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TMI Blog2020 (1) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... judicate same issue de novo and pass fresh order is unjust & against principles of Natural Justice. 3. Ld. CIT erred in law and on facts in setting aside scrutiny assessment order passed pursuant to order u/s 263 of the Act conducting proper inquiries & examination of facts by AO. Ld. Ld. CIT failed to appreciate that AO passed the order after thorough scrutiny of documents. 4. Ld. CIT erred in law and on facts to hold that order passed pursuant to order u/s 263 prima facie suffered from lack of independent and adequate inquiry on the issue and hence order u/s 143 (3) r w s 263 of the Act was erroneous & prejudicial to the interest of revenue. 5. Ld. CIT erred in law and on facts in presuming that since appellant failed to respond to show cause notices sent on available email on record as well as by speed post, the appellant had nothing to submit to proceedings u/s 263 not appreciating that notices were issued to a non - existent appellant at an incorrect address mentioning wrong PAN not possible to respond. 6. Ld. CIT erred in law and on facts holding that any order passed subsequent to order u/s 263 must be in favour of revenue & hence Id. CIT held order passed u/s 143 (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 - 70 31/03/2015 Assessment order u/s 143(3) of the Act 71 - 73 17/04/2015 S.C.N by CIT u/s 263 of the Act 75 - 76 19/05/2015 Written submission before CIT 77 - 111 11/06/2015 First order passed u/s 263 of the Act 112 - 115 09/05/2015 HC sanctioned the scheme of amalgamation of SAPL with Jainco on 11/06/2015 (w.e.f 01/04/2013) 444/1-5 30/12/2015 A.O issued notice to SAPL 116 - 117 Detailed reply to AO by all investor companies 118 - 394 20/01/2016 HC sanctioned the scheme of amalgamation of Jaincco with Gallops 444/6-17 17/11/2016 SAPL informed to AO [ITO ward 10(2)] about the merger with a request of transfer the case to ITO ward 12(2) 439 23/11/2016 A.O issued notice u/s 142(1) to SAPL [ITO ward 12(2)] 395 28/11/2016 Reply to AO[ITO ward 12(2)] by GMPL along with name of SAPL 396 30/11/2016 AO [ITO ward 12(2)]passed fresh order u/s 143(3) r.w.s 263 of the Act accepting the return income - note that SAPL is merged with GMPL 16/01/2019 CIT issued notice u/s 263 of the Act in the name of SAPL but acknowledging merger with GMPL 446 - 447 16/01/2019 Letter to AO intimating merger with the orders for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined about the validity and legality of such assessment orders. In the present case, when the assessment order was passed originally i.e. way back on 31.3.2015, the "SAPL" was not merged with Jainco or Gallops. Scheme of amalgamation was sanctioned by the High Court on 13.6.2015 though w.e.f. 1-4-2013. Thus, the assessment order has already been passed, and an order passed under section 263 is not an assessment order. He also submitted that once an assessment order has been passed, then subsequent appellate proceedings or revisional proceeding is continuation of original assessment proceedings. They can be continued against such entity. In other words, according to him, after passing of the assessment order, the time would freeze qua existence of an entity, as a person for the purpose of taxation under Income Tax act. 8. We have considered rival contentions and gone through the record carefully. Section 263 of the Income Tax Act has direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under: "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 9. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 10. Before adverting to the contentions of the ld.CIT-DR, we would like to take note of position of law laid down by the Hon'ble Supreme Court in the case of Maruti Suzuki (supra). The facts in this case are that Suzuki Motors Corporation, and MSIL constituted a joint venture with shareholding of 70% and 30%. Such joint venture was incorporated as Suzuki Motor India Ltd. Subsequently w.e.f. 8.6.2005 its name was changed to SPIL. On 28.11.2012 SPIL has filed its retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating company ceased to exist. In Saraswati Industrial Syndicate Ltd., (supra) 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince 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 the provisions of Section 292B of the Act." Following the decision in Spice Entertainment, (supra) the Delhi High Court quashed assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal 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 (supra) wherein the High Court had discussed the ruling in Spice Entertainment (supra). It was held that this was a case where the assessment was contrary to law, having been completed against a non-existent company." 11. Hon'ble Supreme Court thereafter took note of the judgment in the case of Sky Light Hospitality Vs. ACIT, 259 taxman 390 (SC). This judgment was pressed in service by the Revenue to point out that if an order was framed in accordance with law in the name of amalgamating company, then it would amount to mistake, defect or omission which is curable under section 292BB of the Income Tax Act. Hon'ble Supreme Court has dealt with this judgment and explained its impact. Hon'ble Supreme Court ultimately upheld the judgment of Hon'ble Delhi High Court in the case of Maruti Suzuki (supra) and held that assessment order passed subsequently in the name of non-existing company would be without jurisdiction and a nullity. Concluding paragraph of the judgment are worth to note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to issue a show cause notice against a juridical person contemplated in section 2(31) of the Income Tax Act and if a juridical person ceases to exist then it would not be construed as a person within the meaning of section 2(31) against whom any action can be taken. The Commissioner would not assume proper jurisdiction and such type of defect would not be cured with help of section 292BB of the Act, because it is not a procedural irregularity which could be cured. 13. Now, let us take note of submissions made by the ld.CIT-DR. The first proposition canvassed by the ld.CIT-DR is that the judgment of Hon'ble Supreme Court is applicable on the case where assessment orders were passed against the dead persons or non-existent entity. This is not applicable on the proceedings under section 263 undertaken by the Commissioner. We have taken cognizance of the section 263. By exercising power under section 263, the ld.Commissioner sought to set aside the assessment order. In exercising such power, he can himself pass an order determining taxable income of the assessee. He can enhance income or he can cancel the assessment order with a direction to pass fresh assessment order. Thus, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77, Hon'ble jurisdictional High Court in the case of PV Doshi vs. CIT reported in 113 ITR 22 has observed that consent will not infuse jurisdiction in an authority. In other words, if an assessee gave consent for assumption of jurisdiction in the AO in passing an assessment order to Commissioner for exercising power under section 263 then also such jurisdiction will not be construed as valid jurisdiction. Jurisdiction deserves to be flowed from the Act in the authority, and not consent of the assessee. If we accept the contentions of the ld.CIT-DR, then it would suggest that notice would be given to "A" person by Commissioner under section 263, but ultimately on the basis of his order tax liability would fall upon "XYZ". This is not permissible under the law nor has been contemplated in the section. Therefore, without going into other issues, we are of the view that notice under section 263 was issued upon a non-existent entity. It is not sustainable. Therefore, no proceeding could be assumed in legal sense and same is not sustainable. Consequently, order passed under section 263 of the income Tax Act against non-existent entity is treated as nullity and void ab inito. Hence, this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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