TMI Blog2019 (7) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment 2017 (12) TMI 754 - SC ORDER] . The decision in Spice Enfotainment has been followed in the case 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. 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. - Civil Appeal No 5409 of 2019 (Arising out of SLP(C) No 4298 of 2019) - - - Dated:- 25-7-2019 - DR DHANANJAYA Y CHANDR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PIL. 6 On 28 November 2012, the assessee filed its return of income declaring an income of ₹ 212,51,51,156/-. The return of income was filed in the name of SPIL (no amalgamation having taken place on the relevant date). 7 On 29 January 2013, a scheme for amalgamation of SPIL and MSIL was approved by the High Court with effect from 1 April 2012. The terms of the approved scheme provided that all liabilities and duties of the transferor company shall stand transferred to the transferee company without any further act or deed. On the scheme coming into effect, the transferor was to stand dissolved without winding up. The scheme stipulated that the order of amalgamation will not be construed as an order granting exemptions from the payment of stamp duty or taxes or any other charges, if payable, in accordance with law. 8 On 2 April 2013, MSIL intimated the assessing officer of the amalgamation. The case was selected for scrutiny by the issuance of a notice under Section 143(2) on 26 September 2013, followed by a notice under Section 142(1) to the amalgamating company. 9 On 22 January 2016, the Transfer Pricing Officer TPO passed an order unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment proceedings invalid. 14 On 14 October 2016, the DRP issued its order in the name of MSIL (as successor in interest of erstwhile SPIL since amalgamated). 15 The final assessment order was passed on 31 October 2016 in the name of SPIL (amalgamated with MSIL) making an addition of ₹ 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 By its decision dated 6 April 2017, the Tribunal set aside the final assessment order on the ground that it was void ab initio, having been passed in the name of a non-existent entity by the assessing officer. The decision of the Tribunal was affirmed in an appeal under Section 260A by the Delhi High Court on 9 January 2018 following its earlier decision in the case of the assessee for AY 2011-12. That has given rise to the present appeal. 17 Mr Zoheb Hossain, learned Counsel appearing on behalf of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s Spice which was non existing entity on that day. In such proceedings and assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law. From the above extract, it would emerge that if an assessment order had been passed on the resulting company, it would not be void. Hence, in the present case, the issuance of a notice under Section 143 (2) to SPIL cannot be considered to be a jurisdictional effect when the assessment order categorically mentions the names of the amalgamated and amalgamating companies; (vi) The decision of the Delhi High Court in Skylight Hospitality LLP v Assistant Commissioner of Income Tax, Circle-28(1), New Delhi (2018) 405 ITR 296 (Delhi) ( Skylight Hospitality LLP ), which was confirmed by this Court on 6 April 2018 (2018) 13 SCC 147 dealt with a situation where a notice under Section 148 was issued in the name of a non-existent private limited company. The Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut winding up, in terms of Section 394 of the Companies Act 1956. The amalgamating company ceases to exist in the eyes of law [Saraswati Industrial Syndicate Ltd. v CIT (1990) 186 ITR 278 (SC) ( Saraswati Industrial Syndicate Ltd. )]; (ii) The amalgamating company cannot thereafter be regarded as a person in terms of Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated and an assessment order passed; (iii) The jurisdictional notice under Section 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 initiation of assessment proceedings against a non-existent entity was void ab initio. It has been held in the following decisions that, if a statutory notice is issued in the name of a non-existent entity, the entire assessment would be a nullity in the eyes of law: - CIT v Intel Technology India (P) Ltd [2016] 380 ITR 272 (Kar.) - PCIT v Nokia Solutions Network India (P) Ltd. ( Nokia Solutions ) [2018] 402 ITR 21 (Del) - Spice Entertainment - Similarly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steels ) [2015] 372 ITR 386 (Del.) (MAG.); and -CIT v Micra India (P) Ltd. ( Micra India ) [2015] 231 Taxman 809 (Del.). The aforesaid judgments of the Delhi High Court have been approved by this Court in Civil Appeal No.285 of 2014 ( other connected matters). Thus applying the doctrine of merger, the law laid down by the Delhi High Court has become a precedent under Article 141. (vi) The Respondent's case is squarely covered by the decision of this Court in its own case for the immediately preceding year: The Delhi High Court by its judgment reported in Maruti Suzuki held in favour of the Respondent by following the judgment in the case of Spice Entertainment. Further, the Revenue's SLP was dismissed by this Court on 16 July 2018 in SLP(C) D.No.14106/2018, following the judgment in Spice Entertainment. Relying on the decision of 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 non-est in the eyes of law: - CIT v BMA Capfin Ltd. [2018] 100 taxmann.com 329 (Del.) (Revenue's SLP dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of a transfer pricing addition of ₹ 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee by the Revenue after 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 : Delay condoned. Heard the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Special Leave Petition (C) No. 7409 of 2018. 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 Court Sky Light Hospitality LLP v Assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come, 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 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Singh (1996) 3 SCC 525 ( 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 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 back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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