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TMI Blog2023 (9) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no other section which was brought over notice in the Act too, which permits any other year for assessing income of the predecessor. On carefully considering the provisions of section 170(2), years which can be assessed for the income of the predecessor can be the year of succession (upto the date of succession) and the immediately preceding previous year and no other years can be assessed in the hands of the successor. Therefore, in the present case at hand, we are of the view that the Ld. AO could not have acquired jurisdiction to assess the income of the predecessor company for the years prior to A.Y. 2015-16. We hold that the Ld. AO lacks jurisdiction in reopening and assessing the case of the predecessor company for A.Y. 2009-10 in the hands of assessee LLP. We quash the reassessment order passed by the Ld. AO for A.Y. 2009-10 and therefore, ground no. 1 of the appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... s an independent and without prejudice to one another. 4. Your appellant craves leave to add, amend, alter or drop all or any of the above grounds of appeal. 4. Brief facts of the case are that :- i. Assessee is a company engaged in the business of `builders and developers. It got itself converted in to a Limited Liability partnership in the name of Bhavna Computers LLP under the Limited Liability Partnership Act 2012 with effect from 22/03/2016. ii. For AY 2008-09, Assessee filed its return of income on 22/09/2008 showing income of Rs. 18858/-. ROI was processed u/s 143 (1) of The Act. Thus, no scrutiny assessment took place for this year. iii. Subsequently Assessment of the assessee was reopened by issuing the notice u/s 148 rws 147 of the Act for the reason that assessee has obtained share application money of Rs 150850000/- from companies based out of Kolkata. Those companies were operated by the alleged accommodation entry providers one Mr. Pradeep Poddar and Mr. Anand Sharma as per their own statement. Thus, notice u/s 148 of the Act was issued on 25/03/2015. Notice u/s 142 (1) of The Act was also issued on 4/3/2016. iv. Prior to making assessment for AY 2008-09, L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 148 of the Act, reassessment order passed by the LD AO is not sustainable. 6. Assessment records were called for and accordingly, the ld. Departmental Representative furnished the same to the Bench. Later, factual report was also called from the Ld. AO. The ld. DR furnished the said report of the Ld. AO dated 10.11.2022. According to that report , ld AO stated that :- "2.1 For A.Y. 2008-09 The original case records for A.Y. 2008-09 has already been submitted to the Sr. AR ITAT 'B' Mumbai Bench and the same facts are also mentioned in para no. 3 of the above-referred letter dated 19.10.2022. Further, on perusal of the Ld. CIT(A) order it is seen that vide Para no. 6.1 Ld. CIT(A) held that "...the assessee had filed submission on 04.03.2016 for treating the return of income filed u/s. 139(1) of the Act as return filed in compliance to notice received u/s 148." It is clear from the Ld. CIT (A) appeals order that the assessee has received the notice u/s. 148 for the A.Y. 2008-09 and submitted its reply accordingly. Hence, contention of the assessee regarding Notice u/s. 148 was not received is not tenable. It is pertinent to mention there that in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Representative in respect of A.Y 2008-09 were looked through by the Hon'ble Judicial Member who had categorically pointed out that the said assessment records reveal that during the fag end of reassessment proceedings, the concerned assessing officer of the appellant had requested the predecessor assessing officer at Kolkata (who had issued the notice u/s. 148) regarding the objections taken by the assessee of not receiving any notice u/s. 148 and that no reasons of reopening had been supplied to it. Accordingly, the Ld. Departmental Representative had sought time to obtain a factual report from the Ld. Assessing Officer in this regard. The same is evident from the Order sheet noting dated 17.10.2022 available on the ITAT Website. 6. Subsequently, duringthe hearing scheduled on 29.11.2022, the Ld. Departmental Representative provided a copy of report from Ld. Assessing Officer dated 10.11.2022 stating that the assessment records for A.Y 2008-09 were already submitted to the Sr. AR ITAT "B" Mumbai Bench. Additionally, the Ld. Assessing officer also stated that letters dated 27.05.2022 and 14.10.2022 have been sent to ITO (WD)-9(2), Kolkata with a request to provide the reasons r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In addition, the ld. Assessing Officer has referred to reminders made on 27.05.2022 and 14.10.2022 to ITO, Ward 9(2), Kolkata to which no response is received till date." 8. Accordingly, the ld. AR submitted that neither proof of service of notice u/s 148 is available , nor the reasons of reopening were provided to the assessee , therefore, i. In absence of proof of services of notice u/s 148 of the Act, the order of reassessment passed by the Ld. AO is a nullity and invalid. ii. in absence of availability of the reasons, the assessee is completely deprived of the reasons recorded and is in no position to make any objections against the same as to whether the same were also tenable or not in the eyes of law. iii. In this regard, reliance was placed on the decision of the Hon'ble Jurisdictional Bombay High Court in the case of CIT vs. IDBI Ltd. [2016] 76 taxmann.com 227 (Bom). 9. Ld. AR further argued that ld AO passed assessment order on a non-existent company despite information in his possession about its non existence, submitted that :- i. Assessment order passed u/s. 143(3) r.w.s. 147 of the Act in the name of M/s. Bhawna Computers Pvt. Ltd. instead of Bhawna Comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT and the order u/s. 127 of the Act. Therefore, there was substantial and affirmative material and evidence on record to show that issue of notice in the name of Pvt. Ltd. Company was a mistake. It was therefore held that wrong name given in the notice is a clerical error, which could be corrected u/s. 292B of the Act. Moreover, the issue in the case of Sky Light Hospitality was that about a "NOTICE" u/s. 148 being challenged and not the "ORDER" in the wrong name. In fact, in the very decision of Sky Light Hospitality of Hon'ble Delhi High Court, a distinction about the same has been sought be made between the notice being issued and order being passed in wrong name and the Honourable High Court has accepted the decision of CIT v. Dimension Apparels (P.) Ltd. [2015] 370 ITR 288 and CIT v. Intel Technology India Ltd. [2016] 380 ITR 272 following the ratio of Spice Infotainment Ltd. (supra) but for there being orders being passed and the case before them was about the notice being issued on a peculiar set of facts. 11. Ld AR in the end submitted on validity of the reassessment order, stating that since the reopening is based upon some information because of search conducted on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng invocation of provisions i.e. 148 instead of 147 of the Act. 14. The arguments advanced by the ld. AR of the assessee to quash the reassessment order being invalid and bad in law are made for 3 reasons which are dealt with as under :- i. First amongst those is that Jurisdiction u/s. 147 is wrongly acquired instead of section 153C, we find that rights of the LD AO to assessee the assessee either u/s 153C or U/s 148 of the Act are subject to specific conditions provided in respective sections. Section 153C and 147 of the Act operate in different field and on different footings. Reasons recorded clearly shows that information was received from the search conducted on third party that income of the assessee has escaped assessment. There is no reference of any incriminating material pertain to or belonging to assessee. We find that some tangible information was made available to the LD AO, which has come in to possession of the LD AO in the form of information from DDIT during the course of search on third parties. No material pertaining to or belonging to the Assessee was found in that search. Mere some information was received. Therefore, there is no jurisdiction available to LD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment proceedings vide letter dated 04.03.2016 and 16.03.2016 objecting that it has not received the reasons recorded coupled with the fact that the assessment records itself speak about the same being sought from the concerned Ld. AO at Kolkata which has even not been received till date. Further, even in the Statement of Facts filed [form no 35 Memorandum of Appeal before CIT (A)] before the ld. CIT (A), the assessee had stated that no notice u/s. 148 was received and without prejudice to the same, it had requested to treat the original return as return in response to notice u/s. 148 of the Act and had even requested to provide the reasons recorded for reopening. However, before the ld. CIT (A), the Ld. AO had not responded or rebutted this fact at all. Even before us, the Ld. AO has failed to demonstrate that the reasons were actually supplied to the assessee. Even the ld. AR has explained that in para 6.2, the ld. CIT (A) had reproduced the submission of A.Y. 2009-10 and not for A.Y. 2008-09 for which rectification had also been filed on 08.12.2022 and have also drawn our attention to the actual submission dated 11.07.2019 filed before CIT (A) for A.Y. 2008-09 placed at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO passed the assessment order in the name of erstwhile company and not in the name of assessee LLP. Although the argument of ld. DR that the same is a mere typographical error on part of the Ld. AO, we are afraid to buy this argument as once the Ld. AO was aware about the non-existence of a particular assessee and had even acted upon it in the subsequent year accordingly, such an error cannot be cured in eyes of law. It is a settled proposition of law that orders passed in the name of non-existent entity is nullity and void ab initio as held by various courts viz.PCIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC), CIT v. Spice Enfotainment Ltd. [CA no. 285 of 2014] (SC) and Spice Entertainment Ltd. v. CIT [2011-TIOL-971-HC-Del-IT]. Even the Hon'ble Supreme Court in the case of Skylight LLP have affirmed the observation of the Hon'ble Delhi High Court that the assessment order if passed in the name of non-existing entity then the same shall be invalid but for the case before them was about the issue of notice under a peculiar set of facts that the notice was upheld even in a wrong name. We therefore hold that once the assessment order is passed in the name of a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the ld. Assessing Officer in making said additions (c) The ld. CIT (A) also failed to appreciate that the statements of third parties relied upon ought to have been confronted to the assessee and backed by corroborative evidences before making the additions. 19. Brief facts of the case are that Assessee filed its ROI on 23/9/2009 declaring income of Rs 361329/-. 20. In the search on 9/10/2014, it was found that the assessee company had raised share application money to the tune of Rs. 9,24,06,000/- from various companies. These investors were alleged by the Ld. AO to have been engaged in providing accommodation entries. This conclusion was arrived at by the Ld. AO based on statements of Shri Pradeep Poddar, Shri Ankit Bagri, Shri Ankit Poddar and Shri Mona Jagatramka. The Ld. AO accordingly doubted the nature and source of the transaction and hence added a total sum of Rs. 9,24,06,000/- u/s. 68 of the Income Tax Act in respect of the share application money received. On the same day i.e. on 9/10/2014, office of the assessee was also subject to survey u/s 133A of the Act. Notice u/s 148 of the Act was issued on 28/3/2016. Assessee submitted a letter dated 21/4/2016 stating acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dissolved and removed from the records of the Registrar of Companies. vi. In this regard, reliance was placed on the decisions of CIT v. Express News Paper Ltd. (Mad HC) 40 ITR 38,59 wherein it is held that when the predecessor company ceased to exist and is struck off the register of Registrar of companies, it is one which "cannot be found". vii. Above decision is further affirmed by the Hon'ble Supreme Court in 53 ITR 250 (SC). viii. In support of his argument, he also referred to following decisions wherein it is held that on dissolution, merger, amalgamation; predecessor company ceases to exist and be treated as "cannot be found": a) Birla Cotton Spg. &wvg. Mills Ltd. vs. CIT (123 ITR 354) (Del.); b) Modi Sugar Mills Ltd. vs. Union of India (144 ITR 29) (All); c) CIT vs. Nuthern P. Ltd. (284 ITR 396) (Guj.): Impsat (P) Ltd. vs. ITO (92 TTJ 552) (Del.); d) Modi Corp. Ltd. vs. JCIT (105 TTJ 303) (Del.): Hewlett Packard India Pvt.Ltd. (TTA No.4016/ Del./05); e) Slocum Investment (Pvt.) Ltd. vs. DCIT (106 ITD 1) (Del.); and f) Better Investment Ltd. (since amalgamated with M Corp. Global) vs. DCIT in ITA No.301/ Del/2005 ix. No notice under the Act can be issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 of the Act in the name of the assessee LLP for the year under consideration i.e. A.Y. 2009-10. Further, from the LLP Act, 2008; it is clear that all the pending proceedings in any court of Tribunal against the company may be continued, completed and enforced by or against the LLP. Accordingly, the ld. DR pleaded that there is no infirmity in the proceedings being initiated u/s. 147 of the Act and hence, the same may be upheld. 26. In rejoinder the ld. AR i. referred to clause (8) of Third Schedule of LLP Act, 2008 which is as follows: "8. All proceedings by or against the company which are pending before any Court, Tribunal or other authority on the date of registration may be continued, completed and enforced by or against the limited liability partnership." ii. the words "pending before any Court, Tribunal or other authority on the date of registration" to submit that only the proceedings pending as on the date of registration may be continued and no new proceedings can be initiated after the date of registration. iii. In the present case, the date of registration is 22.03.2016 whereas the reopening proceedings for A.Y. 2009-10 are initiated on 28.03.2016, which is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms or Registrar of Companies, as the case may be, with which it was registered under the provisions of the Indian Partnership Act, 1932 (9 of 1932) or the Companies Act, 1956 (1 of 1956), as the case may be, about the conversion and of the particulars of the limited liability partnership in such form and manner as may be prescribed. (2) Upon such conversion, the partners of the firm, the shareholders of private company or unlisted public company, as the case may be, the limited liability partnership to which such firm or such company has converted, and the partners of the limited liability partnership shall be bound by the provisions of the Second Schedule, the Third Schedule or the Fourth Schedule, as the case may be, applicable to them. (3) Upon such conversion, on and from the date of certificate of registration, the effects of the conversion shall be such as specified in the Second Schedule, the Third Schedule or the Fourth Schedule, as the case may be. (4) Notwithstanding anything contained in any other law for the time being in force, on and from the date of registration specified in the certificate of registration issued under the Second Schedule, the Third Schedule o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved from the records of the Registrar of Companies. Clause 8: Pending proceedings All proceedings by or against the company which are pending before any Court, Tribunal or other authority on the date of registration may be continued, completed and enforced by or against the limited liability partnership. 29. On careful analysis of above relevant provisions of the LLP Act, 2008, it is noted that i. on conversion of private company into LLP, all tangible and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relation to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the LLP and that the company shall be deemed to be dissolved and removed from the records of the Registrar of Companies . ii. In other words, LLP shall be clothed with all the assets and liabilities of the erstwhile company that is automatically dissolved and struck from the records of the ROC. iii. As regards, the pending proceedings, clause (8) of Third Schedule provides that all proceedings by or against the company which are pending before the Court, Tribunal or other authority on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) Every artificial juridical person, not falling within any of the preceding sub-clauses. Explanation. - For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains. 34. On the issue of applicability of provisions of section 170 (2) of the act, we find that the commentary in Chaturvedi & Pithisaria's Income Tax Law (seventh edition) volume 7) page number 10097, comments that :- "The provisions of section 170 (2) override those of section 170 (1) of happening of the prescribed condition Viz that after the succession having been effected, the predecessor cannot be found. In such case (2) provides that the assessment of the previous year in which the succession to 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 ..... nd could not be found when the impugned notice u/s. 148 of the Act was issued on 28.03.2016. 37. Impugned notice u/s. 148 of the Act dated 28.03.2016 was issued in the name of assessee LLP and therefore, the ld. DR submitted that although the company ceased to exist, the Ld. AO had rightly issued the notice to the successor LLP only. In this regard, we find that the LLP Act, 2008 does not allow the Ld. AO to initiate new proceedings in the name of the successor LLP after the date of conversion / registration. It only speaks about continuing the pending proceedings as on the date of registration. However, section 170 of the Income Tax Act, 1961 gives power to the Ld. AO to assess the income of the predecessor in the hands of the successor. On going through the said provisions of section 170 of the Act, it is noted that in sub-section (1) therein, when any business or profession is succeeded, then predecessor shall be assessed in respect of the income of the previous year in which succession took place upto the date of succession and the successor shall be assessed in respect of the income of the previous year after the date of succession. However, in sub-section (2), it refers to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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