TMI Blog2016 (6) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed by the assessee against the order of the learned Principal Commissioner of Income-tax-5, Mumbai (hereinafter called as the CIT ) passed under section 263 dated December 22, 2015, for the assessment year 2011-12 on the following grounds : 1.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (CIT) erred in initiating proceedings under section 263 of the Income-tax Act, 1961 (the Act), vide show-cause notice dated April 20, 2015, and passing an order under section 263 of the Act as the reasons assigned by him for doing so are wrong and contrary to the facts of the case, the provisions of the Act and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law, the appellant prays that the order of the learned Commissioner of Income-tax passed under section 263 of the Income-tax Act, 1961, may be cancelled being void ab initio and bad in law. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax erred in holding that the assessment order dated October 24, 2013, passed by the Assessing Officer under section 143(3) of the Act with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(3) upon an erstwhile company, viz., M/s. Westpoint Leisureparks Pvt. Ltd. (hereinafter called WLPL), which had already got amalgamated into another company, namely, M/s. 'Westlife Development Ltd.' (hereinafter called WDL) and, therefore, on the date of framing of the assessment order, WLPL was not in existence. It was further submitted that this fact was brought to the knowledge of the Assessing Officer ; despite that the Assessing Officer framed the assessment upon a non- existing entity. It was submitted by him that framing of an assessment upon a company which has already been amalgamated by way of an order of the High Court is nullity in the eyes of law and in support of his arguments he placed reliance upon the following judgments : 1. Judgment of the Delhi High Court in the case of Spice Infotainment Ltd. v. CIT [2012] 247 CTR (Delhi) 500 (I. T. A. Nos. 475 and 476 of 2011, dated August 3, 2011). 2. CIT v. Dimension Apparels P. Ltd. [2015] 370 ITR 288 (Delhi). 3. I. K. Agencies P. Ltd. v. CWT [2012] 347 ITR 664 (Cal). 4. CIT v. Express Newspapers Ltd. [1960] 40 ITR 38 (Mad). 5. Judgment of the Delhi High Court in the case of CIT v. Micra I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the orders passed by the lower authorities as well as the judgments relied upon before us. In our view, we need to decide the following issues, before we go into any other issues or the merits of the impugned order : 1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of the order passed under section 263 ? 2. Whether the impugned assessment order passed under section 143(3) dated October 24, 2013, was valid in the eyes of law or a nullity as has been claimed by the assessee ? 3. If the impugned assessment order passed under section 143(3) was illegal or nullity in the eyes of law then whether the Commissioner of Income-tax had a valid jurisdiction to pass the impugned order under section 263 to revise the non est assessment order ? In our considered view, since these issues are jurisdictional issues and go to the root of the matter, therefore, before dealing with any other issue, we shall first deal with all above three issues one by one, as under : 8. Challenging the jurisdictional defects of the assessment order for assailing the jurisdictional validity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the original proceedings (i.e., primary proceedings). Thus, if the order passed in the original proceedings is itself illegal then that cannot give rise to a valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed then it may so happen that though the order passed in the original proceedings was illegal and, thus, the order passed in the subsequent proceedings in turn would also be illegal but in the absence of a remedy to contest the same, it may give rise to an enforceable tax liability without authority of law. Therefore, the courts have taken this view that the jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to order ejectment of a tenant from a building in the urban area leased out by the landlord. Thereby the civil court inherently lacks jurisdiction to entertain the suit and pass a decree of ejectment. Therefore, though the decree was passed and the jurisdiction of the court was gone into in issue Nos. 4 and 5 at the ex parte trial, the decree thereunder is a nullity, and does not bind the appellant. Therefore, it does not operate as a res judicata. The courts below have committed grave error of law in holding that the decree in the suit operated as res judicata and the appellant cannot raise the same point once again at the execution. 8.4. Similar view has been taken by the hon'ble Supreme Court by following aforesaid judgments recently in the case of Indian Bank v. Mani lal Govindji Khona reported in [2015] 3 SCC 712. Further, a similar view was emphasised by the hon'ble Bombay High Court (Goa Bench) in the case of Mavany Brothers v. CIT (Tax Appeal No. 8 of 2007 in its order dated April 17, 2015) wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution. 8.5. The aforesaid principles, enunciated by the apex court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the Appellate Assistant Commissioner and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on the merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. According to the Tribunal, the assessee having raised the point in the first round and having given it up could not revive it in the second round of proceedings where the issue was limited to the merits of the additions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vass its correctness in collateral proceedings taken for rectification thereof under section 154. The Bench minutely analysed the law in this regard and applying the principle of coram non judice and following the aforesaid judgments of the Supreme Court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment proceedings ought to be given to it . . . (emphasis supplied). 8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri v. Addl. CIT [2006] 98 ITD 187 (Delhi). In the said case, an appeal was filed by the assessee before the Tribunal against the levy of penalty. In the appeal challenging the penalty order, the assessee challenged the validity of block assessment order which had determined the tax liability of the assessee on the basis of which penalty was levied subsequently. The Revenue objected with respect to the ground of the assessee raising juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tpoint Realtors Pvt. Ltd. to Westpoint Leisureparks Pvt. Ltd. (referred to as WLPL). (3) 23-07-2013 Westpoint Leisureparks Pvt. Ltd., amalgamated with Westlife Development Ltd. (referred to as WDL). (4) 03-09-2013 Assessee intimated to the Assessing Officer the fact of amalgamation. Copy of Scheme as well as High Court order submitted to the Assessing Officer (enclosed at page number 57 of P.B). (5) 24-10-2013 Assessment order passed by the Assessing Officer in the name of the erstwhile company Westpoint Leisureparks Pvt. Ltd. (6) 22-12-2015 learned CIT has revised the above referred assessment order vide impugned order passed under section 263 of the Act. 9. 9.2. During the course of hearing before us, our attention has been drawn by the learned counsel upon letter dated September 3, 2013, filed before the Assessing Officer during the course of original assessment proceedings intimating him about the amalgamation of the erstwhile company WLPL with WDL, cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bulls Finance Centre, Senapati Bapat Marg, Elphinstone Road, Mumbai 400 013 Kindly make a note of the transfer in your records and confirm your having done. 9.3. It is also shown to us that this letter has been duly acknowledged by the office of the Income-tax Officer, Range 5(3)(4) (i.e., the Assessing Officer) on September 6, 2013. Our attention was also drawn on the copy of order of the hon'ble Bombay High Court dated July 19, 2013, for effect ing the amalgamation of two companies. Our attention was further drawn on the fact that the permanent account number belonging to WDL was also brought to the notice of the Assessing Officer. Our attention was also drawn on subsequent letters filed before the Assessing Officer. For example, letter dated October 21, 2013 (paper book pages 107-108) showing that all subsequent replies were written by WDL and submitted to the Assessing Officer on its letterhead. All these documentary evidences were shown to bring home the point that the factum of amalgamation was very much in the knowledge of the Assessing Officer and, thus, the Assessing Officer was aware that WLPL was no more in existence. Therefore, by framing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2008-09. 4. Normally, we would not have entertained a petition as an alternative remedy to file an appeal is available to the petitioners. However, prima facie, the impugned notice has been issued in respect of a non-existing entity as M/s. Addler Security Systems Pvt. Ltd., which stands dissolved, having been struck off the Rolls of the Registrar of Companies much before its issue. Consequently, the assessment has been framed also in respect of the non-existing entity. This defect in issuing a reopening notice to a non-existing company and framing an assessment consequent thereto is an issue which goes to the root of the jurisdiction of the Assessing Officer to assess the non-existing company. Thus, prima facie, both the impugned notice dated March 24, 2015, and the assessment order dated March 28, 2016, are without jurisdiction. (emphasis supplied). 9.7. Further, recently, the co-ordinate Bench of the Income-tax Appellate Tribunal, Mumbai, decided an identical issue in the case of Genesys World eye Ltd. in (I. T. A. No. 473/Mum/2012 order dated June 3, 2016) in which one of us (Accountant Member) was a party. The relevant part of this order is reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be struck down. But, in the present case, we find that the assessment, in substance and effect, has been made against amalgamated company in respect of assessment of income of amalgamating company for the period prior to amalgamation and mere omission to mention the name of amalgamated company along with the name of amalgamating company in the body of assessment against the item 'name of the assessee' is not fatal to the validity of assessment but is a procedural defect covered by section 292B of the Act. We hold accordingly. 7. The aforesaid line of reasoning adopted by the Tribunal is clearly blemished with legal loopholes and is contrary to law. No doubt, M/s. Spice was an assessee and as an incorporated company and was in existence when it filed the returns in respect of two assessment years in questions. However, before the case could be selected for scrutiny and assessment proceedings could be initiated, M/s. Spice got amalgamated with MCorp Pvt. Ltd. It was the result of the scheme of the amalgamation filed before the company judge of this court which was duly sanctioned vide orders dated February 11, 2004. With this amalgamation made effective from July 1, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the other. Reconstruction or amalgamation has no precise legal meaning. The amalgamation is a blending of two or more 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 the other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsburys Laws of England, fourth Edition, volume 7, paragraph 1539. Two companies may join to form a new company, but there may be absorption or blending of one by the other and both amounts to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into the other or blended with another, the amalgamating company loses its entity . 9. The court referred to its earlier judgment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act. 13. The Punjab and Haryana High Court stated the effect of this provision in CIT v. Norton Motors [2005] 275 ITR 595 (P H) in the following manner (page 600) : A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Sri Nath Suresh Chand Ram Naresh v. CIT [2006] 280 ITR 396 (All), the Allahabad High Court held that the issue of notice under section 148 of the Income-tax Act is a condition precedent to the validity of any assessment order to be passed under section 147 of the Act and when such a notice is not issued and assessment made, such a defect cannot be treated as cured under section 292B of the Act. The court observed that this provisions condones the invalidity which arises merely by mistake, defect or omission in a notice, if in substance and effect it is in conformity with or according to the intent and purpose of this Act. Since no valid notice was served on the assessee to reassess the income, all the consequent proceedings were null and void and it was not a case of irregularity. Therefore, section 292B of the Act had no application. 16. When we apply the ratio of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of section 292B of the Act are not applicable in such a case. The framing of assessment against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on date this issue was covered in favour of the assessee in view of the judgments as discussed above. In these facts and circumstances and the clear position of law coming out from above discussed judgments of the hon'ble Bombay High Court, the Delhi High Court, the Calcutta High Court and the Karnataka High Court, we find that the impugned assessment order having been passed in the hands of WLPL, i.e., a non est entity at the time of passing the said assessment order was null and void in the eyes of law. 10. If the impugned assessment order passed under section 143(3) was illegal or nullity in the eyes of law, then, whether the Commissioner of Income-tax had a valid jurisdiction to pass the impugned order under section 263 to revise the non est assessment order : 10. Having decided the aforesaid two issues, the next issue that is to be decided by us is about the validity of order passed under section 263 by the learned Commissioner of Income-tax seeking to revise the assessment order which was nullity in the eyes of law. 10.1. We have discussed in detail in the earlier part of our order that an invalid order cannot give birth to legally valid proceedings. It is fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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