Income Tax Appellate Tribunal - Delhi
Dcit, Cc-8, New Delhi vs Bjn Holdings Ltd. (Dissolved Company ... on 28 April, 2023
THE INCOME TAX APPELLATE TRIBUNAL
DELHIBENCH 'A', NEW DELHI
Before Sh. Saktijit Dey, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
ITA No. 42/Del/2022 : Asstt. Year: 2006-07
ITA No. 43/Del/2022 : Asstt. Year: 2007-08
ITA No. 44/Del/2022 : Asstt. Year: 2008-09
ITA No. 45/Del/2022 : Asstt. Year: 2009-10
ITA No. 46/Del/2022 : Asstt. Year: 2010-11
DCIT, Vs. BJN Holdings Ltd,
Central Circle-8, (dissolved company through its
New Delhi successor BJN Holdings (I) Ltd),
Through Director of the company Sh.
Gurbachan Singh Dhingra, Rehan
Basera, 6, Sultanpur Farms,
Mehrauli, New Delhi-110030
(APPELLANT) (RESPONDENT)
PAN No. AAFCB9063L
Assessee by : Sh. Pradeep Dinodia, CA
Sh. R. K. Kapoor, CA
Revenue by : Sh. P. Praveen Sidharth, CIT DR
Date of Hearing: 27.04.2023 Date of Pronouncement: 28.04.2023
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the Revenue against the orders of ld. CIT(A)-24, New Delhi dated 31.01.2020.
2. Since, the issue involved in all these appeals are similar they were heard together and being adjudicated by a common order.
2ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
3. In ITA No. 42/Del/2022, the Revenue has raised the following grounds of appeal:
"1. That Ld.CIT(A) e rred in law in holding that the six assessment ye ars for which assessments have to be made in accordance with the provisio ns of section 153C o f 1. T. Act are to be reckone d with re ference to the Assessment Year relevant to the previous year in which the satisfaction u/s 153C is recorde d and not the one in which the search is conducted o r requisitio n is made.
2. That Ld.CIT(A ) erred in law is not taking no te of the amendment in u/ s 153C o f the I .T. A ct which had alre ady been made w.e .f. 01.04.2017, clarifying that the assessments are to be made "fo r six assessment years immediately preceding the asse ssment year re levant to the pre vio us ye ar in which search is conducte d or re quisitio n is made.
3. The Ld. CIT(A) failed to appreciate that, if his re asoning is applie d, it would lead to the peculiar situation where the assessment/s for the ye ar/s subse quent to the year of the search wo uld have to made u/s 153C (whe re there would be not incriminating material) and so me of the six assessment years prior to the year of the search wo uld be le ft out, there by frustrating the scheme o f assessment containe d in section 153C r.w.s. 153A of the I .T. Act.
4. The Ld. CIT(A) has erred in law and facts in quashing the assessment order holding that the assessment order is framed in the name of BJN Holdings Ltd. and overlooked the fact th at the assessment order was passed in the n ame of M/s. BJN Holdings (1) Ltd (the successor company) which is clear ly mentioned in the assessment order.
5. T he Ld. CIT(A) has e rred in law and facts in quashing the assessment order in holding that the assessment order is framed in the name of BJN Holding Ltd. while the said company was wo und up while ignoring the fact that such winding up o f the company was ne ve r brought to notice of the AO prio r to 10.10.2018 and therefore the notices issued initiating the proceedings u/ s 153C were valid."3
ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
4. Facts relevant to the adjudication of this case are as under:
• A search & seizure operation u/s 132 of the Income Tax Act, 1961 was carried out on 16.09.2011 • Notice u/s 143C was issued on 03.07.2018 • Notice u/s 143(2) was issued on 14.09.2018 • Notice u/s 142(1) was issued on 04.07.2018, 16.10.2018 • The entity BJN Holdings Ltd. was dissolved on 09.08.2010 u/s 273A of the Companies Act, 1931.
• The entire assets and liabilities were taken over by two successor entities namely, BJN Holdings (I) Ltd. and BJN Holdings (BD) Ltd.
5. The backdrop of the above facts, the first page of the Assessment Order has been perused:
4ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
6. The ld. CIT(A) quashed the Assessment Orders holding that the assessment cannot be conducted on a non-existing entity. At the outset, the ld. AR supported the order of the ld. CIT(A).
7. The arguments of ld. DR in writing, rebutting the rationale of the ld. CIT(A) are as under:
"1. In the above mentione d cases the Assessing Officer has no ted the fact that M/s. BJ N Holdings Ltd. no lo nger exists and it has been place d on record that the successor company to the assessee company i.e . M/s. BJN Ho ldings (I) Ltd. was incorpo rated in October, 2009 and the Indian asse ts of the assessee company were transferred to M/s. BJN Holdings (I) Ltd. Further, the assessee company was dissolve d on 09.10.2010 as pe r Department of Economic Deve lopme nt, Isle o f Man. Therefo re, the current assessment is be ing framed on the hands of M/s. BJN Holdings (I) Ltd.
2. The Ld. CIT(A) has followed the j udgment o f Hon'ble Supreme Court in the case of Maruti Suzuki India Ltd. (supra) and findings of Hon'ble Delhi High Court in the case of Spice Info tainment Ltd. Vs CIT (247 CTR 500)( Delhi) and held that the assessment framed in the name of dissolved company B.J .N. Holdings Ltd. are ille gal, void ab- initio and bad in law. The refo re, the Assessment Orde rs passed fo r A.Y . 2006- 07 to A .Y. 2010-11 were quashed and all additions made in all the five years are hereby delete d.
3. The Ld. CIT(A) has erred in law and facts in quashing the assessment o rde r holding that the assessment order is framed in the name of BJN Holdings Ltd. and overlooked the fact that the assessment order was passed in the name of M/s. BJN Holdings (I) Ltd. (the successor company) which is clearly mentioned in the assessment order.5
ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
4. The Ld. CIT(A) has also ignored the fact that such winding up o f the company was neve r brought to notice of the AO prior to 10.10.2018 and therefore the no tice s issue d initiating the procee dings u/s 153C were valid.
In addition, the fo llowing case law may kindly be co nsidered:-
Principal Commissioner of Income Tax Vs. M/s. Mahagun realto rs (P.) Ltd. (Supreme Court) whe rein the Ho n'ble Supremem Court he ld:
"In the light of the facts, what is overwhelmingly evident is that the amalgamatio n was known to the assessee, even at the stage when the search and se izure operatio ns too k place, as well as statements were recorde d by the revenue o f the dire ctors and managing director of the group. A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the co ntrary, the return was of MRPL. Though that entity cease d to be in existe nce , in law, yet, appe als we re file d on its behalf befo re the CIT, and a cross appeal was filed be fore ITAT. Even the affidavit before this court is o n behalf of the director o f MRPL. F urthermore, the assessment order painstakingly attributes specific amounts surrende red by MRPL, and afte r conside ring the special auditor's report, brings specific amounts to tax, in the se arch assessment order. That order is no doubt expresse d to be of MRPL (as the assessee)- but represente d by the transferee , Ml PL. All these clearly indicate that the o rde r adopted a particular metho d of expressing the tax liability. The A O, on the other hand, had the option of making a common order, with MIPL as the asse sse e, but containing separate parts, relating to the different transferor companies (Mahagun De velo pers Ltd., Mahagun Realtors Pvt. Ltd., Unive rsal Advertising Pvt. Ltd., A DR Home Decor Pvt. Ltd.) . The mere choice of the A O in issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it. Right from the time it was issued, and at all stages of various proceedings, the parties conce rned (i.e ., MIPL) 6 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
treated it to be in respect of the transfe ree company (MIPL) by virtue of the amalgamation order- and Section 394 (2). Furthermore, it would be anybo dy's guess, if any refund were due, as to whether MIPL would then say that it is not entitled to it, because the refund orde r wo uld be issued in favo ur o f a non-e xisting company (MRPL). Having regard to all these re asons, this co urt is o f the opinio n that in the facts of this case, the conduct of the assessee , commencing fro m the date the search took place , and be fore all fo rums, reflects that it co nsistently held itself out as the assessee. The approach and orde r of the AO is, in this court's opinio n in co nsonance with the decision in Marshall & So ns (supra), which had held that:
"an assessment can always be made and is supposed to be made o n the Transferee Co mpany taking into account the income of both the Transfero r and Transferee Company."
5. Be fore concluding, this Court notes and holds that whethe r corporate death of an entity upo n amalgamation pe r se invalidates an assessment orde r ordinarily cannot be dete rmined on a bare application of Se ction 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depe nd on the terms of the amalgamatio n and the facts o f each case.
6. In the present case, the decisio n rendere d in the abo ve case will squarely apply and not the judgment in Maruti Suzuki Ltd. relied upo n the Ld. CIT(A) as the assessee himself has been respo nding to no tices of the AO and has also pro filed a writ petitio n W.P. ( C) No. 1708/ 2014 before the Hon' ble Delhi High Court against the assessment proceedings u/s 153C of the I.T . Act under the name of M/s BJN Holdings Ltd. although by his own admission the company se ized to exist prior to the date of filing the writ petition."
7ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
8. Heard the arguments of both the parties and perused the mate rial available on reco rd.
9. On the facts of the case and the order passed by the revenue authorities, the applicability of the decision of the Hon'ble Apex Court in the case of PCIT Vs. Maruti Suzuki India Ltd. in Civil Appeal No. 5409 of 2019 vide order dated 25.07.2019 is examined. The said judgment reads as under:
"16. By its decisio n date d 6 A pril 2017, the Tribunal set aside the final assessment order on the gro und that it was void ab initio , having bee n passed in the name of a non-e xistent entity by the assessing o fficer. The decisio n of the Tribunal was affirmed in an appeal unde r Section 260A by the Delhi High Court on 9 January 2018 following its earlier decision in the case of the assesse e for AY 2011-12. That has given rise to the present appeal.
17. Mr Zohe b Hossain, learne d Co unsel appearing o n be half of the appe llant submitte d that:
(i) The High Court was not j ustified in quashing the final assessment order under Section 143 (3) only on the ground that the assessment was frame d in the name of the amalgamating co mpany, which was not in existence , igno ring the fact that the names of both the amalgamate d company and the amalgamating company were mentio ne d in the assessment orde r;
(ii) Even on the hypo thesis that the assessment orde r was framed incorrectly in the name of the amalgamating com pany, it would amount to a "mistake , de fect or omission" which is curable unde r Se ction 292B whe n the assessment is, "in substance and e ffect, in conformity with o r acco rding to the inte nt and purpose " o f the Act;8
ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
(iii) During the asse ssment proceedings and the subsequent proceedings in appeal, the amalgamating company was duly represe nted by the amalgamated co mpany. No prejudice was caused to any o f the partie s by the assessment order and hence rendering the assessment order invalid o n a 'mere technicality' would be incorrect in law. There was effective participation o f the assessee in the assessment proceedings and there was no doubt in the minds of those who participate d about the entity in relatio n to which the assessment proceedings took place;
(iv) In Spice Ente rtainment Ltd. v Commissioner o f Service Tax10 ("Spice Ente rtainment"), the final assessment order only referred to the name of the erstwhile entity which was non- existent and the re was no re fere nce to the resulting co mpany. In distinction, in the present case, in bo th the draft and the final assessment o rders, the names of bo th the amalgamating and amalgamated companies we re m entio ned;
(v) In paragraph 11 of the decision o f the De lhi High Court in Spice Entertainment, it was he ld that:
"11. A fter the sanctio n of the scheme on 11th A pril, 2004, the Spice ce ases to e xist w.e .f. 1 s t July, 2003. Eve n if Spice had filed the re turns, it became incumbe nt upo n the Income tax authorities to substitute the successor in place of the said 'dead person'. When notice unde r S ection 143(2) was sent, the appellant/amalgamated company appeare d and brought this fact to the knowledge of the AO. He, howeve r, did not substitute the name of the appe llant on record. Inste ad, the Assessing Officer made the assessment in the name of M/s Spice which was non e xisting e ntity on that day. I n such proceedings and assessment order passed in the name of M/s Spice would clearly be vo id. S uch a defect cannot be 9 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
treated as proce dural defect. Mere participation by the appe llant would be of no effect as there is no e stoppe l against law."
From the abo ve e xtract, it wo uld emerge that if an assessment order had been passed on the resulting company, it would not be void. Hence , in the prese nt case , the issuance of a notice under Section 143 (2) to SPIL canno t be conside red to be a jurisdictio nal e ffe ct when the assessment orde r catego rically mentions the names of the amalgamated and amalgamating companies;
(vi) The decision of the De lhi High Co urt in Skylight Hospitality LLP v Assistant Commissioner o f Income Tax, Circle-28( 1), New De lhi12 ("S kylight Hospitality LLP") , which was confirmed by this Court on 6 April 201813 dealt with a situatio n where a notice unde r Section 148 was issued in the name of a no n- existent private limited company. The Court held that the defect in recording the name of a non-existent company in a notice under Section 148 was a pro cedural de fect o r mistake curable unde r Section 292B, since no prejudice was caused to the asse ssee. T he Delhi High Court distinguished the decisio n in Spice Ente rtainment on the ground that in that case even the final assessment order was in the name of a non- existent company;
(vii) In the present case, both the draft assessment order and the final assessment order co ntaine d the names of the amalgamated and amalgamating companies and hence it canno t be held that the final order is in the name of a non- existent company. The o rder of the TPO is not the subject of a challenge by the assessee befo re any fo rum. T he directions of the TPO we re im plemente d by the assessing o fficer in the draft assessment order in accordance with Section 144C(1) 10 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
which was then challenge d by the assessee befo re the DRP unde r Sectio n 144C(2) . Since the names of both the amalgamated and amalgamating companies were mentioned in the draft assessm ent orde r and final assessment orde r, there is no jurisdictio nal de fect;
(viii) In view the decision of this Court in Kunhayammed v State of Kerala14 ("Kunhayammed"), though the doctrine of merger does not apply when a Special Le ave Petition is dismissed before the grant o f leave to appe al, where an orde r rejecting a Special Leave Petition is a speaking order and reasons have been assigned for rejecting the pe tition, the law stated or declared in such an order will attract Article 141; and
(ix) Consequently, in the alte rnative , in view o f the order passed by this Court on 6 April 2018 in S kylight Hospitality LLP o n the one hand and the order date d 16 July 2018 in the case of the present assessee for AY 2011- 12 and the earlie r order date d 2 November 2017 in CI T, New Delhi v Spice Enfo tainment Ltd. ("Spice Enfo tainment Ltd") , there appears to be a direct co nflict of views on the principle whether a notice issued to a non-existent company would suffer from a jurisdictio nal erro r or whether it is a mere de fect or mistake which would be go verne d by Section 292B.
18. On the other hand, Mr. Ajay Vohra, learned Senior Counse l appe aring on behalf of the re sponde nts submitte d that:
(i) Upon a scheme of amalgamatio n being sanctioned, the amalgamated com pany is disso lved witho ut winding up, in terms of Section 394 of the Co mpanies Act 1956. The amalgamating co mpany ce ases to exist in the eye s of law [Saraswati I ndustrial S yndicate Ltd. v CIT16 ("S araswati Industrial S yndicate Ltd.")];11
ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
(ii) The amalgamating company cannot there after be regarded as a "perso n" in terms of Section 2( 31) of the Act 1961 against whom assessment proceedings can be initiated and an assessment orde r passed;
(iii) The jurisdictional notice under Se ction 143(2) of the Act, pursuant to which the assessing officer assumed jurisdiction to make an assessment was issued in the name of SPIL, a non-existent entity, and was invalid. Hence the initiatio n of assessment proce edings against a non-existe nt entity was void ab initio.
• It has been he ld in the following decisions that, if a statuto ry notice is issue d in the name of a non-existent entity, the entire assessment would be a nullity in the eyes of law:
- CIT v Inte l Techno logy India ( P) Ltd.
- PCIT v Nokia So lutions & Ne twork India ( P) Ltd. ("Nokia Solutions")
- Spice Entertainment
- Similarly, a notice to the amalgamating company, subsequent to the amalgamatio n becoming e ffective and despite the fact of the amalgam atio n having been brought to the no tice o f the assessing officer, is void ab initio as held in the fo llo wing decisions:
- BDR Builde rs and Develo pers Pvt. Ltd. v ACIT
- Rustagi Engineering Udyo g ( P.) Ltd. v DCIT
- Khurana Enginee ring Ltd. v DCIT
- Takshashila Realties (P) Ltd. v DCIT
- Alamelu Veerappan v ITO ("A lamelu Veerappan") 12 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
(iv) The order passe d by the TPO in the name of S PIL, a non-
existent entity was invalid in the e yes of the law:
• SPIL cease d to be an "eligible assessee", in te rms of section 144C (15) (b) of the Act. Co nsequently, there was no requirement to pass a draft assessment order/ refe rence to DRP e tc.; and • Furthermore , the final assessment order dated 31 Octo ber 2016 is beyo nd limitation in terms of Section 153( 1) read with Sectio n 153 ( 4) o f the Act.
(v) The assessment framed in the name of the amalgamating Company is invalid:
• In terms of Sectio n 170( 2) of the A ct, once the amalgamation is effective, assessment in respect of the inco me of the amalgamating co mpany upto the appointe d date has to be in the name of the amalgamated company as successo r in inte rest of the amalgamating company.
• The De lhi High Court has he ld in Spice Entertainment that an assessment framed in the name of the amalgamating company, which cease d to exist in the e yes of law, was invalid and untenable in law. Such a de fect wo uld not be cured in terms o f Section 292B o f the Act. F urther, the fact that the amalgamated company participated in the assessment procee dings would no t operate as estoppel.
• Following the aforesaid decisio n o f the High Court in the case of Spice Entertainme nt, the Delhi High Court quashed assessment orders which we re framed in the name of an amalgamating company, recording also the name o f the amalgamate d company, in the fo llo wing cases:13
ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
- CIT v Dimensio n Apparels Pvt. Ltd ("Dimension A pparels"); affirmed by this Hon'ble Co urt vide Civil Appeal No. 3125 of 2015;
- CIT v Micro n S teels P. Ltd. ("Micron Steels") and
- CIT v Micra I ndia ( P) Ltd. ("Micra India") The aforesaid judgments of the De lhi High Co urt have been approve d by this Court in Civil Appeal No .285 o f 2014 (& other co nnected matters) . Thus applying the doctrine of merger, the law laid down by the Delhi High Court has become a prece de nt under A rticle 141.
(vi) The Respondent's case is squarely covered by the decision of this Court in its own case fo r the immediately pre ceding year:
• The Delhi High Co urt by its judgme nt re ported in Maruti Suzuki held in favour o f the Respondent by follo wing the judgment in the case of Spice Ente rtainment. • Further, the Re ve nue's SLP was dismissed by this Court on 16 July 2018 in SLP( C) D.No.14106/2018, fo llo wing the judgment in Spice Ente rtainment.
• Relying on the decision o f this Hon'ble Court, in the following decisions, assessments framed in the case of a non-existent entity (the amalgamating company) have been held to be no n-est in the e yes of law:
- CIT v BMA Capfin Ltd. (Reve nue's S LP dismissed against the same vide order dated 19 No ve mber 201828 passed in S LP( C) Diary No .40486 o f 2018) .
- Nokia So lutio ns 14 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
(vii) The judgment o f the De lhi High Court in Skylight Hospitality LLP is distinguishable and is not applicable to the facts of the prese nt case:
• The judgment was rendere d on its o wn peculiar facts. • In that case , the tax evasio n petition mentioned the factum of conversion o f the com pany into a Limited Liability Partne rship29, which was also no tice d in the reasons to belie ve and approval of the Principal Commissioner ( before issuance of a notice under Section 148 of the Act) . However, only because of a clerical mistake , the no tice was wro ngly issued in the name of Skylight Hospitality Pvt. Ltd. instead of Skylight Hospitality LLP.
• In the aforesaid facts, the High Co urt held that this was an irre gularity and proce dural/ technical lapse which was curable under section 292B of the Act.
• The decision in the case o f Spice Enfotainment was not followed on the ground that it pertaine d to the passing of an assessment order in the name of a non-existent entity whe reas the case at hand dealt with a no tice unde r Section 148 of the Act.
• The SLP filed by the assessee against the decision of the Delhi High Court was dismisse d recording: "In the peculiar facts o f this case , we are convinced that wro ng name given in the notice was merely a clerical error which could be correcte d unde r S ection 292B of A ct 1961";
• Subsequently, various High Courts, including the Delhi High Court have in the following de cisions distinguished the judgment in the case of Skylight Hospitality LLP and 15 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
have quashed the notice/ assessment framed in the name of a no n-existe nt entity:
- Rajende r Kumar Sehgal v ITO ("Rajende r Kumar Sehgal")
- Chandreshbhai Jayantibhai Pate l v ITO ("Chandreshbhai J ayantibhai Pate l"); and
- Alamelu Veerappan
19. While assessing the merits of the rival submissions, it is necessary at the outset to advert to certain significant facets of the present case:
(i) Firstly, the income which is sought to be subjecte d to the charge of tax for AY 2012- 13 is the income of the erstwhile entity (S PIL) prio r to amalgamatio n. This is on acco unt o f a transfe r pricing addition of Rs. 78.97 cro res;
(ii) Secondly, unde r the approve d sche me of amalgamation, the transfe ree has assumed the liabilities of the transfero r company, including tax liabilities;
(iii) Thirdly, the consequence of the scheme of amalgamatio n approve d unde r Section 394 of the Companies Act 1956 is that the amalgamating company cease d to e xist. In S araswati Industrial Syndicate Ltd., the principle has bee n fo rmulated by this Co urt in the following observations:
"5. Gene rally, where only one company is invo lve d in change and the rights o f the share holders and cre ditors are varie d, it amounts to reco nstruction o r reo rganisatio n o f scheme of arrangement. In amalgamatio n two or more companies are fused into one by merger or by taking ove r by anothe r. Reconstruction or 'amalgamation' has no precise lega l meaning. T he am algamatio n is a blending o f two or more 16 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
existing undertakings into o ne undertaking, the shareholde rs of each ble nding company become substantially the share holde rs in the company which is to carry on the blended unde rtakings. There may be amalgamatio n e ithe r by the transfe r o f two o r more unde rtakings to a ne w company, or by the transfer of one or more undertakings to an existing company. S trictly 'amalgamation' does not cove r the mere acquisitio n by a company of the share capital of other company which remains in existence and continues its unde rtaking but the context in which the term is used may show that it is intende d to include such an acquisition. See: Halsbury's Laws o f England (4th edition vo lume 7 para 1539) . Two companies may join to form a new company, but there may be abso rptio n or blending of one by the other, bo th amount to amalgamatio n. When two companies are merged and are so joine d, as to form a third company or one is absorbed into one or blended with anothe r, the amalgamating company loses its entity."
(iv) Fourthly, upo n the amalgamating co mpany ceasing to exist, it canno t be regarde d as a perso n under Section 2( 31) o f the Act 1961 against who m assessment pro ceedings can be initiated or an o rde r o f assessment passed;
(v) Fifthly, a notice unde r Section 143 (2) was issued on 26 September 2013 to the amalgamating company, S PIL, which was followe d by a notice to it under Section 142(1);
(vi) Sixthly, prior to the date on which the jurisdictional no tice unde r Sectio n 143 (2) was issued, the scheme of amalgamatio n had been approve d o n 29 January 2013 by the High Court of Delhi unde r the Companies Act 1956 with effect from 1 A pril 2012;
17ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
(vii) Seventhly, the assessing o fficer assumed jurisdictio n to make an assessment in pursuance of the notice unde r Section 143 (2). The no tice was issued in the name of the amalgamating company in spite of the fact that on 2 April 2013, the amalgamated company MSIL had addressed a communicatio n to the assessing officer intimating the fact of amalgamatio n. In the above co nspectus of the facts, the initiation of assessment proce edings against an entity which had ceased to exist was vo id ab initio.
20. I n Spice Ente rtainment, a Division Be nch o f the Delhi High Co urt dealt with the que stion as to whether an assessment in the name of a company which has been amalgamated and has been disso lved is null and void or, whether the framing o f an assessment in the name of such company is merely a proce dural de fect which can be cured. The High Court held that upon a no tice unde r Section 143 ( 2) being addresse d, the amalgamated company had bro ught the fact o f the amalgamation to the notice o f the assessing o fficer. Despite this, the assessing officer did not substitute the name of the amalgamated company and proceede d to make an assessment in the name of a non-e xistent company which re nders it vo id. This, in the view of the High Court, was no t merely a procedural de fect. Moreover, the participatio n by the amalgamated company wo uld have no effect since there could be no estoppe l against law:
"11. After the sanction o f the schem e on 11th April, 2004, the Spice ceases to exit w.e.f. 1 s t J uly, 2003. Even if Spice had filed the returns, it becam e incumbent upo n the I ncome tax authorities to substitute the successor in place o f the said "de ad person‟. When notice under Section 143 ( 2) was sent, the appe llant/ amalgamated company appeare d and bro ught this fact to the kno wledge of the AO. He , ho wever, did not substitute the name of the appe llant o n record. I nste ad, the Assessing Officer made the asse ssment in the 18 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
name of M/s Spice which was no n existing entity on that day. I n such proceedings an assessment o rder passe d in the name of M/s Spice would cle arly be void. Such a de fect cannot be tre ate d as procedural defect. Mere participatio n by the appe llant wo uld be of no effect as there is no estoppe l against law.
12. Once it is found that assessment is framed in the name of no n- existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisio ns of Section 292B of the Act."
Following the decision in Spice Entertainment, the Delhi High Co urt quashed assessm ent orde rs which were framed in the name of the amalgamating company in:
(i) Dimensio n A pparels; (ii) Micron Steels; and (iii) Micra India.
21. In Dimension Apparels, a Division Bench of the Delhi High Court affirmed the quashing of an assessment order dated 31 December 2010. The Respo ndent had amalgamated with another company and thus, cease d to e xist from 7 Dece mber 2009. T he Court rejected the argument of the Revenue that the assessment was in substance and effect in confo rmity with the Act by reason of the fact that the assessing o fficer had used correct nomenclature in addressing the Assessee; stated the fact that the company had amalgamated and mentione d the co rrect address of the amalgamated company. It was the Re venue's contention that the omissio n on the part of the assessing office r to mention the name of the amalgamated company is a procedural de fe ct. The De lhi High Court rejected this contentio n. In doing so, it re lie d on the holding in Spice Entertainment, whe re the High Court expressly clarified that "the framing of assessment against 19 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
a non-existing entity/pe rson" is a jurisdictio nal defe ct. The Division Bench also re lie d on the holding in Spice Entertainment that participation by the amalgamate d company in proce edings does no t cure the defect as "there can be no estoppe l in law", to affirm the quashing o f the assessment o rder.
22. In Micro n Steels, a no tice was issue d to Micro n Steels Pvt Ltd (original assesse e) after it had amalgamated with Lakhanpal Infrastructure Pvt Ltd. A Divisio n Be nch o f the Delhi High Court upheld the setting aside of assessme nt orders, noting that Spice Ente rtainment is an authority for the proposition that completion o f assessment in respect of a no n-existent company due to the amalgamatio n o rder, would re nder the assessment a nullity.
23. In Micra India, the original assessee Micra India Pvt. Ltd had amalgamated with Dynamic Buildmart (P) Ltd. Notice was issued to the original assessee by the Revenue after the fact o f amalgamation had been communicated to it. The Court note d that tho ugh the assessee had participate d in the assessment, the o riginal assessee was no longe r in existe nce and the assessment office r did not the take the remedial measure of transposing the transfe ree as the company which had to be assessed. I nste ad, the original assessee was describe d as one in e xistence and the order mentioned the transfe ree's name belo w that o f the o riginal assessee . T he Division Bench adverted to the judgment in Dime nsion Apparels wherein the High Co urt had discusse d the ruling in Spice Ente rtainment. It was held that this was a case where the assessment was contrary to law, having been completed against a no n-existent company.
24. A batch of Civil A ppe als was filed be fore this Court against the decisions of the Delhi High Court, the le ad appeal being Spice Enfo tainment. On 2 November 2017, a Bench of this Court consisting of Hon'ble Mr. J ustice Rohinton F ali Nariman and Hon'ble Mr. Justice 20 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
Sanjay Kishan Kaul dismissed the Civil A ppeals and tagge d Special Leave Pe titions in terms o f the fo llo wing o rder:
"Delay condoned.
Heard the learned Senior Counsel appearing for the parties.
We do not find any reaso n to interfere with the impugne d judgment(s) passe d by the High Court.
In view of this, we find no merit in the appeals and special leave petitio ns.
Accordingly, the appeals and special leave petitions are dismisse d."
25. The doctrine of merger results in the settled legal position that the judgment of the Delhi High Court stands affirmed by the abo ve decision in the Civil Appe als.
26. The orde r of assessment in the case of the responde nt fo r AY 2011- 12 was se t aside on the same ground. This resulted in a Special Leave Petition by the Principal Com missioner of Inco me Tax - 6 De lhi. The Special Leave Petition was dism issed by a two judge Bench of this Court consisting of Hon'ble Mr. J ustice Ro hinton F ali Nariman and Hon'ble Ms Justice Indu Malhotra on 16 July 2018 in view of the orde r date d 2 Novembe r 2017 gove rning Civil Appeal No. 285 o f 2014 in Spice Enfo tainment and the connected batch o f cases. Though, le ave was no t grante d by this Court, re asons have bee n assigned by this Court for rejecting the Special Le ave Pe titio n. The law declared would attract the applicability of Article 141 of the Constitution. For, as this Court has held in Kunhayammed:
"40...Whe re the order rejecting an S LP is a speaking o rder, that is, where reaso ns have been assigned by this Co urt for rejecting the 21 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
petitio n for special leave and are stated in the order still the orde r remains the one rejecting prayer fo r the grant of leave to appeal. The petitio ner has been turne d away at the threshold without having been allowed to ente r in the appe llate jurisdiction o f this Court. He re also the doctrine o f merger wo uld not apply. But the law stated o r de clare d by this Co urt in its order shall attract applicability of Article 141 of the Constitution. The reaso ns assigned by this Court in its o rde r expressing its adjudicatio n (expressly or by necessary implication) on point o f fact o r law shall take away the jurisdiction of any o ther co urt, tribunal o r authority to expre ss any o pinion in conflict with or in de parture from the view taken by this Court because perm itting to do so would be subve rsive of j udicial discipline and an affront to the order of this Co urt. Howeve r this would be so not by refe rence to the doctrine o f me rger."
27. The submissio n however which has been urged o n behalf of the Revenue is that a contrary positio n emerges from the decision o f the Delhi High Co urt 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 Bhushan. I n assessing the merits of the above submission, it is necessary to e xtract the o rder date d 6 A pril 2018 of this Court:
"In the peculiar facts of this case, we are convinced that wro ng name give n in the notice was merely a clerical e rro r which co uld be correcte d unde r Section 292B of the Income Tax Act.
The special leave petitio n is dismissed.
Pending applicatio ns stand disposed of."
Now, it is evident from the abo ve extract that it was in the peculiar facts of the case that this Court indicated its agreeme nt that the wrong 22 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
name given in the notice was merely a clerical error, capable o f being correcte d under Section 292B. The "peculiar facts" of Skylight Hospitality emerge from the decisio n of the De lhi High Court. Skylight Hospitality, an LLP, had take n over on 13 May 2016 and acquire d the rights and liabilities of S kylight Ho spitality Pvt. Ltd upon conve rsio n unde r the Limite d Liability Partne rship Act 2008. It instituted writ proceedings for challe nging a notice unde r Sections 147/148 o f the Act 1961 dated 30 March 2017 fo r AY 2010-2011. The "re asons to believe "
made a refere nce to a tax evasion re port received from the investigation unit of the income tax department. The facts we re ascertained by the investigation unit. The re asons to belie ve re ferred to the assessment order fo r AY 2013-2014 and the findings reco rde d in it. Though the notice under Sections 147/ 148 was issued in the name of Skylight Hospitality Pvt. Ltd. ( which had ce ase d to exist upon conversion into an LLP), there was, as the De lhi High Court held "substantial and affirmative mate rial and evide nce o n record" to show that the issuance of the no tice in the name of the dissolve d company was a mistake . The tax evasion re port adverte d to the conversion o f the private limite d company into an LLP. Moreo ver, the re asons to belie ve recorded by the assessing officer adverted to the appro val o f the Principal Co mmissioner. The PAN number of the LLP was also mentione d in so me of the documents. The notice under Sections 147/148 was no t in conformity with the reaso ns to belie ve and the approval of the Principal Commissio ner. It was in this backgro und that the Delhi High Court held that the case fell within the purview o f Section 292B for the fo llo wing reaso ns:
"18...The re was no doubt and debate that the no tice was meant for the petitione r and no one else. Legal erro r and mistake was made in addressing the notice . Noticeably, the appellant having rece ive d the said notice, had filed without prejudice reply/letter dated 11.04.2017. T hey had objected to the notice be ing issued in the 23 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
name of the Com pany, which had ceased to exist. However, the reading o f the said lette r indicates that they had understood and were aware , that the notice was fo r them. It was replied and dealt with by them. The fact that no tice was addressed to M /s. Skylight Hospitality 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 distinguishe d with the following observations:
"19. Pe titione r relies on Spice Infotainment Ltd. v. Commissioner of Service Tax, (2012) 247 CTR 500. Spice Corp. Ltd., the company that had file d the return, had amalgamated with another company. Afte r notice under Section 147/148 o f the Act was issued and rece ive d in the name of Spice Co rp. Ltd., the Assessing Office r was informed about amalgamatio n but the Assessment Orde r was passe d in the name o f the amalgamated company and not in the name of amalgamating co mpany. In the said situation, the amalgamating company had filed an appe al and issue of validity of Assessment Order was raised and e xamined. It was he ld that the assessment orde r was invalid. This was not a case where in notice under Section 147/ 148 o f 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 perso n which had ceased to exist and stoo d dissolved as per provisions of the Companies Act. Order was in the name of non-e xisting pe rson and hence void and ille gal."
29. F rom a reading of the order o f this Co urt dated 6 April 2018 in the Special Leave Pe titio n filed by Skylight Hospitality LLP against the judgment o f the Delhi High Court re jecting its challenge, it is evident that the peculiar facts o f the case weighed with this Court in coming to 24 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
this conclusion that the re was o nly a clerical mistake within the meaning o f Sectio n 292B. The decision in Skylight Ho spitality LLP has been distinguishe d by the Delhi, Guj arat and Madras High Courts in:
(i) Rajende r Kumar S ehgal; (ii) Chandreshbhai Jayantibhai Pate l; and (iii) Alamelu Veerappan.
30. The re is no conflict be tween the decisions of this Court in Spice Enfo tainment (dated 2 Novembe r 2017) 36 and in Skylight Hospitality LLP (date d 6 A pril 201837).
31. Mr Zohe b Hossain, learne d Co unsel appearing o n be half of the Revenue urge d during the course o f his submissions that the notice that was in issue in Skylight Hospitality Pvt. Ltd. was unde r Sections 147 and 148. He nce, he urged that despite the fact that the notice is of a jurisdictional nature for reope ning an assessme nt, this Court did not find any infirmity in the decision of the Delhi High Court ho lding that the issuance of a notice to an erstwhile private limited company which had since been dissolved was only a mistake curable unde r Section 292B. A close reading o f the orde r o f this Co urt dated 6 A pril 2018, howe ver indicates that what weighed in the dismissal of the Special Leave Petition we re the peculiar facts o f the case. Those facts have bee n noted above . What had weighe d with the Delhi High Court was that tho ugh the notice to reope n had been issued in the name of the e rstwhile entity, all the mate rial o n reco rd including the tax evasio n repo rt suggeste d that there was no manne r of doubt that the notice was always intende d to be issue d to the successor e ntity. Hence, while dismissing the Special Leave Petition this Court obse rved that it was the pe culiar facts of the case which led the court to acce pt the finding that the wro ng name given in the no tice was mere ly a technical erro r which co uld be corrected 36 Civil Appeal No. 285 of 2014 and connected unde r Section 292B. Thus, the re is no conflict 25 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
between the decisions in Spice Enfotainment on the one hand and Skylight Hospitality LLP on the o ther hand.
It is of re levance to refe r to Section 292B o f the I ncome Tax Act which reads as follo ws:
"292B. No return of income, asse ssment, notice, summons or other procee ding, furnished or m ade or issued or taken or purported to have been furnishe d or made or issued or taken in pursuance of any of the pro visions of this Act shall be invalid o r shall be deemed to be invalid merely by reason of any mistake, defect or omissio n in such return of income, assessment, notice, summons or other proceeding if such re turn of income , assessment, notice, summons or other procee ding is in substance and e ffect in co nformity with o r according to the inte nt and purpose o f this Act."
In this case , the notice unde r Section 143( 2) under which jurisdiction was assumed by the assessing officer was issue d to a non-e xistent company. T he assessment order was issued against the amalgamating company. This is a substantive ille gality and not a procedural vio lation of the nature adve rted to in Sectio n 292B.
In this conte xt, it is necessary to advert to the provisions o f Sectio n 170 which deal with succession to business otherwise than o n death. Section 170 pro vides as fo llo ws:
"170. ( 1) Whe re a person carrying o n any business or profession (such person he reinafter in this section be ing refe rred to as the predecesso r) has bee n succee ded the rein by any other perso n (he reinafter in this section re ferred to as the successo r) who continues to carry on that business o r pro fession,--26
ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
(a) the pre decessor shall be assesseed in respect of the income of the previous year in which the succession took place up to the date of successio n;
(b) the successor shall be asse sse ed in re spect o f the income of the previous ye ar afte r the date o f succe ssion.
(2) Notwithstanding anything contained in sub-sectio n (1), when the predecesso r cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of successio n and of the previous year preceding that ye ar shall be made on the successor in like manne r and to the same extent as it would have been made o n the predecesso r, and all the provisions o f this Act shall, so far as may be, apply acco rdingly.
(3) When any sum payable unde r this section in respe ct of the income of such business or pro fessio n fo r the previous year in which the successio n took place up to the date of successio n or for the previous year preceding that ye ar, assesse d on the predece ssor, cannot be recovere d from him, the 99[Assessing] Officer shall record a finding to that effect and the sum payable by the predecesso r shall the reafte r be payable by and re coverable from the successor and the successor shall be entitle d to reco ver from the prede cessor any sum so paid.
(4) Whe re any business o r pro fession carrie d on by a Hindu undivided family is succeede d to, and simultaneously with the succession or afte r the succession there has been a partitio n of the joint family pro perty between the members or gro ups of members, the tax due in respect of the income of the business or pro fe ssion succeede d to, up to the date of succession, shall be assessed and recovered in the manner provided in sectio n 171, but without prejudice to the provisio ns of this section.
Explanation.--For the purposes o f this section, "inco me" includes any 27 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
gain accruing fro m the transfer, in any manner whatsoeve r, of the business o r pro fession as a result of the succession."
Now, in the prese nt case, learne d Counsel appearing on behalf o f the respondent submitted that S PIL ce ased to be an eligible assessee in terms of the provisions of Section 144C read with clause ( b) o f sub section 15. Moreo ver, it has been urged that in co nse quence , the final assessment order dated 31 Octo ber 2016 was be yond lim itatio n in terms of Section 153( 1) read with S ection 153 (4) . Fo r the purpose s of the pre sent proce eding, we do not conside r it necessary to delve into that aspect of the matter having regard to the re asons which have weighe d us in the earlier part o f this judgment.
32. On be half of the Revenue , reliance has been placed on the decision of this Court in Commissioner o f Income Tax, Shillong v J ai Prakash Singh ("Jai Prakash Singh"). That was a case where the assessee did not file a return for three assessment years and died in the meantime . His son who was one of the legal representative s file d returns upo n which the assessing officer issued notices unde r Section 142 (1) and Section 143 ( 2) . These were complied with and no objectio ns we re raise d to the assessment proceedings. The assessment orde r mentione d the names of all the legal representatives and the assessment was m ade in the status of an individual. I n appeal, it was contended that the assessment proceedings were void as all the legal represe ntatives were not given notice. In this backdrop, a two judge Bench of this Court held that the assessment proceedings were not null and vo id, and at the worst, that the y were de fective . In this co nte xt, reliance was place d on the decision of the Federal Co urt in Chatturam v CIT holding that the jurisdiction to assess and the liability to pay tax are not conditional on the validity of the notice: the liability to pay tax is fo unde d in the charging sections and no t in the machine ry pro visions to determine the amount of tax. Reliance was also place d on the decision in Maharaja of Patiala v CIT ("Maharaja o f Patiala") . That was 28 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
a case where two notices were issue d after the de ath of the assessee in his name, re quiring him to make a return of income. The notices were served upon the successo r Maharaja and the assessment order was passe d describing the assessee as "His Highness...late Maharaj a o f Patiala". The successor appe aled against the assessment contending that since the no tices were sent in the name of the Maharaja of Patiala and not to him as the legal re prese ntative o f the Maharaj a o f Patiala, the assessments were illegal. The Bombay High Court held that the successor Maharaj a was a legal re presentative of the deceased and while it would have been better to so describe him in the notice , the notice was not bad merely be cause it omitte d to state that it was served in that capacity. Follo wing these two decisions, this Court in Jai Prakash S ingh he ld that an omission to serve or any de fect in the service of notices provide d by proce dural pro visions does not e fface or erase the liability to pay tax where the liability is cre ated by a distinct substantive provision. The omission or de fect may render the o rde r irre gular but not void or illegal. Jai Prakash Singh and the two decisions that it place d reliance upon were evidently base d upon the specific facts. Jai Prakash Singh involved a situation where the return of income had been filed by one of the legal re presentatives to whom notices were issued under Section 142( 1) and 143( 2). No o bjection was raise d by the legal re presentative who had filed the return that a notice should also to be se rved to other legal re presentatives of the deceased assesse e. No o bjection was raised befo re the assessing officer. Similarly, the decision in Maharaja of Patiala was a case where the notice had be en served on the legal represe ntative, the successor Maharaja and the Bombay High Court he ld that it was not void merely because it omitte d to state that it was se rved in that capacity.
33. In the prese nt case, despite the fact that the assessing o fficer was info rmed of the amalgamating com pany having ce ased to exist as a result of the approved scheme of amalgamatio n, the jurisdictional 29 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
notice was issue d only in its name . The basis on which jurisdiction was invoke d was fundamentally at odds with the legal principle that the amalgamating entity ce ases to exist upon the approved scheme of amalgamatio n. Participatio n in the proceedings by the appellant in the circumstances cannot ope rate as an estoppe l against law. This position now holds the fie ld in view o f the j udgment o f a co-o rdinate Bench o f two learned j udge s which dismissed the appe al o f the Revenue in Spice Enfo tainment on 2 November 2017. The decisio n in Spice Enfo tainment has been followe d in the case o f the respo ndent while dismissing the Special Leave Pe tition for AY 2011- 2012. In doing so , this Co urt has relie d o n the decision in Spice Enfotainment.
34. We find no re ason to take a different vie w. T here is a value which the court must abide by in promoting the interest of certainty in tax litigation. The vie w which has been taken by this Co urt in relation to the respondent for AY 2011- 12 must, in our view be adopted in respect of the present appeal which re late s to AY 2012-13. Not do ing so will only result in uncertainty and displacement o f settled e xpectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisio ns are made in the expectation of consistency, unifo rmity and ce rtainty. To detract from those principle s is ne ither expedie nt nor desirable .
35. Fo r the above reaso ns, we find no merit in the appeal. The appeal is accordingly dismissed. There shall be no order as to costs."
10. Having examined the facts of the case, the judgment of the Hon'ble Delhi High Court in Skylight Hospitality LLP, Spice Infotainment Ltd. v. Commissioner of Service Tax, (2012) 247 CTR 500 and the judgment of Hon'ble Apex Court in the case of PCIT Vs. Maruti Suzuki India Ltd. (supra) and in PCIT Vs. 30 ITA Nos. 42 to 46/Del/2022 BJN Holdings Ltd.
Mahagun Realtors Pvt. Ltd. (supra), since the Assessing Officer is in know of the dissolution of the company as established from the Assessment Order itself, we hereby affirm the decision of the ld. CIT(A), Sh. S. S. Rana, quashing the Assessment Orders.
11. In the result, all the appeals of the Revenue are dismissed. Order Pronounced in the Open Court on 28/04/2023.
Sd/- Sd/-
(Saktijit Dey) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 28/04/2023
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR