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TMI Blog2023 (11) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances that the revisionary order passed under section 263 on the non-existent company, to be bad-in-law since the said entity was amalgamated/dissolved. When the original revisionary order was itself illegal and without jurisdiction, the same cannot be give rise any valid collateral proceedings in the second round as well. Therefore, the impugned order passed under section 263 dated 23.03.2022 pursuant to such illegal and invalid original revisionary order dated 13.03.2020 deserves to be quashed. Reopening of assessment proceedings - The re-assessment notice was issued under section 148 of the Act by the ld. Assessing Officer without obtaining prior approval from ld. JCIT/Addl. CIT, Range- 4, Kolkata in terms of section 151 of the Act and, therefore, the order passed u/s 147 is rendered null and void. The facts of the case are that notice under section 148 was issued by the ld. ITO, Ward-4(1), Kolkata after the expiry of four years and within six years from the end of the relevant assessment year. In terms of section 151 of the Act as it stood then, at the relevant point of time, the ld. ITO was required to obtain prior approval of ld. Addl./Jt. CIT, Range-4, Kolkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.12.2017 assessing the total income at nil. The AO examined the issue and came to the conclusion that the information pertained to FY 2010-11 relevant to AY 2011-12 and not to the instant assessment for AY 2010-11 and, therefore, no disallowance was made. Thereafter, the AO reopened the assessment for AY 2011-12 u/s. 147 of the Act by issuing notice u/s. 148 of the Act dated 29.03.2018 and after looking into the matter, AO noted that transactions were duly recorded in the books of account and there was no undisclosed income and accordingly assessed them at nilvide order dated 20.11.2018. Thereafter, the assessee received a notice u/s. 154 of the Act dated 14.01.2019 in which the AO pointed out the mistake in applying provisions of section 68 of the Act which was replied on 18.03.2019 in which it was pointed out that the information did not pertain to AY 2010-11 but to AY 11-12. It was also stated before the AO that AY 2011-12 was reopened and after necessary verification, the assessment was framed u/s. 143(3)/147 of the Act for AY 2011-12 making no addition by the AO as these were duly found recorded in the books of accounts. Besides, it was pointed out that impugned issue did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 27.12.2017 was ab initio void. As a consequence, the revisionary action u/s 263 of the Act stands rendered non-est in the eyes of law as well. Notice u/s 148 of the Act dated 29.03.2017 was issued by the AO without the approval of Jt./Addl. CIT and therefore the reassessment proceedings stood vitiated in law. Hence, as the reassessment order was rendered void, the consequent action u/s. 263 of the Act also deserves to be quashed as being bad in law. The reasons recorded for reopening of assessment was done in a mechanical manner without application of mind in as much as the concerned information also did not pertain to the relevant year. Hence, since the recorded reasons were invalid, the consequent order dated 27.12.2017 was ab initio void. As a consequence, the revisionary action u/s.263 of the Act stands rendered non-est in the eyes of law as well. The records available in the ITBA portal suggests that the AO had passed a rectification order u/s 154 of the Act dated 10.04.2019 (although the same is neither served upon the assessee nor is available on the IT portal). If that be so, then the assessment order u/s 144/147 of the Act dated 27.12.2017 stood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of P B. Doshi Vs. CIT 11 ITR 22 (Guj). 8. The Ld. AR on his second limb of argument submitted that reassessment order u/s. 144 read with section 147 of the Act dated 27.12.1970 itself suffered from the fundamental infirmity and jurisdiction defect thereby rendering all the consequential action and proceeding including revisionary order u/s. 263 as nonest in the eyes of law. The Ld. AR submitted that in an appeal against the order of 263 of the Act which ceased to revise the order u/s. 147 of the Act, the assessee has a legal right legitimately conferred by the law to challenge the validity of the order so passed u/s. 147 of the Act as well as initiation of proceeding u/s. 147 of the Act. The Ld. AR contended that the original proceeding u/s. 147 were null and void for want of proper jurisdiction and as such the validity can be challenged in the collateral proceeding u/s. 263 of the Act. The ld. AR submitted that if the order passed u/s. 147 of the Act is found to be bad in law then the consequent action u/s. 263 of the Act is also null and void. In defense of his argument, the Ld AR relied on the decision of Hon ble Apex Court in the case of Kiran Singh Vs. Chaman Pasw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. AR stated that consequent thereto the present proceeding also stand initiated by the said non-obtaining of approval from a competent authority. 11. On the third limb of argument, the Ld. AR stated that reasons were recorded by the AO on complete non-application of mind and in a mechanical manner by simply following the dictate of Investigation Wing and for realizing that the information supplied by the Investigation Wing did not pertain to relevant AY 2010-11 but AY 2011-12. The Ld. AR further stated that the AO has recorded the reasons that income chargeable to tax has escaped assessment after independent application of mind to the material and information which comes in his possession. Accordingly, reopening at the dictate of higher authority or on borrowed satisfaction or based on information forwarded by the Investigation Wing of the Department or any other agency is bad in law and so far as the assessment framed u/s. 147 read with 144 of the Act, the Ld. AR stated that before forming reason to believe on the basis of such information there has to be application of mind in an objective manner by the AO and only thereafter, there should be formation of belief. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 03.04.2019 and notice under section 263 was issued on 07.01.2020 and the revisionary order was framed on 13.03.2020 which were in the name of non-existent entity despite the fact having been brought to the knowledge of the ld. Assessing Officer as stated hereinabove and the fact was very much available in the assessment records. Therefore, the original revisionary order passed under section 263 of the Act was itself void ab initio and invalid and consequently notice issued under section 263 of the Act dated 15.02.2022 in the set aside proceedings as well as the impugned order dated 23.03.2022 were also rendered invalid and void regardless of the fact that revisionary order dated 13.03.2020 was restored to the Pr. CIT by the tribunal. The case of the assessee finds support from the decision of the Coordinate Bench of this Tribunal in the case of M/s. Durga Vinimay Pvt. Limited Others in ITA No. 1408-1412/KOL/2019 dated 22.11.2019, in which the Coordinate Bench has held on the similar facts and circumstances that the revisionary order passed under section 263 on the non-existent company, to be bad-in-law since the said entity was amalgamated/dissolved. The operative part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no adverse inference need to be drawn against the assessee. 15. Thereafter, the AO records that summons u/s. 131 of the Act was issued on 24.10.2016 to the director of the assessee company fixing the date of hearing on 27.07.2016. And pursuant to the summons, the Director Shri Rajeev Kumar appeared with photo identity proof, and his statement was recorded by the AO and placed in the records. According to AO (which he records in the reassessment order dated 28.10.2016), that during the course of assessment proceedings u/s 143(3)/263 the following features he noted which are as stated below:- [ Reproduced from reassessment order dated 28.10.2016] A. Discharge of onus of liability by M/s. Durja Vinimay Pvt. Ltd., as under: i) Assessee Company furnished all documents as requisitioned earlier. [ii] Information provided by assessee Company later on, turned to be correct one. (ill) Attendance of one of the Present Director of company against Summon issued u/s.131 and recording his statement is sufficient. B. Responses of Investors Companies:- (i) Subscribing companies has sufficient capital for investments. (ii] Subscribing companies also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xist. That is the plain and simple effect in law as held by the Hon ble Delhi High Court in M/s. Spice Infotainment Lt.ds Vs. CIT (supra). It is noted that the scheme of amalgamation itself provided for this consequences, in as much as simultaneous with the sanctioning of the scheme, the assessee M/s. Durja Vinimay Pvt. Ltd. stood dissolved by specific order of Hon ble NCLT. With the dissolution of M/s. Durja Vinimay its name was struck off from the rolls of the companies maintained by the ROC. The Hon ble Delhi High court in M/s. Spice Infotainment has explained the effect of dissolution of a company A company incorporated under the Indian companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation the amalgamating company ceases to exist in the eyes of law. Therefore, the impugned order passed by the Ld. Pr. CIT in the name of M/s. Durja vinimay Pvt. Ltd. i.e, in the name of assessee s which ceased to exist after the sanction of scheme on 21.12.2018 with effect from 01.04.2017, by the impugned order dated 12.03.209 is void. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to this case. We note that in this present cases/appeals, the ratio of Hon ble Delhi High Court in M/s. Spice Infotainment is applicable, which order of Hon ble Delhi High Court has been upheld by the Hon ble Supreme Court by order dated 02.11.2017 reported in 247 CTR 500 (SC) wherein we note that the Hon ble Supreme Court has distinguished the case of M/s. Sky Light Hospitality LLP (supra) in PCIT V. Maruti Suzuki India Ltd. [Civil Appeal No. 5409 of 2019] order dated 25.07.2019. 19. On behalf of the revenue, reliance has been placed on the decision of Hon ble Supreme Court in the case of Gita Devi Aggarwal Vs. CIT (1970) 76 ITR 496 (SC). That was a case wherein the assessee had challenged that she did not receive the notice issued by the Commissioner while exercising his revisionary power u/s. 33B of 1922 Act (as per 1961 Act it is Sec. 263) and had filed a Writ Petition before the Hon ble Calcutta High court which has been dismissed by the Hon ble High court. And the same was challenged before the Hon ble Supreme Court wherein their Lordship confirmed the order of the Hon ble Calcutta High Court by observing that section 33B of 1922 Act does not in express terms r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of Maruti Suzuki India Ltd. was adjudicating a judgment of the Division Bench of the Hon ble Delhi High Court which upheld the decision of the Income Tax Appellate Tribunal. The Tribunal held that the assessment made in the name of M/s. Suzuki Powertrain India Ltd. for the AY 2012-13 is a nullity since the entity has been amalgamated with M/s. Maruti Suzuki India Ltd. under an approved scheme of amalgamation and was not in existence. The Hon ble Supreme Court noted the facts of the case as under: 5.The assessee was a joint venture between M/s. Suzuki Motor Corporation and Maruti Suzuki India Ltd. The shareholding of the two companies in the assessee was 70% and 30%. The assessee was known upon incorporation as Suzuki Metal India Limited. Subsequently, with effect from 8 June 2005, its name was changed to SPIL. 6. On 28 November 2012, the assessee filed its return of income declaring an income of ₹ 212,51,51,156/-. The return of income was filed in the name of SPIL (no amalgamation having taken place on the relevant date). 7. On 29 January 2013, a scheme for amalgamation of SPIL and MSIL was approved by the High Court with effect from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of the assessment for AY 2012-13. The communication was addressed to: The Principal Officer M/s Suzuki Power Train India Limited (Now known as M/s Maruti Suzuki India Limited). 12 On 8 October 2015, a communication was addressed by the DGM (Finance) for MSIL in response to the notice under Section 142 (1) adverting to the case of SPIL for AY 2012-13. 13. On 12 April 2016, MSIL filed its appeal before the Dispute Resolution Panel9 as successor in interest of the erstwhile SPIL, since amalgamated. Form 35A was verified by Mr Kenichi Ayukawa, Managing Director CEO of MSIL. The grounds of appeal before the DRP did not allude to the objection that the draft assessment order was passed in the name of SPIL (amalgamated with MSIL) or that this defect would render the assessment proceedings invalid. 14 On 14 October 2016, the DRP issued its order in the name of MSIL (as successor in interest of erstwhile SPIL since amalgamated). 15 The final assessment order was passed on 31 October 2016 in the name of SPIL (amalgamated with MSIL) making an addition of ₹ 78.97 crores to the total income of the assessee. While preferring an appeal before the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment 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 would be of no effect as there is no estoppel against law. From the above extract, it would emerge that if an assessment order had been passed on the resulting company, it would not be void. Hence, in the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 in CIT, New Delhi v Spice Enfotainment Ltd. 15 ( 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. 21. After hearing the Ld. Counsel for the assessee, the Hon ble Supreme Court has adverted to certain significant facets of the present case (Maruti suzuki s case) (i) Firstly, the income which is sought to be subjected to the charge of tax for AY 2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of ₹ 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. Generall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of amalgamation. In the above conspectus of the facts, the initiation of assessment proceedings against an entity which had ceased to exist was void ab initio. 22. Thereafter, the Hon ble Supreme court has distinguished the Hon ble Delhi High Court decision in skylight Hospitality LLP which was affirmed by the Hon ble supreme court on 6th April, 2018 by observing as under: The submission however which has been urged 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 Bhushan33. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tality Pvt. Ltd., a company which had been dissolved, was an error and technical lapse on the part of the respondent. No prejudice was caused. 28 The decision in Spice Entertainment was distinguished with the following observations: 19. Petitioner relies on Spice Infotainment Ltd. v. Commissioner of Service Tax, (2012) 247 CTR 500.Spice Corp. Ltd., the company that had filed the return, had amalgamated with another 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. 24. In the light of the aforesaid discussions and relying on the decision of the Hon ble Apex court in Maruti Suzuki (Supra) and Spice Infotainment Ltd.(supra), we note that the impugned order passed under section 263 0f the Act by the Ld. Pr. CIT against the amalgamating companies which were not in existence on the date of the impugned order is a nullity and, therefore, we are inclined to quash all the impugned orders as shown in the captioned appeals 13.1. When the original revisionary order was itself illegal and without jurisdiction, the same cannot be give rise any valid collateral proceedings in the second round as well. Therefore, the impugned order passed under section 263 dated 23.03.2022 pursuant to such illegal and invalid original revisionary order dated 13.03.2020 deserves to be quashed. The case of the assessee finds support from the decision of the Hon ble Gujarat High Court in the case of P.V. Doshi vs.- CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , disclosed that the reasons came to the notice of the assessee for the first time when the AAC perused this order sheet and brought this fact to the notice of the assessee. Even on that ground, therefore, there could be no question of any waiver on the facts of the instant case. Even the alternative ground of finality of this order of the Tribunal suffered from the same infirmity, as the Tribunal had failed to notice this material distinction between a mere procedural provision which could be waived and such jurisdictional provision or a mandatory provision enacted in public interest which could not be waived, because by consent no jurisdiction could be conferred on the authority unless the conditions precedent were first fulfilled. The Tribunal's view was clearly erroneous that the matter became final when the Tribunal passed the earlier remand order so that this point of jurisdiction got finally settled, which could not be agitated unless the assessee had come in the reference to the High Court at this stage. The Tribunal s view was also incorrect that in restoring the case to the file of the ITO by the earlier order, the only point left open was in respect of addition on me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is also invalid , non-est and bad in the eyes of law. The case of the assessee is squarely covered by the decision of the Hon ble Apex Court in the case of Kiran Singh vs.- Chaman Paswan AIR 954 SC 340, wherein Hon ble Court has held as under:- It is a fundamental principle well established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties . 13.3. We also observe that the coordinate benches have decided in a series of cases in favour of the assessee by following the above decision of the Hon ble Apex court namely i Concord Infra Project Pvt. Ltd. Vs. Pr. CIT (supra) ii) Westlife Development Pvt. Ltd. Vs. Pr. CIT (supra) ,iii) Krishna Kumar Saraf Vs. CIT (supra) and iv)Indian Farmers Fertilizers Coop. Ltd. Vs. JCIT (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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