Income Tax Appellate Tribunal - Mumbai
Century Enka Ltd. vs Deputy Commissioner Of Income-Tax, Cci on 14 February, 2006
Equivalent citations: [2006]101ITD489(MUM), [2008]303ITR1(MUM), (2006)105TTJ(MUM)528
ORDER
Sunil Kumar Yadav, Accountant Member
1. This appeal by the assessee is directed against the order of the CIT(A) on various grounds. The original grounds being of argumentative nature were revised by the assessee. We, accordingly, replace the original grounds by the revised grounds of appeal which arc as under:
Ground I
1. On the facts and the circumstances of the case and in law, the CIT(A)-Central I, Mumbai [the CIT(A)] erred in upholding the action of the DCIT, Central Circle-1, Mumbai ('the DCIT') of initiating the assessment proceedings by issue of notice under Section 143(2) of the Income-tax Act, 1961 ('the Act') in the name of Rajashree Polyfils Ltd. (RPL) inasmuch as it had amalgamated with Century Enka Limited ('CEL') and, hence, was not in existence at the time of assessment proceedings.
2. The appellant prays that the assessment be held to be abinitio or otherwise void, illegal, in operative and bad in law and as such liable to be quashed.
Ground II Without prejudice to Ground I above:
1. The CIT(A) erred in upholding the action of the DCIT of initiating the assessment proceedings by issue of notice under Section 143(2) of the Act in the name of RPL inasmuch as it had amalgamated with CEL and, hence, was not in existence at the time of assessment proceedings.
2. The appellant prays that it be held that issue of notice under Section 143(2) on RPL which did not exist in the sense that it had amalgamated with CEL and subsequent assessment of RPL are not curable defect within the meaning of Section 292B of the Act.
Ground III Without prejudice to Grounds I and II above:
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the DCIT of assessing interest and dividend of Rs. 14,13,05,418 under Section 56 of the Act.
2. The appellant prays that the amount of Rs. 14,13,05,418 be held as not chargeable to tax under Section 56 of the Act as the business of the appellant was not set up during the year.
Ground IV Without prejudice to Grounds I, II and HI above:
1. The CIT(A) erred in upholding the action of the DCIT of disallowing the appellant's claim for deduction of interest paid on monies borrowed under Section 57(iii) of the Act against interest and dividend income.
2. The appellant, therefore, prays that the DCIT be directed to allow deduction of interest under Section 57(iii) of the Act against interest and dividend income.
2. Through ground No. 1, the assessee has assailed the validity of the assessment order on the ground that the assessment was framed in the name of the company which was not in existence at the relevant point of time when the assessment order was passed. Since the assessment order was passed in the name of non-existing entity, it deserves to be quashed on this score.
3. The learned Counsel for the assessee has invited our attention to the fact that during the course of assessment proceedings the Assessing Officer was duly informed vide letter dated 27.4.1998 that the Honourable High Courts of Gujarat and Calcutta have sanctioned the scheme of amalgamations of Rajashree Polyfil Limited vide their orders dated 27.1.1998 and 13.1.1998. The Assessing Officer was accordingly requested to make the necessary entries in his records and the name of the assessee be replaced by name as Rajashree Polyfil Ltd. (RPL), The counsel of the assessee further informed vide letter dated 18.5.1998 that Rajashree Polyfil Ltd. have been amalgamated with Century Enka Ltd. (CEL) as the claim of amalgamation was approved by Hon'ble High Court of Gujarat. As such, the change in the name of the assessee-company Rajashree Polyfil Ltd. is required and it should be substituted by Century Enka Ltd. (successor to Rajashree Polyfil Ltd.) and all correspondence should be made at the address of Century Enka Limited. These intimations were also given to the CIT(A) and Addl. CIT, Central Range. Despite of these intimations, the Assessing Officer had issued notice under Section 143(2) of the Income-tax Act in the name of RPL and framed the assessment in the same name. Since the RPL was amalgamated vide scheme of amalgamations in the month of February, 1998, it losts its legal existence and becomes a nonentity and if any assessment is framed in the name of the deceased or a non-existing entity that assessment is invalid and deserves to be quashed.
4. The learned DR on the other hand has pointed out that the Assessing Officer has joined the assessment proceedings and did not raise this objection before the Assessing Officer. He further invited our attention to the assessment order and the notice issued under Section 143(2) with the submissions that the assessment proceedings were conducted and assessment was framed by DCIT, Central Range-1, whereas, the assessee has sent these intimations either to the ACIT, Central Range-1 or Addl. CIT, Central Range-1. A letter dated 20.4.1998 was also written to the ITO, TDS, Central-1. But, nothing is placed on the record to prove that the assessee has raised this objection of jurisdiction before the Assessing Officer during the course of assessment proceedings. Moreover, once the assessee has joined the assessment proceedings he has waived his right to challenge the jurisdiction of the Assessing Officer and the validity of the assessment. In support of his pica, he invited our attention to the provisions of Sections 170 and 292B of the Income-tax Act. The learned DR further contended that, at the most it can be called to a procedure irregularities, but, not illegality, for which entire assessment can be knocked down. It was simply a mistake in the name of the assessee which was caused due to ignorance of the fact.
5. Having heard the rival submissions and from careful perusal of the record, we find that the return of income was filed in the name of RPL on 28.11.1996 which were processed under Section 143(1)(a) of the Income-tax Act on 17.10.1997. Thereafter, Section 143(1)(a) intimation was rectified vide order dated 22.7.1998 which was appealed to the CIT(A), but, it was later on dismissed vide order dated 27.11.1996. The assessment was framed vide order dated 8.12.1998 in the name of M/s. Rajashree Polyfil Ltd. by the DCIT, Central Circle-1, Mumbai. It is also an admitted fact that Rajashree Polyfil Ltd. was amalgamated with Century Enka Ltd. vide scheme of amalgamation approved by the High Court of Gujarat at Ahmedabad vide order dated 27.2.1998 and intimation to this effect was also sent by the counsel of the assessee M/s. Kumarji & Co. vide letter dated 18.5.1998. But, this intimation was sent to the ACIT, Central Circle-1, CIT(A) and the Addl. CIT(A), Central Range-1, whereas, the notice under Section 143(2) was issued by the DCIT, Central Circle-1, Mumbai on 30.11.1998 and the assessment was also framed by the DCIT, Central Circlc-1, Mumbai on 8.12.1998. From perusal of the assessment order, duration of assessment proceedings are not very clear. In any case, it is evident from the record that whatever intimations regarding the amalgamations of the Rajashree Polyfil Ltd. with Century Enka Ltd. was given, it was sent to different authorities, not to the DCIT, Central Circle-1, Mumbai who has issued notice under Section 143(2) and has framed the assessment under Section 143(3). Since no direct communication regarding the amalgamation of the assessee-company was made to the Assessing Officer i.e., DCIT, Central Circle-1, Mumbai, he framed the assessment in the name of Rajashree Polyfil Ltd. It is also very strange to note that when the assessee has joined the assessment proceedings before the Assessing Officer why has sent the communication to different officers and got acknowledgement from dispatch clerk. Proper communication could have been made directly with the Assessing Officer.
6. We have also carefully examined the orders of the Tribunal referred to by the assessee in the case of Makers Development Services Ltd. v. Dy. CIT [1992] 40 ITD 185 (Bom.), CIT v. Express Newspapers Ltd. [1960] 40 ITR 38 (Mad.) and from careful perusal of these judgments, we are of the view that if an assessment is framed in the name of deceased or an entity which is not in existence, by the Assessing Officer, who has knowledge of these facts, the assessment is bad in law as the defect is not curable. But, it has not been held anywhere, where the assessment is framed in the name of the deceased persons or in the name of a non-existent entity due to ignorance of the fact, even then, the assessment is bad and the defect is not curable?
7. In the instant case, we find that return of income was filed in the name of RPL and intimation under Section 143(1) was also issued in the same name. During the course of assessment proceedings, though the assessee has written letter to various authorities, but, we do not find any communication, directly made to the Assessing Officer with regard to the amalgamation of this company though assessee has joined the assessment proceedings. Since, nothing has been placed on record to prove that the Assessing Officer, despite having full knowledge about the fact of amalgamation of the assessee-company, has passed the assessment order in the name of the entity which is not in existence. In these circumstances, we are of the view that the order in the name of non-existing entity was passed on account of ignorance of the fact of amalgamation. For this reason, the assessment cannot be held to be invalid and be knocked down. The right course is to set aside the assessment and restore the matter to the file of the Assessing Officer with a direction to re-frame the assessment in the correct name of the assessee. It is only an irregularity which can be rectified by restoring the matter back to the Assessing Officer for framing assessment de novo starting with issuance of notice under Section 143(2) in the name of the successor company. We, therefore, set aside the order of the CIT(A) and restore the matter to the file of the Assessing Officer to re-frame the assessment de novo in terms indicated above. Since, no argument was raised on merit and the entire assessment is set aside and the matter is restored to the file of the Assessing Officer for fresh assessment, we find no justification to deal the issues on merits.
8. In the result, appeal of the assessee is allowed for statistical purposes.