Income Tax Appellate Tribunal - Mumbai
Acit Circle-7(3)(2), Mumbai vs M/S Piramal Enterprises Ltd. ... on 9 April, 2021
आयकर अपीऱीय अधिकरण "C" न्यायपीठ मुंबई में । IN THE INCOME TAX APPELLATE TRIBUNAL " C" BENCH, MUMBAI श्री भहावीय स हिं , उऩाध्मक्ष एविं श्री ए रयफ़ौय यहभान, रेखा दस्म के भक्ष । BEFORE SRI MAHAVIR SINGH, VP AND SRI S RIFAUR RAHMAN, AM आमकय अऩीर िं. / ITA No. 2338/Mum/2019 ( ननधाायण वर्ा / Assessment Years 2010-11) The Asst. Commissioner of Income M/s. Piramal Enterprises Tax, Circle 7(3)(2), Room No. Ltd.
128A, 1 s t Floor, Aayakar Bhavan, Successor in interest to M.K. Road, Mumbai- 400 020 Piramal International Pvt.
फनाभ/ Ltd.
Vs. 10, Piramal tower, G.K.
Marg, Lower Parel,
Mumbai-400 013
(अऩीराथी / Appellant) (प्रत्मथी/ Respondent)
स्थामी रेखा िं./PAN No. AABCP6125D
अऩीराथी की ओय े/ Appellant by : Ms. Sh r e ek al a P a rd e sh ai , D R
प्रत्मथी की ओय /े Respondent by
: Ms . M an si Pad h i ya r, AR
न
ु वाई की तायीख / Date of hearing: 24. 03 .20 21 घोर्णा की तायीख / Date of pronouncement: 09. 04 .20 21 आदे श / O R D E R भहावीय स हिं , उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP:
This appeal of Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)]-13, Mumbai, [in short CIT(A)], in appeal No. CIT(A)-13/ITO-7(3)(3)/69/2018-19 dated 28.11.2018. The assessment was framed by the Income Tax Officer, Wad 7(3)(3), Mumbai Page | 2 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 (in short ITO/ AO), for the A.Y 2020-11 vide order dated 30.12.2016 under section 143(3) read with section 147 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟).
2. The only issue in this appeal of Revenue is against the order of CIT(A) quashing the reopening of assessment under section 147 read with section 148 of the Act by holding that the reopening of notices under section 148 was issued in the name of non-existent company i.e. Piramal International Pvt. Ltd.. For this, Revenue has raised the following three grounds: -
―1. The learned CIT(A) has erred in law and facts in quashing the reopening proceedings under section 147 for the AY. 2010-11 in the case of Piramal International Pvt. Ltd. (which was renamed as PHL Holdings Pvt. Ltd. (amalgamated into M/s. Piramal Enterprises Ltd. The CIT(A) failed to appreciate that though the notice is addressed to M/s Piramal International Pvt. Ltd. The name of M/s Piramal Enterprises ltd. Is also mentioned alongwith it as ―now Piramal Entprises Ltd.
2. The learned CIT(A) has erred in law and facts in not appreciating the fact that the assessee company has not raised any objection at the time of original assessment when the assessment was completed under section 143(3) on 31.12.2012 in the name of Page | 3 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 M/s Piramal International Pvt. Ltd. When the name was changed to PHL Holding Pvt. Ltd.
Wef 15.11.2011. Since the assessee has not filed any objection at the time of original assessment, the jurisdiction for reopening the assessment lies with the Assessing Officer who has completed the assessment.
3. The learned CIT(A) has erred in law and facts by relying on the decision of the Hon'ble ITAT in the case of M/s. Shell India Markets Pvt. Ltd. Without appreciating the fact that the assessee has not objected the assessment passed under section 143(3) on 31.12.2012 in the name of M/s Piramal International Pvt. Ltd.‖
3. Briefly stated facts are that the assessee filed its return of income originally on 20.09.2010 and the same was first processed under section 143(1) of the Act and subsequently the assessment was framed under section 143(3) of the Act vide order dated 31.12.2012 for the AY 2010-
11. Subsequently a notice under section 148 of the Act was issued on 30.03.2016 by ITO, Ward 7(3)(3), Mumbai. The assessee during the course of assessment proceedings filed preliminary objections against the reopening of assessment vide letter dated 23.06.2016. The assessee after rejection of preliminary objection by the Assessing Officer, brought into the notice of the Assessing Officer that the notice under section 148 of the Act has been issued without jurisdiction as PHL holding private limited has merged with the assessee and therefore, now is a non-
Page | 4 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 existent entity vide letter dated 04.08.2016. The Assessing Officer has not accepted the said contention of the assessee by giving the reasoning that the same is curable defect under section 292BB of the Act.
4. At the very outset, it requires to be noted that the name of Piramal international Pvt. Ltd. ("PIPL") was changed to PHL Holdings Pvt. Ltd. ("PHL") as per the fresh certificate of incorporation of ROC dated November 15,2011 and thereafter PHL is amalgamated into Piramal Enterprises Ltd. w.e.f. 01.01.2013. Therefore, by operation of law, PHL ceased to exist with effect from 01.01.2013. The very same fact has been intimated to the Department during the assessment proceedings of AY 2013-14 vide letter dated 04.09.2015 and also by letter dated 04.08.2016. The jurisdictional AO of the successor company i.e. Piramal Enterprises Ltd. is Dy. Commissioner of Income Tax-7(3)(2), Mumbai whereas the notice under section 148, 142(1) 0f the Act and also the reassessment order under section 143(3) read with section 147 of the Act is passed by ITO 7(3)93). The approval under section 151 of the Act is obtained for reopening of assessment of Piramal International Pvt. Ltd. (before amalgamation) which is no longer in existence. Further, the AO issued notice under section 143(2) of the Act dated 24.05.2016 in the name of PHL Holdings Pvt. Ltd. (before amalgamation) Now [Piramal Enterprises Pvt. Ltd.]. As already stated above, PHL has been amalgamated with PEL w.e.f. 01.01.2013. The notice under section 148 of the Act dated 30.03.2016 i.e. after amalgamation but issued in the name of Piramal International Pvt. Ltd. (before amalgamation) now Piramal Enterprises Pvt. Ltd.
5. The CIT(A) relying on the decision of ITAT Mumbai in the case of Shell Markets India Pvt. Ltd. in ITA No. 773/Mum/2013 for AY 2008-09 Page | 5 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 and ITA No. 1055/Bang/2011 for AY 2007-08 vide order dated 20.12.2017, wherein quashed the assessment by observing as under:-
―In view of the decision of the jurisdictional tribunal quoted above and various other decisions cited by the appellant, notice under section 148 issued and the assessment order passed in the name of amalgamating company, Piramal International Pvt. Ltd., which was non-existent as on date of the issue of the notice and the passing the order, is hereby quashed.
Since the assessment order has been quashed, other pleas raised by the appellant are not decided. Due to quashing of the assessment order, other grounds of appeal raised by the appellant have become infructuous, accordingly, they are not decided.‖ Aggrieved now, Revenue is in appeal before Tribunal.
6. We have heard the rival contentions and gone through the facts and circumstances of the case. We find in the aforesaid case relied upon herein, the assessment order had been passed in a similar manner like the present one before us where the name of amalgamating company was referred to followed by the fact that the said company had merged with TCL and this Tribunal by following the ratio laid down by the Hon‟ble Supreme Court in the case of Maruti Suzuki India Ltd., reported in 416 Page | 6 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 ITR 613 had declared the final assessment order as void ab initio for having been passed in the name of non-existent entity. We find that before us, the ld. DR filed detailed written submissions by placing reliance on various decisions by also filing a detailed paper book comprising of various documents through e-mail, all the factual documents relied upon by the ld. DR and placed on record by him in the paper book does not advance the case of the revenue in as much as the notice u/s.148 of the Act was issued in the name of nonexistent entity and re-assessment framed in the name of non-existent entity. Merely, because the assessee had participated in the said reassessment proceedings after pointing out the actual fact of amalgamation before erstwhile AO, the assessment framed by a non-jurisdictional AO cannot be sustainable in the eyes of law. With regard to decisions relied upon by the ld. DR, we find that all those decisions were already considered by the Hon‟ble Apex Court in the case of Maruti Suzuki India Ltd. reported in 416 ITR 613 and in any case, the decision of the Hon‟ble Supreme Court would bind us as it becomes the law of the land under Article 141 of the Constitution. The relevant operative portion of the facts as well as the finding given by the Hon‟ble Supreme Court in Maruti Suzuki India Ltd. are as under:-
―10. On 11 March 2016, a draft assessment order was passed in the name of Suzuki Powertrain India Limited‖ (amalgamated with Maruti Suzuki India Limited). The draft assessment order sought to increase the total income of the assessee by Rs. 78.97 crores in accordance with the order of the TPO in order Page | 7 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 to ensure that the international transactions with regard to the payment of royalty to the Associated Enterprises is at Arm‗s Length.
11 to 14. ........................
15. The final assessment order was passed on 31 October 2016 in the name of SPIL (amalgamated with MSIL) making an addition of Rs. 78.97 crores to the total income of the assessee. While preferring an appeal before the Tribunal, the assessee raised the objection that the assessment proceedings were continued in the name of the non-
existent or merged entity SPIL and that the final assessment order which was also issued in the name of a non-existent entity, would be invalid.
16. ..................
17. Mr. Zoheb Hossain, learned Counsel appearing on behalf of the appellant submitted that:
(i) The High Court was not justified in quashing the final assessment order under Section 143 (3) only on the ground that the assessment was framed in the name of the amalgamating company, which was not in Page | 8 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 existence, ignoring the fact that the names of both the amalgamated company and the amalgamating company were mentioned in the assessment order;
(ii) to (viii) .................
(ix) Consequently, in the alternative, in view of the order passed by this Court on 6 April 2018 in Skylight Hospitality LLP on the one hand and the order dated 16 July 2018 in the case of the present assessee for AY 2011-12 and the earlier order dated 2 November 2017 in CIT, New Delhi v Spice Enfotainment Ltd.15 (―Spice Enfotainment Ltd), there appears to be a direct conflict of views on the principle whether a notice issued to a non-
existent company would suffer from a jurisdictional error or whether it is a mere defect or mistake which would be governed by Section 292B.
18. .............
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:
Page | 9 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11
(i) Firstly, the income which is sought to be subjected to the charge of tax for AY 2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of Rs. 78.97 crores;
(ii) Secondly, under the approved scheme of amalgamation, the transferee has assumed the liabilities of the transferor company, including tax liabilities;
(iii) Thirdly, the consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist. In Saraswati Industrial Syndicate Ltd., the principle has been formulated by this Court in the following observations:
―5. Generally, where only one company is involved in change and the rights of the shareholders and creditors are varied, it amounts to reconstruction or reorganisation of 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 Page | 10 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 no precise legal meaning. The amalgamation is a blending of two or more 30 [2019] 260 Taxman 412 (Del.) 31 (2019) 261 Taxman 137 (Guj) existing undertakings into one undertaking, the shareholders of each blending company become substantially the shareholders 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: Halsbury's Laws of England (4th edition volume 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 Page | 11 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 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.‖
(iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed;
(v) Fifthly, a notice under Section 143 (2) was issued on 26 September 2013 to the amalgamating company, SPIL, which was followed by a notice to it under Section 142(1);
(vi) Sixthly, prior to the date on which the jurisdictional notice under Section 143 (2) was issued, the scheme of amalgamation had been approved on 29 January 2013 by the High Court of Delhi under the Companies Act 1956 with effect from 1 April 2012;
(vii) Seventhly, the assessing officer assumed jurisdiction to make an assessment in pursuance of the notice under Section 143 (2). The notice was issued in the name of the Page | 12 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 amalgamating company in spite of the fact that on 2 April 2013, the amalgamated company MSIL had addressed a communication to the assessing officer intimating the fact of amalgamation. In the above conspectus of the facts, the initiation of assessment proceedings against an entity which had ceased to exist was void ab initio.
20. In Spice Entertainment, a Division Bench of the Delhi High Court dealt with the question as to whether an assessment in the name of a company which has been amalgamated and has been dissolved is null and void or, whether the framing of an assessment in the name of such company is merely a procedural defect which can be cured. The High Court held that upon a notice under Section 143 (2) being addressed, the amalgamated company had brought the fact of the amalgamation to the notice of the assessing officer. Despite this, the assessing officer did not substitute the name of the amalgamated company and proceeded to make an assessment in the name of a non- existent company which renders it void. This, in the view of the High Court, was not merely a procedural defect. Moreover, the Page | 13 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 participation by the amalgamated company would have no effect since there could be no estoppel against law:
―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 an 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.
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 Page | 14 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 the provisions of Section 292B of the Act.‖ Following the decision in Spice Entertainment, the Delhi High Court quashed assessment orders which were framed in the name of the amalgamating company in:
(i) Dimension Apparels;
(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 Respondent had amalgamated with another company and thus, ceased to exist from 7 December 2009. The Court rejected the argument of the Revenue that the assessment was in substance and effect in conformity with the Act by reason of the fact that the assessing officer had used correct nomenclature in addressing the Assessee; stated the fact that the company had amalgamated and mentioned the correct address of the amalgamated company. It was the Revenue‗s contention that the omission on the part of the assessing officer to mention the name of the amalgamated company is a procedural defect. The Delhi Page | 15 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 High Court rejected this contention. In doing so, it relied on the holding in Spice Entertainment, where the High Court expressly clarified that ―the framing of assessment against a non-existing entity/person‖ is a jurisdictional defect. The Division Bench also relied on the holding in Spice Entertainment that participation by the amalgamated company in proceedings does not cure the defect as ―there can be no estoppel in law‖, to affirm the quashing of the assessment order.
22. In Micron Steels, a notice was issued to Micron Steels Pvt Ltd (original assessee) after it had amalgamated with Lakhanpal Infrastructure Pvt Ltd. A Division Bench of the Delhi High Court upheld the setting aside of assessment orders, noting that Spice Entertainment is an authority for the proposition that completion of assessment in respect of a non-existent company due to the amalgamation order, would render 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 Page | 16 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 the fact of amalgamation had been communicated to it. The Court noted that though the assessee had participated in the assessment, the original assessee was no longer in existence and the assessment officer did not the take the remedial measure of transposing the transferee as the company which had to be assessed. Instead, the original assessee was described as one in existence and the order mentioned the transferee‗s name below that of the original assessee. The Division Bench adverted to the judgment in Dimension Apparels wherein the High Court had discussed the ruling in Spice Entertainment. It was held that this was a case where the assessment was contrary to law, having been completed against a non- existent company.
24. A batch of Civil Appeals was filed before this Court against the decisions of the Delhi High Court, the lead appeal being Spice Enfotainment. On 2 November 2017, a Bench of this Court consisting of Hon‗ble Mr Justice Rohinton Fali Nariman and Hon‗ble Mr Justice Sanjay Kishan Kaul dismissed the Civil Appeals and tagged Special Leave Petitions in terms of the following order :
Page | 17 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 ―Delay condoned. Heard the learned Senior Counsel appearing for the parties. We do not find any reason to interfere with the impugned judgment(s) passed by the High Court.
In view of this, we find no merit in the appeals and special leave petitions. Accordingly, the appeals and special leave petitions are dismissed.
25. The doctrine of merger results in the settled legal position that the judgment of the Delhi High Court stands affirmed by the above decision in the Civil Appeals. 26 The order of assessment in the case of the respondent for AY 2011-12 was set aside on the same ground. This resulted in a Special Leave Petition by the Principal Commissioner of Income Tax - 6 Delhi32. The Special Leave Petition was dismissed by a two judge Bench of this Court consisting of Hon‗ble Mr Justice Rohinton Fali Nariman and Hon‗ble Ms Justice Indu Malhotra on 16 July 2018 in view of the order dated 2 November 2017 governing Civil Appeal No. 285 of 2014 in Spice Enfotainment and the connected batch of cases. Though, leave was not granted by this Court, reasons have been assigned by this Page | 18 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 Court for rejecting the Special Leave Petition. The law declared would attract the applicability of Article 141 of the Constitution. For, as this Court has held in Kunhayammed:
―40...Where the order rejecting an SLP is a speaking order, that is, where reasons have been assigned by this Court for rejecting the petition for special leave and are stated in the order still the order remains the one rejecting prayer for the grant of leave to appeal. The petitioner has been turned away at the threshold without having been allowed to enter in the appellate jurisdiction of this Court. Here also the doctrine of merger would not apply. But the law stated or declared by this Court in its order shall attract applicability of Article 141 of the Constitution. The reasons assigned by this Court in its order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other court, tribunal or authority to express any opinion in conflict with or in departure from the view taken by this Court because permitting to do so would be subversive of judicial discipline and an affront to the order of this Court.However Page | 19 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 this would be so not by reference to the doctrine of merger.‖
27. The submission however which has been urged on behalf of the Revenue is that a contrary position emerges from the decision of the Delhi High Court in Skylight Hospitality LLP which was affirmed on 6 April 2018 by a two judge Bench of this Court consisting of Hon‗ble Mr Justice A K Sikri and Hon‗ble Mr Justice Ashok Bhushan SkyLight Hospitality LLP (supra). In assessing the merits of the above submission, it is necessary to extract the order dated 6 April 2018 of this Court:
―In the peculiar facts of this case, we are convinced that wrong name given in the notice was merely a clerical error which could be corrected under Section 292B of the Income Tax Act. The special leave petition is dismissed. Pending applications stand disposed of.‖ Now, it is evident from the above extract that it was in the peculiar facts of the case that this Court indicated its agreement that the wrong name given in the notice was merely a clerical error, capable of being corrected under Section 292B. The ―peculiar facts‖ of Skylight Hospitality emerge from the decision of the Delhi High Page | 20 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 Court. Skylight Hospitality, an LLP, had taken over on 13 May 2016 and acquired the rights and liabilities of Skylight Hospitality Pvt. Ltd upon conversion under the Limited Liability Partnership Act 2008. It instituted writ proceedings for challenging a notice under Sections 147/148 of the Act 1961 dated 30 March 2017 for AY 2010- 2011. The ―reasons to believe‖ made a reference to a tax evasion report received from the investigation unit of the income tax department. The facts were ascertained by the investigation unit. The reasons to believe referred to the assessment order for AY 2013-2014 and the findings recorded in it. Though the notice under Sections 147/148 was issued in the name of Skylight Hospitality Pvt. Ltd. (which had ceased to exist 33 Special Leave Petition (C) No. 7409 of 2018 34 ―Sky Light Hospitality LLP v Assistant Commissioner of Income Tax : (2018) 405 ITR 296 (Delhi) 35 ―LLP Act 2008‖ upon conversion into an LLP), there was, as the Delhi High Court held ―substantial and affirmative material and evidence on record‖ to show that the issuance of the notice in the name of the Page | 21 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 dissolved company was a mistake. The tax evasion report adverted to the conversion of the private limited company into an LLP. Moreover, the reasons to believe recorded by the assessing officer adverted to the approval of the Principal Commissioner. The PAN number of the LLP was also mentioned in some of the documents. The notice under Sections 147/148 was not in conformity with the reasons to believe and the approval of the Principal Commissioner. It was in this background that the Delhi High Court held that the case fell within the purview of Section 292B for the following reasons:
―18...There was no doubt and debate that the notice was meant for the petitioner and no one else. Legal error and mistake was made in addressing the notice. Noticeably, the appellant having received the said notice, had filed without prejudice reply/letter dated 11.04.2017. They had objected to the notice being issued in the name of the Company, which had ceased to exist. However, the reading of the said letter indicates that they had understood and were aware, that the notice was for them. It was replied and dealt with by them. The fact that notice was Page | 22 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 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 distinguished with the following observations:
―19. Petitioner relies on Spice Infotainment Ltd. v. Commissioner of Service Tax, (2012) 247 CTR 500. Spice Corp. Ltd., the company that had filed the return, had amalgamated with another company. After notice under Section 147/148 of the Act was issued and received in the name of Spice Corp. Ltd., the Assessing Officer was informed about amalgamation but the Assessment Order was passed in the name of the amalgamated company and not in the name of amalgamating company. In the said situation, the amalgamating company had filed an appeal and issue of validity of Assessment Order was raised and examined.
It was held that the assessment order was invalid. This was not a case wherein notice under Section 147/148 of the Act was declared to be void and invalid but a case in which assessment order was passed in the name of and against a juristic person which had ceased to exist and stood dissolved as Page | 23 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 per provisions of the Companies Act. Order was in the name of non-existing person and hence void and illegal.
29. From a reading of the order of this Court dated 6 April 2018 in the Special Leave Petition filed by Skylight Hospitality LLP against the judgment ITA of the Delhi High Court rejecting its challenge, it is evident that the peculiar facts of the case weighed with this Court in coming to this conclusion that there was only a clerical mistake within the meaning of Section 292B. The decision in Skylight Hospitality LLP has been distinguished by the Delhi, Gujarat and Madras High Courts in: (i) Rajender Kumar Sehgal; (ii) Chandreshbhai Jayantibhai Patel; and (iii) Alamelu Veerappan. 30 . There is no conflict between the decisions of this Court in Spice Enfotainment (dated 2 November 2017)36 and in Skylight Hospitality LLP (dated 6 April 201837). 31 Mr Zoheb Hossain, learned Counsel appearing on behalf of the Revenue urged during the course of his submissions that the notice that was in issue in Skylight Hospitality Pvt. Ltd. was under
Sections 147 and 148. Hence, he urged that despite the fact that the notice is of a Page | 24 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 jurisdictional nature for reopening an assessment, this Court did not find any infirmity in the decision of the Delhi High Court holding that the issuance of a notice to an erstwhile private limited company which had since been dissolved was only a mistake curable under Section 292B. A close reading of the order of this Court dated 6 April 2018, however indicates that what weighed in the dismissal of the Special Leave Petition were the peculiar facts of the case. Those facts have been noted above. What had weighed with the Delhi High Court was that though the notice to reopen had been issued in the name of the erstwhile entity, all the material on record including the tax evasion report suggested that there was no manner of doubt that the notice was always intended to be issued to the successor entity. Hence, while dismissing the Special Leave Petition this Court observed that it was the peculiar facts of the case which led the court to accept the finding that the wrong name given in the notice was merely a technical error which could be corrected 36 Civil Appeal No. 285 of 2014 and connected cases 37 Special Leave Petition No. 7409 of 2018 under Section 292B. Thus, there is no conflict between the Page | 25 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 decisions in Spice Enfotainment on the one hand and Skylight Hospitality LLP on the other hand. It is of relevance to refer to Section 292B of the Income Tax Act which reads as follows: ―292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued 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 reason 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 proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.‖ In this case, the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B. In this context, it is necessary to Page | 26 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 advert to the provisions of Section 170 which deal with succession to business otherwise than on death. Section 170 provides as follows: ―170. (1) Where a person carrying on any business or profession (such person hereinafter in this section being referred to as the predecessor) has been succeeded therein by any other person (hereinafter in this section referred to as the successor) who continues to carry on that business or profession,-- (a) the predecessor shall be assesseed in respect of the income of the previous year in which the succession took place up to the date of succession; (b) the successor shall be assesseed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of 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, and all the provisions of this Act shall, so far as may be, apply accordingly. (3) When any sum payable under this section in Page | 27 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 respect of the income of such business or profession for the previous year in which the succession took place up to the date of succession or for the previous year preceding that year, assesseed on the predecessor, cannot be recovered from him, the [Assessing] Officer shall record a finding to that effect and the sum payable by the predecessor shall thereafter be payable by and recoverable from the successor and the successor shall be entitled to recover from the predecessor any sum so paid. (4) Where any business or profession carried on by a Hindu undivided family is succeeded to, and simultaneously with the succession or after the succession there has been a partition of the joint family property between the members or groups of members, the tax due in respect of the income of the business or profession succeeded to, up to the date of succession, shall be assesseed and recovered in the manner provided in section 171, but without prejudice to the provisions of this section. Explanation.--For the purposes of this section, ―income‖ includes any gain accruing from the transfer, in any manner whatsoever, of the business or profession as a result of the succession‖ Now, in the Page | 28 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 present case, learned Counsel appearing on behalf of the respondent submitted that SPIL ceased to be an eligible assessee in terms of the provisions of Section 144C read with clause (b) of sub section 15. Moreover, it has been urged that in consequence, the final assessment order dated 31 October 2016 was beyond limitation in terms of Section 153(1) read with Section 153 (4). For the purposes of the present proceeding, we do not consider it necessary to delve into that aspect of the matter having regard to the reasons which have weighed us in the earlier part of this judgment. 32. On behalf of the Revenue, reliance has been placed on the decision of this Court in Commissioner of Income Tax, Shillong v Jai Prakash Singh38 (―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 representatives filed returns upon which the assessing officer issued notices under Section 142 (1) and Section 143 (2). These were complied with and no objections were raised to the assessment proceedings. The assessment order mentioned the names of all the legal representatives and the assessment Page | 29 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 was made in the status of an individual. In appeal, it was contended that the assessment proceedings were void as all the legal representatives were not given notice. In this backdrop, a two judge Bench of this Court held that the assessment proceedings were not null and void, and at the worst, that they were defective. In this context, reliance was placed on the decision of the Federal Court in Chatturam v CIT39 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 founded in the charging sections and not in the machinery 38 (1996) 3 SCC 525 39 (1947) 15 ITR 302 (FC)provisions to determine the amount of tax. Reliance was also placed on the decision in Maharaja of Patiala v CIT40 (―Maharaja of Patiala‖). That was a case where two notices were issued after the death of the assessee in his name, requiring him to make a return of income. The notices were served upon the successor Maharaja and the assessment order was passed describing the assessee as ―His Highness...late Maharaja of Patiala‖. The successor appealed against the assessment contending that since the notices were sent Page | 30 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 in the name of the Maharaja of Patiala and not to him as the legal representative of the Maharaja of Patiala, the assessments were illegal. The Bombay High Court held that the successor Maharaja was a legal representative of the deceased and while it would have been better to so describe him in the notice, the notice was not bad merely because it omitted to state that it was served in that capacity. Following these two decisions, this Court in Jai Prakash Singh held that an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where the liability is created by a distinct substantive provision.
The omission or defect may render the order irregular but not void or illegal. Jai Prakash Singh and the two decisions that it placed reliance upon were evidently based upon the specific facts. Jai Prakash Singh involved a situation where the return of income had been filed by one of the legal representatives to whom notices were issued under Section 142(1) and 143(2). No objection was raised by the legal representative who had filed the return that a notice should also to be served to other legal representatives of the deceased Page | 31 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 assessee. No 40 (1943) 11 ITR 202 (Bombay) objection was raised before the assessing officer. Similarly, the decision in Maharaja of Patiala was a case where the notice had been served on the legal representative, the successor Maharaja and the Bombay High Court held that it was not void merely because it omitted to state that it was served in that capacity. 33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation.
Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case Page | 32 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment. 34. We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-
13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. 35. For the above reasons, we find no merit in the appeal. The appeal is accordingly dismissed. There shall be no order as to costs.‖
7. We find in the aforesaid case before the Hon‟ble Supreme Court also, the Hon‟ble Supreme Court was concerned with similar fact scenario where the draft assessment order as well as the physical Page | 33 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 assessment order had been passed on the amalgamating company followed by reference to amalgamated company in the title. In that case also, the revenue‟s Counsel before the Hon‟ble Supreme Court urged that since the assessment order has been passed referring to both the names, the said order could not be recorded as invalid. Similar arguments were advanced by the ld. DR before us also. This aspect has already been considered by the Hon‟ble Apex Court while rendering its decision in Maruti Suzuki Ltd supra.
8. We also find that the ld. DR had placed heavy reliance on the decision of the Hon‟ble Delhi High Court in the case of Sky Light Hospitality LLP vs. ACIT reported in 405 ITR 296 which according to the ld. DR was subsequently approved by the Hon‟ble Apex Court by way of dismissal of Special Leave Petition. We find that this judgment also was considered by the Hon‟ble Apex Court while rendering its decision in Maruti Suzuki India Ltd. referred to supra wherein it had been duly mentioned that the conclusion reached in the case of Sky Light Hospitality LLP was based on its peculiar facts and hence, not applicable. In fact, the Hon‟ble Apex Court also proceeded to adjudicate the facts of Sky Light Hospitality LLP by stating that in that case the company had been converted into Limited Liability Partnership (LLP) after which a notice u/s.148 of the Act had been issued in the name of erstwhile company. The initiation of re-assessment proceedings was challenged by way of writ petition before the High Court. The peculiar facts in that case were that the tax evasion report which formed the basis in formation of belief with respect to escapement of income, the reasons recorded before the reopening the assessment and the decision given by the Pr. Commissioner u/s.151 of the Act referred to LLP and not the erstwhile Page | 34 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 company. Further, in various documents, the Permanent Account Number of LLP was mentioned. In these peculiar facts and circumstances, the Court held the reference to Company in the 148 notice as a clerical error. Accordingly, the Hon‟ble Apex Court in Maruti Suzuki India Ltd., had distinguished the decision of Sky Light Hospitality referred to supra. It is not in dispute that in the instant case before us, the notice u/s.148 of the Act dated 30/03/2016 was issued in the name of non-existent entity and re-assessment was also framed in the name of non-existent entity.
9. In view of the aforesaid observations and on the facts and circumstances of the instant case and the judicial precedents relied upon hereinabove, we hold that notice u/s.148 of the Act dated 30/03/2016 was issued in the name of (non-existent entity) PHL Holdings Pvt. Ltd. and hence CIT(A) has rightly quashed the same. We affirm the same.
10. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 09.04.2021.
Sd/- Sd/-
(ए रयफ़ौय यहभान / S RIFAUR RAHMAN) (भहावीय स ह
िं /MAHAVIR SINGH)
(रेखा दस्म / ACCOUNTANT MEMBER) (उऩाध्मक्ष / VICE PRESIDENT)
भुिंफई, ददनािंक/ Mumbai, Dated: 09.04.2021.
ुदीऩ यकाय, व. ननजी चिव/ Sudip Sarkar, Sr.PS Page | 35 ITA No. 2338/Mum/2019 Piramal Enterprises Ltd..; AY 10-11 आदे श की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to :
1. अऩीराथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमुक्त(अऩीर) / The CIT(A)
4. आमकय आमुक्त / CIT
5. ववबागीम प्रनतननचध, आमकय अऩीरीम अचधकयण, भिंफ ु ई/ DR, ITAT, Mumbai
6. गार्ा पाईर / Guard file.
आदे शानसार/ BY ORDER, त्मावऩत प्रनत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भिंफ ु ई / ITAT, Mumbai