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2019 (11) TMI 368

..... any which had ceased to exist with effect from 01/10/2012 onwards pursuant to the scheme of merger approved by the Hon’ble Bombay High Court. We hold that no assessment could be framed on a non-existent entity. This issue is now well settled by the recent decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. [2019 (7) TMI 1449 - SUPREME COURT] AO was wrong in framing the assessment in the hands of the non-existent entity i.e Churu Trading Company Pvt. Ltd. and accordingly, the entire assessment framed thereon, had to be declared as null and void ab initio . - Decided in favour of assessee. - ITA No.5709/Mum/2017, ITA No.5623/Mum/2017, Co No.310/Mum/2018 (Arising Out of ITA No.5623/Mum/2018) - 6-11-2019 - Shri M. Balaganesh, AM And Shri Amarjit Singh, JM For the Assessee : Shri Percy Pardiwala For the Revenue : Shri Awungshi Ginson ORDER PER BENCH: These appeals in ITA No.5709/Mum/2017 & 5623/Mum/2017 and Cross Objection No.310/Mum/2018 for A.Y.2012-13 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-14, Mumbai in appeal No.CIT(A)-14/IT-10545/15-16 dated 28/06/2017 (ld. CIT(A) in short) against the order of assessmen .....

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..... e ld. AO vide letter dated 20/03/2015 wherein it had been categorically mentioned as under:- We submit that the company/ had ceased to be in existence since it was amalgamated and got merged into Sprit Textiles P Ltd., (STTL) w.e.f the year 2011-12 in terms of the approval of the Scheme of Arrangement as approved by the Hon'ble Bombay High Court, copy of the said order is enclosed with one of the issues raised hereunder. Therefore, the said company had ceased to exist and has become a part of STPL 3.1. Alongwith this letter, the assessee had also submitted various details that were called for by the ld. AO on 35 issues, which are not reiterated for the sake of brevity herein. We find that the ld. AO vide letter dated 23/03/2015 addressed to the Principal Officer of Churu Trading Company Pvt. Ltd., had taken cognizance of the fact of amalgamation with Sprit Textiles Pvt. Ltd. by referring the letter dated 20/03/2015 supra of the assessee, had expressed his inability to grant further time to the assessee for furnishing of balance details that were originally called for by him. This letter dated 23/03/2015 addressed by the ld. AO to the amalgamating company i.e. Churu Trading Comp .....

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..... recent decision of Hon ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. reported in (2019) 107 Taxman.com 375 (SC) dated 25/07/2019 wherein it was held as under:- 19. While assessing the merits of the rival submissions, it is necessary at the outset to advert to certain significant facets of the present case: (i) Firstly, the income which is sought to be 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 ₹ 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. .....

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..... 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 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 appella .....

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..... 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 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 file .....

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..... n 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 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. 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 .....

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..... een 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 per provisions of the Companies Act. Order was in the name of non-existing person and he .....

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..... ent, 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 as the predecessor) has been succe .....

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..... 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 backdrop, a two judge Bench of this Court held that the assessment proceedings were not n .....

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..... gh 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 court must abide by in promoting the interest of certainty in tax litigation .....

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