TMI Blog2017 (11) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee Company and issue raised for reopening was before the Hon'ble Settlement Commission, Kolkata for the subject assessment year, it was beyond the jurisdiction of the A.O. to invoke section 147 on the assessee. In the present case, the notice u/s 148 of the Act was issued in the name of a non- existent company which is clearly a case of jurisdictional defect and not a mere procedural irregularity. Provisions of section 292B of the Act are not applicable. The initiation of proceedings against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity or a technical mistake but a jurisdictional defect as there cannot be any assessment against a 'dead person'. - Decided in favour of assessee. - I.T.A. No. 1052/Kol/2015, I.T.A. No. 1053/Kol/2015 - - - Dated:- 15-11-2017 - Shri A. T. Varkey, JM And Dr. A. L. Saini, AM For the Appellant : Shri Kalyan Nath, Addl. CIT, DR For the Respondent : Shri Ravi Tulisyan, FCA ORDER Per Shri A. T. Varkey, JM These two appeals filed by the revenue are against the order of Ld. CIT(A)-21, Kolkata dated 25.05.2015 and 19.05.2015 respectively for AY 2006-07. 2. We note that these two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of AO and exclusive jurisdiction with the Settlement Commission with the filing of application u/s. 245C(1) the notice u/s. 148 of the Act for AY 2006-07 being covered AYs 2005-06 to 2012-13 is without jurisdiction and, therefore, erroneous and bad in law. The assessee company in order to contend that the notice issued u/s. 148 of the Act against the amalgamating company is bad in law relied on the decision of the Coordinate Bench of this Tribunal in the case of M/s. Pampasar Distillery Ltd. Vs. ACIT (2007) 15 SOT 331. However, the AO ignored the contention/explanation of the assessee company and proceeded with the reassessment proceeding. The AO vide notice dated 19.11.2013 provided the reasons recorded by him for reopening the assessment of M/s. NPPL for AY 2006-07. The reasons for reopening has been reproduced by AO from pages 1 to 3 of the reassessment order and thereafter, we note that the AO did not agree with the contentions raised by the assessee and was of the opinion that the proceedings before the Settlement Commission has no relevance with respect to the issue that has been raised by the AO to reopen the assessment. Thereafter, he passed a best judgment assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice of notice u/s. 148 of the Act and hence, no reopening proceedings u/s. 148 of the Act could be initiated in the name of M/s. NPPL. It was also brought to our knowledge that vide letter dated 26.11.2013 the assessee company had requested the AO to provide the reasons for reopening and to dispose of the objection raised against reopening the assessment of M/s. NPPL. It was brought to our knowledge that the AO without disposing of the objection raised by the assessee company proceeded further by issuing notice u/s. 142(1)of the Act dated 19.11.2013 on M/s. NPPL. In response to the notice, the assessee company had again filed a reply submitting that the proceedings are illegal and bad in law. Pursuant to the said reply of the assessee the AO vide letter dated 03.12.2013 issued in the name of M/s. NPPL stated as under: The reopening proceedings is in respect of M/s. Nayanmani Properties Pvt. Ltd. which was amalgamated with M/s. Mani Square Ltd. w.e.f. 01.04.2008. Notice u/s. 148 has been served on you as the successor company in respect of M/s. Nayanmani Properties Pvt. Ltd., the proceedings u/s. 147 are not in respect of your company i.e. M/s. Mani Square. Hence, the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effective from 1st July, 2003, S ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, S was also stood dissolved by specific order of this Court. With the dissolution of this company, its name was struck off from the rolls of companies maintained by the RoC. A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. In view of the aforesaid clinching position in law, it is difficult to digest the circuitous route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect. After the sanction of the scheme on 11th Feb., 2004, S ceased to exist w.e.f 1st July, 2003. Even if S had filed the returns, it became incumbent upon the IT authorities to substitute the successor in place of the said 'dead person'. When notice under s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s laid by the Hon ble Supreme Court and High Courts: In Commissioner of Income-tax v. Adminarayana Murty (K.) (1967) 65 ITR 607(SC) the Hon ble Supreme Court held that - The respondent was a Hindu undivided family. Subsequent to the original assessment, the Income-tax Officer had information that the respondent had done some procurement business and earned large profits which had escaped assessment for the assessment year 1949-50. Since for the assessment year 1954-55 the Income-tax Officer had taken the status of the respondent to be that of an individual , he issued a notice under section 34 of the Income-tax Act on March 22, 1957, to reopen the assessment for the assessment year 1949-50 in the status of an individual , having taken the sanction of the Commissioner to make the reassessment in that status. The respondent, however, filed a return in the status of a Hindu undivided family . Pending the proceedings the Appellate Assistant Commissioner, in an appeal against the assessment for the year 1954-55 held that the status of the respondent was that of a Hindu undivided family. Thereafter the Income-tax Officer issued a fresh notice under section 34 on February 12, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961, the assessee filed his return in the status of individual. The Assessing Officer completed the assessment treating the status of the assessee as Hindu undivided family as against individual. This was confirmed by the Commissioner (Appeals). The Tribunal held that the assessment framed by the Assessing Officer was null and void because the notice issued to the assessee under section 148 was without intimating his status to be Hindu undivided family. On appeal: Held,_ dismissing the appeal, that the finding of the Tribunal was that the assessee did not make any statement about the status of Hindu undivided family in the letter in question on which the Assessing Officer had placed heavy reliance. Once a notice under section 148 and other notices under section 143(2) and 142(1) were issued treating the assessee as individual then the Assessing Officer could not have framed the assessment treating the income in the hands of the Hindu undivided family. 15. In view of the above case laws and the ratio laid in the aforesaid case laws, when applied in the present case, since the AO issued notice for reopening u/s. 148 of the Act only against the amalgamating company M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, 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, s. 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to s. 292B. 17. In the present case, the notice u/s 148 of the Act was issued in the name of a non- existent company which is clearly a case of jurisdictional defect and not a mere procedural irregularity. To support the contention of the assessee, reliance is placed on the judgment of the Delhi High Court in the case of Spice Infotainment Ltd. Vs. CIT (Delhi) (2012) 247 CTR 500 wherein it was held, Once it is found that assessment is framed in the name of non-existing entity, it does not remain a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of NPPL which did not exist as on the date of issuance, sec. 292B of the Act cannot come to the rescue of the AO and cure the defect which is not merely an irregularity and which is jurisdictional defect, so it cannot be cured by relying on section 292B of the Act, and since the notice issued was not as per law and hence the entire proceedings are illegal and so vitiated. 19. Another aspect which came to our notice is in respect to the assessee s contentions that AO lacked jurisdiction to even reopen the assessment in question because the Hon ble Settlement Commission has taken cognizance of the assessment in question. It is firstly relevant here to quote the provision of section 245(F), which confers exclusive jurisdiction with the Settlement Commission with the filing of application u/s 245C(I). The section reads as follows: Section 245F - Powers and procedure of Settlement Commission (2) Where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub- section (4) of section 245D, have, subject to the provisions of sub-section (3) of that section, excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of two orders, each of a different income tax authority, determining the total income of an assessee for the same assessment year. If the contention of the Revenue is accepted, not only will the finality of the order of settlement be disturbed, but it will also result in different orders relating to the same assessment year and relating to the same assessee being allowed to stand. We have grave doubts whether such a result, which is likely to create chaos and confusion in the tax administration could have been intended. The order of the ITSC can be reopened only in cases of fraud and misrepresentation and in no other case. (emphasis given by us). 22. The Tribunal, Delhi Bench in the case of Vivek Nagpal vs. Deputy Commissioner of Income Tax, Central Circle-18 165 Taxman 75 wherein it was held that- During the pendency of the proceedings before the Settlement Commission and in the absence of express direction of the Settlement Commission, the authorities below have erred in invoking the provisions of section 147/148 of the Act against the assessee. . 23. Coming back to our case, considering the second limb of argument of the assessee, we note that the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Report, therefore, clearly suggests that the above issue was before the Hon'ble Settlement Commission, Kolkata. This itself goes on to show that the jurisdictional CIT of the assessing officer was of the view that the said issue was required to be adjudicated by the Hon'ble Settlement Commission and was part of the said proceedings. Since that was the facts, the AO had no jurisdiction to reopen the assessment on the very same issue which was before the ITSC. Thereafter, the Ld. AR also brought to our notice that Hon'ble Settlement Commission has already passed the order u/s 245D(4) of the Act dated 03.06.2014 in the case of M/s. Mani Square Limited, being the amalgamating company (assessee company), covering all the issues brought to the notice of the Commission in the application filed by the assessee. (A copy of the order is enclosed at page 38- 117 of the paper book.) We note that the observations made by the learned CIT in the Rule 9 report was also duly examined by the Hon'ble Settlement Commission in the said order passed u/s 245D(4). The issue of jama kharchi transactions through entry operator Sri Suresh Kejriwal was discussed in the said order at page 56- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same is hereby upheld. The challenge against the finding of the Ld. CIT(A) that section 292B of the Act does not come to the rescue of the revenue is also correct as per the decision of Hon ble High Courts discussed (supra). Therefore, we do not find any legally valid ground to interfere with the decision of the Ld. CIT(A) and, therefore, we uphold it. 27. Coming to ITA No. 152/Kol/2015, M/s. Mani Square Ltd., (successor company of M/s. Alex Merchants Pvt. Ltd. ), we find that identical notice was only issued against the amalgamating company i.e. M/s. Alex Merchants Pvt. Ltd; and even though it was pointed out by the assessee company that M/s. Alex Merchants Pvt. Ltd. is amalgamated with the assessee company, the AO did not bother to issue notice u/s. 148 of the Act against the assessee company and went ahead to make the reassessment which is not valid in the eyes of law and, therefore, on the same reasons discussed above, we uphold the action of the Ld. CIT(A). The revenue s challenge against the finding of the Ld. CIT(A) that section 292B of the Act does not cure the defect of invalid notice, as we discussed earlier it has been held by Hon ble High Courts, (supra) that it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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