Income Tax Appellate Tribunal - Delhi
Acit, Central Circle-19, New Delhi vs M/S Sindhu Trade Links Ltd, New Delhi on 25 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "A" : DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI L.P. SAHU, ACCOUNTANT MEMBER
ITA.No.5065/Del./2017
Assessment Year 2009-2010
The ACIT, Central M/s. Sindhu Trade Links
Circle-19, Room No.104, vs Ltd., 17, Vasant Enclave
ARA Centre, Tula Ram Marg, New Delhi
E-2, Jhandewalan, PIN 110057. PAN
New Delhi. AACCB4137E
(Appellant) (Respondent)
Cross Objection No.14/Del./2018
Arising out of
ITA.No.5065/Del./2017 - Assessment Year 2009-2010
M/s. Sindhu Trade Links The ACIT, Central
Ltd., 17, Vasant Enclave vs Circle-19, Room No.104,
Tula Ram Marg, New Delhi ARA Centre,
PIN 110057. PAN E-2, Jhandewalan,
AACCB4137E New Delhi.
(Cross-Objector) (Respondent)
For Revenue : Shri Ravi Kant Gupta, Sr. D.R.
Shri S.K. Tulsiyan, Advocate
For Cross Objector : Ms. Nisha Rachh, C.A. &
Shri Karan Kumra, C.A.
Date of Hearing : 17.05.2018
Date of Pronouncement : 25.05.2018
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ITA.No.5065/D/2017 & CO.No.14/D/2018
M/s. Sindhu Trade Links Ltd., New Delhi.
ORDER
PER BHAVNESH SAINI, J.M.
The Departmental Appeal as well as Cross Objection by assessee are directed against the order of Ld. CIT(A)-27, New Delhi, Dated 31st May, 2017, for the A.Y. 2009-2010. The Revenue in the Departmental Appeal challenged the Order of the Ld. CIT(A) in holding re-assessment order to be void abinitio and deleting the addition on merit. The Cross objection filed in support of the order of the Ld. CIT(A).
2. The facts of the case are that assessee M/s. Sindhu Holding Ltd., (in short "M/s.SHL") was a Company, incorporated under the Companies Act on 05.02.1992. Pursuant to the Judgment of the Hon'ble jurisdictional Delhi High Court Dated 19.01.2011 M/s. Sindhu Holding Ltd., merged with M/s. Bhandari Consultants & Finance Ltd., (in short "M/s. BCFL") and M/s. Bhandari Consultants & Finance Ltd., (after amalgamation) was subsequently renamed as M/s. Sindhu Trade Links Ltd., (in short "M/s. STLL"). Assessment in 3 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
the case of erstwhile M/s.SHL was originally completed under section 153A/143(3) vide order dated 30.03.2015 on a total income of Rs.1,01,48,800/-, after giving effect to the order dated 09.11.2015, the total taxable income was redetermined to be at Rs.99,36,691/-. The case was reopened under section 147 of the I.T. Act and notice under section 148 of the I.T. Act dated 29.03.2016 was issued to M/s.SHL (assessee) after recording reasons under section 148 of the I.T. Act, 1961.
3. During the course of assessment proceedings, the assessee submitted various letters before A.O. and proceedings were concluded vide order under section 143(3)/147 of the I.T. Act, dated 28.12.2016 wherein addition of Rs.78,26,435/- was made.
3.1. The assessee challenged the legality of the assessment proceedings as well as addition on merit before Ld. CIT(A). The assessee briefly contended before Ld. CIT(A) that the assessment order is illegal, invalid and void abinitio and merits quashing. Notice under section 148 dated 29.03.2016 initiating 4 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
re-assessment proceedings is void abinitio and illegal because it has been issued on an entity which is no longer in existence. The assessee has intimated about the merger of the assessee with other company vide several letters to the jurisdictional Officers. The A.O. did not take cognizance of the same, therefore, re-assessment is void and illegal. There is no basis to make any addition against the assessee.
4. The Ld. CIT(A) noted that assessee has merged with M/s. BCFL vide order of the Hon'ble jurisdictional Delhi High Court dated 19.01.2011 which was subsequently renamed as M/s. STLL. Pursuant to such amalgamation, M/s.SHL ceased to exist. The merger of the assessee was intimated to the DCIT, Circle-8(1) vide letter dated 04.01.2012 and subsequently to the A.O. after centralization of the case i.e., ACIT, Circle-17 vide letters dated 23.12.2014 and 16.02.2015 which are also filed on record. The A.O. recorded reasons for reopening of the assessment and issued notice under section 148 to M/s.SHL, an entity which is no longer in existence, therefore, notice was 5 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
illegal, invalid and void abinitio. The assessee also explained that assessee furnished details of client code modification and other details to show that addition is not justified. However, the A.O. ignored the explanation of assessee and passed re- assessment order wherein addition of Rs.78,26,435/- was made against the assessee. The written submissions of the assessee are reproduced in the appellate order in which the assessee reiterated the same facts as were explained above. It was explained that since the assessee merged with M/s. BCFL as per Judgment of the Hon'ble jurisdictional Delhi High Court, therefore, it did not exist on the date of issue of notice under section 148 of the I.T. Act. Therefore, reasons recorded under section 148 and issue of notice under section 148 to the non- existing entity was illegal, void and invalid. The assessee relied upon several decisions of ITAT, Delhi and Hon'ble jurisdictional Delhi High Court in support of the contention that re- assessment is invalid and addition on merit is wholly unjustified.
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ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
5. The Ld. CIT(A) considering the explanation of assessee and following the decision of Hon'ble jurisdictional Delhi High Court in the case of Spice Infotainment Ltd., vs. CIT I.T. Appeal No.4756 of 2011 dated 03.08.2011 held that re- assessment cannot be held to be valid order and accordingly annulled. The findings of the Ld. CIT(A) in para 6.1 of the order is reproduced as under :
"Findings :
6.1. Vide Ground Nos. 1 to 6, the appellant has stated the erstwhile M/s. Sindhu Holdings Limited was amalgamated with M/s. Bhandari Consultancy and Finance Limited vide order of Hon'ble Delhi High Court dated 19.01.2011. Pursuant to such amalgamation, M/s Sindhu Holdings Limited ceased to exist. Subsequently, M/s Bhandari Consultancy and Finance Limited was renamed as M/s Sindhu Trade Links Limited. It is also the contention of the appellant that intimation of such merger 7 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
was submitted with jurisdictional AOs vide multiple letters from time to time.
The assessment records were called for and verified. Based on a perusal of such assessment records and copies provided by the appellant, it is noted that intimation of amalgamation of M/s Sindhu Holdings Limited was indeed given to the following authorities:
• Vide letter dated 04.01.2012 before the Dy./ Asst.
Comm. Of Income Tax, Circle 8(1), New Delhi i.e. the jurisdictional AO;
• Vide letter dated 23.12.2014 before the Asst.
Commissioner of Income Tax, Central Circle - 17, New Delhi i.e. the jurisdictional AO pursuant to search and survey proceedings and centralisation of cases; and • Vide letter dated 16.02.2015 before the Asst.
Commissioner of Income Tax, Central Circle - 17, New Delhi i.e. the jurisdictional AO pursuant to search and survey proceedings and centralisation of cases.8
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
A perusal of each of the above 3 letter reveals that erstwhile M/s Sindhu Holdings Limited had prior to issuance of notice u/s 148, sufficiently discharged its onus of intimating the AO regarding its amalgamation along with documentary evidence.
The central issue for consideration therefore, is whether the assessment could he framed in the case of M/s Sindhu Holdings Limited, which ceased to exist after its amalgamation with M/s Bhandari Consultancy and Finance Limited vide order of Hon'ble Delhi High Court dated 19.01.2011. The AR has relied on decisions of the Hon'ble Jurisdictional High Court and Hon'ble Tribunal on the proposition that notices/assessment orders in the name of erstwhile entities or entities which ceased to exist on the date of the notices/assessment orders are illegal and void abinitio.
The Hon'ble High Court in the case of Spice Entertainment vs. CIT (ITA 476 of 2011 dated 03.08.2011) decided as under :9
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
"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-existent person would be invalid and liable to be struck down. But, in the present case, we find that the assessment, in substance and effect, has been made against amalgamated company in respect of assessment of income of amalgamating company for the period prior to amalgamation and mere omission to mention the name of amalgamated company along with the name of amalgamating company in the body of assessment against the item "name of the assessee" is not fatal to the validity of assessment but is a procedural defect covered by Section 292B of the Act. We hold accordingly."10
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
7. The aforesaid line of reasoning adopted by the Tribunal is clearly blemished with legal loopholes and is contrary to law. No doubt, M/s Spice was an assessee and as an incorporated company and was in existence when it filed the returns in respect of two assessment years in questions. However, before the case could be selected for scrutiny and assessment proceedings could be initiated, M/s Spice got amalgamated with MCorp Pvt. Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Coup which was dully sanctioned vide orders dated 11th February, 2004. With this amalgamation made effective from 1st July, 2003, M/s Spice ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, M/s Spice was also stood dissolved by specific order of this Court. With the dissolution of this company, its name was struck off from the rolls of Companies maintained by the Registrar of Companies.
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ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
8. 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. This position is even accepted by the Tribunal in para-14 of its order extracted above. Having regard this consequence provided in law, in number of cases, the Supreme Court held that assessment upon a dissolved company is impermissible as there is no provision in Income-Tax to make an assessment thereupon. In the case of Saraswati Industrial Syndicate Ltd. Vs. CIT, 186 ITR 278 the legal position is explained in the following terms:
"The 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 12 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
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 another. Reconstruction or amalgamation has no precise legal meaning. The amalgamation is a blending of two or more existing undertakings into one undertaking, 13 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
the share holders of each blending Company become substantially the share holders in the Company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new Company, or by the transfer of one or more undertakings to an existing Company. Strictly amalgamation does not cover the mere acquisition by a Company of the share capital of other Company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsburys Laws of England 4th Edition Vol. 7 Para 1539. Two companies may join to form a new Company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third Company or one is absorbed into one or blended with another, the amalgamating Company loses its entity. "14
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
9. The Court referred to its earlier judgment in General Radio and Appliances Co. Ltd. Vs. M.A. Khader (1986) 60 Comp Case 1013. In view of the aforesaid clinching position in law, it is difficult to digest the circuitous route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect.
10. Section 481 of the Companies Act provides for dissolution of the company. The Company Judge in the High Court can order dissolution of a company on the grounds stated therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. Smith (Plant Hire) Ltd. Vs. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342 (CA) that "once a company is dissolved it becomes a non-existent party and therefore no action can be brought in its name. Thus an insurance company which was subrogated to the rights of another insured company was held not to be entitled to 15 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
maintain an action in the name of the company after the latter had been dissolved".
11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exit 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.
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ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
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 reasons of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act."
13. The Punjab & Haryana High Court stated the effect of this provision in CIT Vs. Norton Motors, 275 ITR 595 in the following manner:-
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ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
"A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, Section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to Section 292B.
14. The issue again cropped up before the Court in CIT Vs. Harjinder Kaur (2009) 222 CTR 254 18 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
(P&H). That was a case where return in question filed by the assessee was neither signed by the assessee nor verified in terms of the mandate of Section 140 of the Act. The Court was of the opinion that such a return cannot be treated as return even a return filed by the assessee and this inherent defect could not be cured inspite of the deeming effect of Section 292B of the Act. Therefore, the return was absolutely invalid and assessment could not be made on a invalid return. In the process, the Court observed as under:-
"Having given our thoughtful consideration to the submission advanced by the learned Counsel for the appellant, we are of the view that the provisions of Section 292B of the 1961 Act do not authorize the AO to ignore a defect of a substantive nature and it is, therefore, that the aforesaid provision categorically records that a return would 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 19 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
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 Income Tax Act is a condition precedent to the validity of any assessment order to be passed under section 147 of the Act and when such a notice is 20 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
not issued and assessment made, such a defect cannot be treated as cured under Section 292B of the Act. The Court observed that this provisions condones the invalidity which arises merely by mistake, defect or omission in a notice, if in substance and effect it is in conformity with or according to the intent and purpose of this Act. Since no valid notice was served on the assessee to reassess the income, all the consequent proceedings were null and void and it was not a case of irregularity. Therefore, Section 292B of the Act had no application.
16. When we apply the ratio of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of Section 292B of the Act are not applicable in such a case. The framing of assessment against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person."
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ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
17. The order of the Tribunal is, therefore, clearly unsustainable. We, thus, decide the questions of law in favour of the assessee and against the Revenue and allow these appeals. "
In CIT vs Micron Steel (P) Ltd. (supra) the Hon'ble Delhi High Court (ITA No. 19 to 24 of 2014) held as under :
"6. This court notices, at the outset, that the issue urged is no longer res integra. As stated earlier, Spice Entertainment Ltd. (supra) is an authority for the proposition that completion of assessment in respect of a non-existent company, due to the amalgamation order, would render assessment in the name and in respect of the original assessee-company, a nullity "
The Hon'ble Delhi High Court in the case of CIT, C-II vs Micra India (P) Ltd. in ITA 441, 444, 445, 446, 452 and 461/2013 vide order dated 22.01.2005 held as under :
"6. In a case of amalgamation, the predecessor of the assessee (being a dissolved company) "cannot be found". Consequently, Section 170(2) of the Act applies. This provision clarifies that where the predecessor cannot be found, 22 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
"the assessment of the income of the previous year in which the succession took place up to the date of the succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor."
(Emphasis Supplied)
7. The revenue, however, urges that the assessment is justified because the liabilities of the amalgamating company accrue to the amalgamated (transferee) company. While that is true, the question here is which entity must the assessment be made on. The text of Section 170(2) makes it clear that the assessment must be made on the successor (i.e., the amalgamated company).
8. In Saraswati Industrial Syndicate (supra) it was held that :
"after the amalgamation of the two companies the transferor company ceased to have any entity and the amalgamated company acquired a new status and it was not possible to treat the two companies as partners or jointly liable in respect of their liabilities and assets. "23
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
In Vivid Marketing (supra), this court held:
"When the Assessing Officer passed the order of assessment against the respondent company, it had already been dissolved and struck off the register of the Registrar of companies u/s 560 of the Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any assessment order passed against the company which was not in existence as on that date in the eyes of law it had already been dissolved. "
It was further held that Section 176 of the Act, which enacts provisions relating to discontinuation of business, does not apply to a case of amalgamation/ dissolution. It was further held that Section 159 of the Act, which provides for tax liability to be attached to the legal representatives of a deceased person, is also inapplicable. The language of Section 159 ex-fade applies to natural persons, and cannot be extended, through a legal fiction, to the dissolution of companies.
9. There is another aspect in these appeals, which is the applicability of Section 292B of the Act. Section 292B, inter alia, prescribes that proceedings etc. initiated cannot be 24 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
deemed invalid "merely by reason of mistake, defect or omission" in any return of income, assessment or notice. The revenue had argued that this provision neutralizes procedural defects in jurisdiction. In these circumstances, it was submitted, having regard to the assessee's omission to urge the so-called illegality at the threshold, the Court ought to interfere with the order of the ITAT. This question, too, has been dealt with - in CIT v. Dimension Apparels Pvt. Ltd. reported in (2015) 370 ITR 288. In that case, after noticing Section 292B, the Court discussed the ruling in Spice Entertainment (supra), wherein it had been held that since the assessment made in such cases is against an amalgamated company in respect of income of the amalgamating company for the period prior to the amalgamation, the income tax authorities are nevertheless under an obligation to substitute the successor in place of the amalgamated company. Thus, "such a defect cannot be treated as procedural defect." In any event, it is to be noted that the fact of amalgamation of the assessee with the transferee company had been intimated and disclosed in response to the notice under Section 153C on 22.11.2010. Accordingly, this ground, too, has no merit and is rejected. 25
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
10. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed. Instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; the order also mentioned the transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to the assessment being completed in the name of the transferee company. According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed against a non-existent company. The ITAT's decision is, in the circumstances, justified and warranted.
11. For the above reasons it is held that these appeals do not involve any substantial question of law and of liability. The appeals are accordingly dismissed. "
The Hon'ble Jurisdictional ITAT in the case of Maruti Suzuki India Ltd. vs DCIT Circle 16(1), New Delhi (IT Appeal No. 288 (Delhi) of 2016) held as under :26
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
"10. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the amalgamating company M/s Suzuki Powertrain India Ltd. amalgamated with M/s Maruti Suzuki India Ltd. w.e.f. 01.04.2012, as a result of scheme of amalgamation duly approved by the Hon'ble Delhi High Court vide order dated 29.01.2013 and the assessment in this has been framed by the AO vide order dated 03.03.2015. Therefore, it is clear that when the assessment order was passed on 03.03.2015, M/s Suzuki Powertrain India Ltd. was not inexistence.
It is also noticed that the aforesaid fact was in the knowledge of the department as the assessee informed vide various letters mentioned in para 5 of the former part of this order which were written to the various Tax Authorities. However, the AO in spite of knowing this fact that M/s Suzuki Powertrain India Ltd. amalgamated with M/s Maruti Suzuki India Ltd., made the reference to the TPO and also issued the notice dated 07.11.2014 to the non-existent entity i.e. 27 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
M/s Suzuki Powertrain India Ltd.
..................
13. In the present case also as the assessment was framed in the name of non existing entity i.e. M/s Suzuki Powertrain India Ltd. which amalgamated with M/s Maruti Suzuki India Ltd. and this irregularity was not curable. Therefore, the assessment order passed by the AO in the name of non- existing entity was void ab initio and deserves to be quashed, we order accordingly."
Adverting to the case on hand, the facts are similar. The notice u/s 148 is named in the name of M/s Sindhu Holdings Limited, a company which did not exist on the date of such notice i.e. on 29.03.2016 in view of its amalgamation with M/s Bhandari Consultancy and Finance Limited vide order of Hon'ble Delhi High Court dated 19.01.2011. This fact of merger/amalgamation of erstwhile M/s Sindhu Holdings Ltd. was submitted vide 28 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
various letters by the company prior to issuance of notice u/s 148 and also reiterated subsequently. It is settled law that framing of assessment or issuance of notice against a non existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any notice/ assessment against a "dead person" and as such the notice u/s 148 is a nullity. Consequently, the proceedings initiated u/s 148 and the assessment order u/s 147 r.w.s. 143(3) are also a nullity. In view of the rulings of the Hon'ble Jurisdictional High Court of Delhi and Tribunal referred above, which clearly applies to facts of the case, the notice framed against the non existent entity/person is a jurisdictional defect and cannot be sustained. Respectfully following the ratio of the decisions of the Hon'ble Jurisdictional Courts referred above, the assessment order cannot be held as valid order and is accordingly annulled." 29
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
6. The assessee also challenged the addition on merit and written submissions of the assessee is reproduced in the appellate order. However, the Ld. CIT(A) held that since re- assessment order have been annulled, therefore, the ground on merit are left with academic discussion, therefore, same was not adjudicated. The appeal of assessee was allowed.
7. The Ld. D.R. relied upon the order of the A.O. and also relied upon the decision of Hon'ble jurisdictional Delhi High Court in the case of Skyline Hospitality LLP vs. ACIT dated 02.02.2018 which is confirmed by the Hon'ble Supreme Court by dismissing the SLP of the assessee vide Judgment dated 06.04.2018.
8. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and referred to PB-53 which is notice under section 148 dated 29.03.2016 issued in the name of M/s.SHL. PB-54 is reasons recorded under section 148 which is also issued in the name of M/s.SHL. Learned Counsel for the Assessee submitted that the 30 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
same issue came up for consideration before ITAT, Delhi Bench in the case of the assessee and other group cases vide Order dated 05.01.2018. The case of M/s. SHL was considered for A.Y. 2008-2009 in ITA.No.446/Del./2016 and C.O.No.121/Del./ 2016. The findings of the Tribunal in para 38 of the order is reproduced as under :
"38. All these issues are similar as have been decided in the case of M/s. Garuda Imaging and Diagnostic Pvt.
Ltd., New Delhi (supra) in A.Ys. 2007-08, 2009-10 and 2010-2011. Following the reasons for decision of the same, we set aside the orders of the authorities below and quash the assessments. The department appeal fails on these ground. However, the cross objection of assessee are allowed.
8.1. In the case, the order in the case of M/s. Garuda Imaging and Diagnostic Pvt. Ltd., New Delhi for A.Y. 2007-2008 and others have been followed. The findings in that case in paras 12 to 15 are reproduced as under :31
ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
"12. On Ground No.1 of the cross-objection, the assessee submitted that the assessment order passed by the A.O. and subsequently the departmental appeal are bad in law and void abinitio as the same have been framed by the Revenue Department on a merged entity, which is no longer in existence.
13. Learned Counsel for the Assessee submitted that the assessee company M/s. Garuda Imaging and Diagnostics Pvt. Ltd., M/s. Sindhu Holdings Ltd., and other companies have merged with M/s. Bhandari Consultancy and Finance Ltd., vide judgment dated 19th January, 2011 passed by the Hon'ble Delhi High Court in a Scheme of Amalgamation pursuant to Section 391 and 394 and other relevant provisions of the Companies Act. Copy of the judgment dated 19th January, 2011 is filed at page-75 of the paper book. He has referred to PB-116 of the paper book which is judgment of the Hon'ble Delhi High Court dated 19th January, 2011 in which the assessee company merged 32 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
with M/s. Bhandari Consultancy and Finance Ltd., from the appointed date i.e., 1st April, 2009. He has submitted that A.O. passed the assessment order on 30th March, 2015 on a non-existing assessee company. He has also submitted that on the date of search on 12th April, 2012, on the date of issue of notice under section 153A of the I.T. Act on 23rd October, 2013, and also on the date of issue of notice under section 142(1) and 143(2) of the I.T. Act, and resultant assessment order passed under section 153A/143(3) on 30th March, 2015 on a non-existing entity, is void abinitio and bad in law. The A.O. passed the assessment order in the name of non-existing company (assessee). He has therefore, submitted that notices issued and assessment framed on a non-existing entity were illegal, null and void. In support of his contention, he has relied upon the several decisions of the Tribunal and others.
14. On the other hand, Ld. D.R. relied upon the order of the A.O. 33 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
15. We have considered the rival contentions. The assessee has filed judgment of the Hon'ble Delhi High Court dated 19th January, 2011, according to which, assessee- company has merged with M/s. Bhandari Consultancy and Finance Ltd., in the Scheme of Amalgamation pursuant to Sections 391 and 394 of the Companies Act vide Company Petition 283/10 and Company Application No.74 of 2010. The appointed date is 1st April, 2009. The search is however, conducted on 12th April, 2012 and on the date of search i.e., on 12th April, 2012, the assessee-company did not exist because it has already merged with M/s. Bhandari Consultancy and Finance Ltd. Notice under section 153A was issued on 23rd October, 2013 and on that date also the assessee company did not exist as it has already merged with the above company. The A.O. passed the assessment order under section 153A/143(3) on 30th March, 2015 in the name of assessee-company which would not be in existence as per Law. The above judgment of the Hon'ble Delhi High Court clearly support the 34 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
contention of the Learned Counsel for the Assessee that assessee ceased to exist on the appointed date i.e., 01.04.2009. The department came to know later on about merger of the assessee-company with transferee company which would not make any difference. Even on the date of search and issue of notice under section 153A against the assessee, the assessee-company did not exist. Therefore, issue of notice under section 153A itself was void abinitio and bad in law. The Hon'ble Delhi High Court in the case of BDR Builders & Developers Pvt. Ltd., 397 ITR 529 held that when assessee company ceases to exist from appointed date, was not liable for assessment under section 153A of the I.T. Act. The assessment under section 153A is void abinitio. The Hon'ble Delhi High Court similarly in the case of Maruti Suzuki Ltd., 397 ITR 681 held that assessment order in the name of amalgamating company is not a procedural irregularity. Assessment order in the name of non-existing amalgamating company untenable. Considering the facts and circumstances of the case and in 35 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
the light of judgment of the Hon'ble Delhi High Court dated 19th January, 2011, we are of the view that assessment framed against the assessee under section 143(3)/153A is bad in law and void abinitio. Resultantly, we set aside the orders of the authorities below and quash the assessment order. In the result, ground No.1 of cross objection of assessee is allowed."
8.2. Learned Counsel for the Assessee, therefore, submitted that the issue is covered in favour of the assessee in the case of the same assessee. He has submitted that the decision of Hon'ble jurisdictional Delhi High Court in the case of M/s. Skyline Hospitality LLP (supra) is distinguishable on facts.
9. We have considered the rival submissions. It is not in dispute that the A.O. recorded reasons for reopening of the assessment and issued notice under section 148 dated 29.03.2016 in the name of M/s.SHL. It is also not in dispute that M/s.SHL was amalgamated with M/s. BCFL vide 36 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
Judgment of the Hon'ble jurisdictional Delhi High Court Dated 19th January, 2011. Pursuant to such amalgamation, M/s.SHL ceased to exist. Subsequently, this company was also renamed as M/s. STLL. The Ld. CIT(A) verified from the record and found that intimation of amalgamation of M/s.SHL was provided to various authorities. Copies of some of the letters are also placed in paper book filed by Learned Counsel for the Assessee. The assessee, therefore, intimated to the Revenue Department about the merger of M/s.SHL with other Company prior to the issue of notice under section 148 of the I.T. Act. Thus, the assessee proved that intimation was given to the Revenue Department about the amalgamation through documentary evidences. The Ld. CIT(A) relied upon decision of the Hon'ble jurisdictional Delhi High Court including M/s. Spice Entertainment (supra) which is directly on the point in issue. Since on the date of issue of notice under section 148, M/s.SHL did not exist, therefore, recording reasons in their name or issue notice under section 148 is clearly void abinitio, illegal and invalid. An identical issue has also been considered in the case 37 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
of the same assessee for A.Y. 2008-2009 referred to above. Therefore, Learned Counsel for the Assessee rightly contended that the issue is covered in favour of assessee by order of the Tribunal. The Judgment of the Hon'ble Delhi High Court in the case of M/s. Skyline Hospitality LLP (supra) is distinguishable on facts. Moreover, it is well settled law that if two views are possible, then the view in favour of the assessee may be adopted. We, therefore, did not find any infirmity in the order of the Ld. CIT(A) in annulling the re-assessment proceedings. Ground No.1 of Departmental Appeal stands dismissed. The Ld. CIT(A) did not decide the appeal on merits because re- assessment proceedings have been annulled. We also do not propose to decide the same issue on merit because it is left with academic discussion only. In view of the above discussion, we do not find any merit in the appeal of the Revenue and the same is accordingly dismissed.
10. The Assessee filed the cross objection in support of the order of the Ld. CIT(A). Since, we are upholding the view of 38 ITA.No.5065/D/2017 & CO.No.14/D/2018 M/s. Sindhu Trade Links Ltd., New Delhi.
the Ld. CIT(A) on the point in issue discussed hereinabove, the cross objection of the assessee is allowed.
11. In the result, appeal of the Revenue is dismissed and Cross Objection of the Assessee is allowed.
Order pronounced in the open Court.
Sd/- Sd/-
(LP SAHU) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 25th May, 2018
VBP/-
Copy to
1. The applicant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT 'A' Bench, Delhi
6. Guard File.
// BY Order //
Assistant Registrar : ITAT Delhi Benches :
Delhi.