us to accept that the return allegedly filed by the assessee was in substance and effect in conformity with or according to the intent and purpose of this Act. Thus viewed, it is not possible for us to accept the contention advanced by the learned Counsel for the appellant on the basis of Section 292B of the 1961 Act. The return under reference, which had been taken into consideration by the Revenue, was an absolutely invalid return as it had a glaring inherent defect which could not be cured in spite of the deeming effect of Section 292B of the 1961 Act. 15. Likewise, in the case of Sri Nath Suresh Chand Ram Naresh Vs. CIT (2006) 280 ITR 396, the Allahabad High Court held that the issue of notice under Section 148 of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td, supra as well as Honble Karnataka High Court in the case of CIT vs Intel Technology Pvt Ltd 380 ITR 272 (Karnatka) also followed the view taken by Hon'ble Delhi High Court in the case of Spice Infotainment Ltd 247 CTR 500 (Delhi) and held that framing of assessment against non-existing entity/person would go to root of matter and was not mere procedural irregularity, but a jurisdictional defect and there could not be any assessment against a dead person. Thus, apparently, assessment proceedings having been initiated against non-existing company even after amalgamation of assessee company with another company were illegal, and thus order passed under such proceedings without jurisdiction and null void. 9.9 During the course of hearing, no contrary judgement was brought to our notice by the Ld. CIT-DR. It was fairly stated that as on date this issue was covered in favour of the assessee in view of the judgments as discussed above. In these facts and circumstances and the clear position of law coming out from above discussed judgments of Hon'ble Bombay High Court, Delhi High Court, Calcutta High Court and Karnatka High Court, we find that the impugned assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the provisions of limitation are provided in the same. 20. In view of above discussion, ground no.3 is allowed and revision order passed u/s 263 is quashed. 10.2 It is further noticed by us that similar view has been taken by Chandigarh Bench of the Tribunal in the case of Steel Strips Ltd (supra). 11. Thus, after taking into account all the facts and circumstances of the case, we find that in this case, the original assessment order passed u/s 143(3) dt 24-10-2013 was null void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the Ld. CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed u/s 263 by the Ld.CIT is also nullity in the eyes of law and therefore the same is hereby quashed. 12. Since we have quashed the impugned order passed u/s 263 by Ld. CIT on jurisdictional ground, we do not find it necessary to deal with, at this stage, other legal aspects and issues raised on merits of the impugned order. 26. Further, we observe that the Hon'ble Jurisdictional High Court also dismissed the appeal of the revenue against the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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