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TMI Blog2023 (7) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent : Nitin Kumar Pasari, Adv. Ms. SidhiJalan, Adv ORDER The instant appeal is directed against the order dated 16.09.2020 passed by the learned Income Tax Appellate Tribunal, Ranchi Bench, Ranchi (hereinafter to be referred as ITAT); in I.T.A. No. 290/Ran/2019 along with Cross Objection No. 05/Ran/2020 for the Assessment Year 2011-12, whereby, the learned ITAT has rejected the appeal of the Revenue. 2. The brief fact as can be gathered from the records of the case is that the assessee M/S Mount View Dealmark Private Limited had declared a total income of Rs. 2081/- for the assessment year in question. On 12.02.2018, notices were issued under Section 133(6) of the Income Tax Act, 1961 (hereinafter to be referred as the Act) for furnishing details and documents for carrying out inquiry as the respondent Company had issued 156000 equity shares of Rs. 10/- value at a share premium of Rs. 190/-and the Company had received total share premium of Rs. 2,96,40,000/. Based upon the same, treating the share premium so received to be unexplained cash credit, notice under Section 148 was issued on 29.03.2018. Having received the notice, the assesse Company sought for reasons to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 148 of the Income Tax Act, 1961 is defective, and as the Assessing Officer did not have reasons to believe that the income chargeable to tax has escaped assessment, therefore the notice itself issued under section 148 of the Income Tax Act, 1961 is void ab-initio and liable to be quashed. 5. Aggrieved thereof, the Revenue preferred an appeal before the learned ITAT which was also dismissed with following finding: The assessee Company was merged with M/s Vishesh Marketing Pvt. Ltd. This fact was reported to the AO vide a letter dated 14.11.2018, a copy of which is at page 177 of paper book. Date of amalgamation was 09.08.2018. The assessment order was passed on 20.12.2018. The assessee Company M/s Mount View Dealmark Pvt. Ltd. was not in existence as on the dated of passing of the assessment order. Hence, assessment order passed on a non-existent Company is bad in law. We are holding so by respectfully following the judgment passed by the Hon ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. [2019] 416 ITR 613 (SC). This ground was taken before the CIT(A) but the ld. CIT(A) has granted relief to the assessee as another ground but had not adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d case overwhelmingly showed that amalgamation was known to the assessee at the stage of search and seizure operations as well as statements recorded by the revenue of the Directors and Managing Director of the group. A return was filed pursuant to the notice which suppressed the fact of amalgamation; on the contrary the return was of MRPL. Though that entity had ceased to be in existence in law yet appeals were filed on its behalf before the CIT and a cross appeal was filed before the ITAT. The Apex Court noted that the assessment order no doubt was expressed to be of MRPL (as the assessee), but represented by the transferee MIPL. Having regard to all these reasons, the Court was of the opinion that in the facts of the case the conduct of the assessee commencing from the date the search took place and before all forums reflected that it consistently held itself out as the assessee. The approach of the assessing officer was found to be 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. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that issuance of share at premium is an arrangement between the investor and the Company and no addition could be made under Section 68 of the Act, in the absence of any positive evidence against the Company. The Revenue had preferred an appeal before the Hon ble Apex Court against the aforesaid order in Special Leave Petition (Civil) Diary No. 1992/2019 which was also dismissed by the Hon ble Apex Court vide its order dated 18.02.2019. (iii) The Company in question lost its existence as on the day the assessment order was passed and as such, no order as againsta non-existent Company could have been passed which was well within the knowledge of the Assessing Officer. (iv) In reply to the contention of the petitioner as regards the applicability of the decision in Mahagun Realtors (P) Ltd. (supra) learned counsel for the respondent assessee has specifically placed reliance on para-35 to 37 of the same judgment to distinguish the case of that assessee for the year 2006-07. He has submitted that relief was denied to the said assesseefor the relevant year on the plea of amalgamation though the said plea of amalgamation was accepted in respect of the same-assessee for the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) property includes property, rights and powers of every description and liabilities includes duties of every description; and.. 20. Amalgamation, thus, is unlike the winding up of a corporate entity. In the case of amalgamation, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues - enfolded within the new or the existing transferee entity. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee Company. It is, therefore, essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action or the complaint does not per se cease - depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer (impugned in the writ petition) were not warranted in law. The business carried on by the Transferor Company (Subsidiary Company) should be deemed to have been carried on for and on behalf of the Transferee Company. This is the necessary and the logical consequence of the court sanctioning the scheme of amalgamation as presented to it. The order of the Court sanctioning the scheme, the filing of the certified copies of the orders of the court before the Registrar of Companies, the allotment of shares etc. may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be January 1, 1982. This is also the ratio of the decision of the Privy Council in RaghubarDayal v. The Bank of Upper India Ltd. AIR 1919 PC 9, relied on. 15. Counsel for the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basis for this apprehension. Firstly, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstitute 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. 33. In Maruti Suzuki (supra), the scheme of amalgamation was approved on 29.01.2013 w.e.f. 01.04.2012, the same was intimated to the AO on 02.04.2013, and the notice under Section 143(2) for AY 2012-2013 was issued to amalgamating Company on 26.09.2013. This court in facts and circumstances observed the following: 35. In this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following bases. 36. Firstly, in both the relied upon cases, the assessee had duly informed the authorities about the merger of companies and yet the assessment order was passed in the name of amalgamating/non-existent Company. However, in the present case, for AY 2006-2007, there was no intimation by the assessee regarding amalgamation of the Company. The ROI for the AY 2006-2007 first filed by the respondent on 30.06.2006 was in the name of MRPL. MRPL amalgamated with MIPL on 11.05.2007, w.e.f. 01.04.2006. In the present case, the proceedings against MRPL started in 27.08.2008- when search and seizure was first conducted on the Mahagun group of companies. Notices under Section 153A and Section 143(2) were issued in the name MRPL and the representative from MRPL corresponded with the department in the name of MRPL. On 28.05.2010, the assessee filed its ROI in the name of MRPL, and in the Business Reorganization column of the form mentioned not applicable in amalgamation section. Though the respondent contends that they had intimated the authorities by letter dated 22.07.2010, it was for AY 2007-2008 and not for AY 2006-2007. For the AY 2007-2008 to 2008-2009, separate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dates, i.e., 22/27.07.2010, letters were written on behalf of MRPL, intimating about the amalgamation, but this was for AY 2007-2008 (for which separate proceedings had been initiated under Section 153A) and not for AY 2006-2007. 6. The return specifically suppressed - and did not disclose the amalgamation (with MIPL) - as the response to Query 27(b) was N.A . 7. The return - apart from specifically being furnished in the name of MRPL, also contained its PAN number. 8. During the assessment proceedings, there was full participation - on behalf of all transferor companies, and MIPL. A special audit was directed (which is possible only after issuing notice under Section 142). Objections to the special audit were filed in respect of portions relatable to MRPL. 9. After fully participating in the proceedings which were specifically in respect of the business of the erstwhile MRPL for the year ending 31.03.2006, in the cross-objection before the ITAT, for the first time (in the appeal preferred by the Revenue), an additional ground was urged that the assessment order was a nullity because MRPL was not in existence. 10. Assessment order was issued - undoubtedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any refund were due, as to whether MIPL would then say that it is not entitled to it, because the refund order would be issued in favour of a non-existing company (MRPL). Having regard to all these reasons, this court is of the opinion that in the facts of this case, the conduct of the assessee, commencing from the date the search took place, 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. 10. A perusal of the aforesaid discussion shows that the argument of learned counsel for the appellant based upon para-42 of the decision in Mahagun Realtors (P) Ltd.to distinguish the case of the present assessee is not acceptable for the following reasons: In the said case the proceedings against MRPL started on 27th August 2008 when search and seizure was first conducted on the Mahagun group of companies. Notices under Section 153A and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt with treatment of taxes. However, the Assessing Officer proceeded to assess the respondent Company in question, which had lost its existence, as on the date of passing of the assessment order dated 20.12.2018 though the same was within the knowledge of the AO. As it is evident that at no point of time the respondent assessee had represented during assessment proceedings as representing on behalf of the amalgamating/transferee company. In fact the amalgamation took place during the assessment proceedings on 9th August 2018. Learned counsel for the respondent assessee has shown from the supplementary affidavit that since the assessment order was passed against the present respondent company even after it had lost its existence, the appeal was preferred by it on behalf of the amalgamating /transferee company. Though the CIT appeals set aside the assessment order on other grounds, but ITAT rejected the appeal of the revenue by recording the finding that the assessee company had already merged with the transferee company during the assessment proceedings and this fact was duly brought to the notice of the assessing officer. Therefore, the decision of the Apex Court in the case of Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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