TMI Blog2021 (7) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... al order contained the names of the non-existent entity and the successor assessee, since the notice u/s. 143(2) of the Act was issued in the name of a non-existent entity, it rendered the entire proceedings and consequent order to be nullity in the eyes of law Identical legal issue came up for consideration before the Hon'ble Delhi High Court in the case of Savita Kapila vs. ACIT. [ 2020 (7) TMI 441 - DELHI HIGH COURT ] wherein the question before the High Court was, whether the issuance of notice u/s. 148 of the Act in the name of a non-existent person was bad in law or was it a curable defect u/s. 292B of the Act. Thus we note that there is no whisper much less any allegation by the AO that the assessee has failed to disclose material facts necessary for assessment in the return of income, and therefore the reopening of assessment is held to be bad in law - Decided in favour of assessee. - ITA No. 2422/Kol/2018 - - - Dated:- 29-6-2021 - J. Sudhakar Reddy, Member (A) And Aby T. Varkey, Member (J) For the Appellant : S. M. Surana, Adv. For the Respondents : Vijay Shankar and Manish Kanojia, CIT, D/R ORDER Per J. Sudhakar Reddy, AM This appeal fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The Ld. AO supplied the copy of reasons recorded. In the recorded reasons the Ld. AO referring to the application for Settlement of the cases filed by M/s. Emta Coal Ltd. for AY 2011-12 to 2013-14 and the report filed by the Ld. Pr. CIT in Rule 9 before the Settlement Commission, alleged that he had reason to believe that income chargeable to tax for these years had escaped assessment. The AO thereafter issued notices u/s. 142(1)/143(2) of the Act on 23.7.2014 and 9.10.2014. On receipt of the reasons so recorded, objections were filed by the assessee challenging the validity of the reopening, notice and the reasons recorded u/s. 147 of the Act for all the three years on 18.11.2014. It was inter alia contended that, the original assessment was completed u/s. 143(3) and that full enquiry was made in the original assessment, and therefore, the assessments were being reopened on 'change of opinion'. The AO was therefore requested to drop the proceedings for all the three years by the assessee. A reminder letter dated 11.3.2015 was again filed requesting the AO to dispose of the objection and drop the proceedings. Since no response was received from the AO, writ petitions we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment in first round on 21.3.2014. Thereafter, the AO continued the second assessment proceedings u/s. 148 against the company. The company however did not agree with the clarification given by the AO. It challenged the AO's action of continuing the proceedings u/s. 148 of the Act against the Company for the reason that the AO never re-opened the case of the company but had issued the notice u/s. 148 of the Act bearing the name and PAN of the Firm, M/s. Eastern Mineral and Trading Agency, which was served on them on 24/04/2017. The company contended that this was a jurisdictional defect which is not curable u/s. 292B of the Act since it was issued in the name of non-existent person. The AO rejected the objections of the assessee and held that it was only a procedural defect, which was curable u/s. 292B of the Act. 2.6. Thereafter, the AO completed the assessment u/s. 144 of the Act for non-compliance by the company vide assessment order dated 29.12.2017. The order u/s. 144/147 of the Act was passed in the name of the company, under the PAN No. of the company by making addition on account of alleged bogus payment of operational charges to the four parties. The notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agency on 30/03/2017. Even the PAN mentioned therein was that of the erstwhile Firm. The notice nowhere mentioned the name of the assessee company. b) He refuted the finding of the AO that, the notice was meant to be issued to the company but the notice generated bearing the name of the firm with the firm's PAN No. was a clerical mistake and thus curable u/s. 292B is bad in law. According to him, this was a jurisdictional defect and hence, Section 292B cannot come to the rescue of the Firm. c) As regards the finding of the ld. CIT(A) that the Revenue was not aware about the fact that the business of the Firm had been taken over the Company, the ld. Counsel invited our attention to the notices issued u/s. 148 of the Act dated 21/03/2014 in the name of Eastern Mineral and Trading Agency (Succeeded by Emta Coal Ltd.) and the reasons recorded pursuant thereto, which clearly showed that the Revenue was aware that the Firm had been dissolved on 18/03/2010. d) He thus contended that the notice issued u/s. 148 being bad in law, the entire proceedings as well as the order passed u/s. 144/147 be declared ab initio void. For this proposition, he relied on the following ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. counsel for the assessee further argued that, when the assessment has been first reopened on 21/03/2014 on identical reasons and such reopened assessment was neither completed nor closed, the AO's action of initiating second reopening of the same assessment year for the same reasons was bad in law. He pointed out that that the original assessment of the assessee was completed u/s. 143(3) of the Act on 14/12/2012. Thereafter, the first reassessment proceedings u/s. 147 of the Act was initiated on the company on 21/03/2014. The AO also issued notices u/s. 142(1) and 143(2) of the Act on 23/07/2014 and 31/07/2014. The assessee had filed objections to the reopening vide letter dt. 18/01/2014. According to the ld. counsel of the assessee, this reassessment proceedings was not terminated and remained pending. In the meanwhile, another notice u/s. 148 of the Act dt. 30/03/2017, was issued once again reopening the assessment u/s. 147 of the Act. The ld. counsel for the assessee contended that such action of the AO was bad in law. For this proposition, he relied on the following case-law:- CIT vs. P Krishnan Kutty Menon reported in 181 ITR 237 [Kerala] The Indian Tub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile firm M/s. Eastern Mineral and Trading Agency, the ld. CIT DR supported the order of the lower authorities and contended that the generation of notice in the name of the Firm was merely a human/computer error. He drew our attention to page 246 of the paper book which contained the reasons recorded by the AO for reopening the assessment. He pointed out that in the recorded reasons, the AO had recorded the name of the assessee as EMTA Coal Ltd. (erstwhile Partnership Firm M/s. Eastern Mineral and Trading Agency for A.Y. 2010-11). He further referred to the memo of approval issued by Pr. CIT which showed that the approval to issue notice for reopening of assessment had been given in the name of EMTA Coal Ltd. (erstwhile Partnership Firm M/s. Eastern Mineral and Trading Agency for A.Y. 2010-11). Therefore, according to Ld. CITDR, the AO had committed an error while printing the notice issued u/s. 148 of the Act. He argued that this clerical mistake cannot invalidate the reassessment order. According to Ld. CIT DR, procedural law should not pave way for miscarriage of justice, as held by the Hon'ble Supreme Court in M/s. Skylight Hospitality Ltd. Vs. Asst. CIT in 254 Taxman 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings including at appellate proceedings even for the first time before this Tribunal as held by the Hon'ble Supreme Court in NTPC Vs. CIT 229 ITR 383 (SC) if the facts are on record and no investigation into facts are required. He submitted that the omnibus ground challenging the validity of reopening of assessment has to be adjudicated by the ITAT. He submitted that notice was issued on non-existent party and that the notice has not been served as per the requirements of law and hence the consequent order passed u/s. 144/147 was bad in law. 10. The Ld. CIT, DR at this stage submitted that if the assessee is disputing the validity of the service of the notice i.e. the notice is served on some executive of the company and not on the erstwhile partners of the firm, then the defect if any is covered u/s. 292BB of the Act. He argued that the assessee is not clear as to whether its case is that, the notice itself is defective or whether the service of the notice is defective. 11. We have heard rival contentions. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record as well as case laws cited and the orders of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee in the assessment proceedings and there was no doubt in the minds of those who participated about the entity in relation to which the assessment proceedings took place;' 14. We note the Hon'ble Supreme Court answering the question against the Revenue and in favour of the assessee, held that irrespective of the fact that the final order contained the names of the non-existent entity and the successor assessee, since the notice u/s. 143(2) of the Act was issued in the name of a non-existent entity, it rendered the entire proceedings and consequent order to be nullity in the eyes of law. The relevant findings of the Hon'ble Supreme Court, are as follows: 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 1 April 2012; (vii) Seventhly, the assessing officer assumed jurisdiction to make an assessment in pursuance of the notice under section 143(2). The notice was issued in the name of the amalgamating company in spite of the fact that on 2 April 2013, the amalgamated company MSIL had addressed a communication to the assessing officer intimating the fact of amalgamation. In the above conspectus of the facts, the initiation of assessment proceedings against an entity, which had ceased to exist was void ab initio. [Emphasis given by us] 15. It is noted that, in this later judgment, the Hon'ble Supreme Court had considered the judgment rendered by them earlier in the case of Skylight Hospitality Ltd. Vs. Asst. CIT (supra), cited by the ld. CIT, DR. Accordingly, the Hon'ble Apex Court held that issuance of notice u/s. 143(2) in the name of a non-existent person was a jurisdictional defect which could not be cured. We are thus bound to follow the later judgment of the Hon'ble Supreme Court. 16. It is noted that, this identical legal issue came up for consideration before the Hon'ble Delhi High Court in the case of Savita Kapila vs. ACIT (426 ITR 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar to that of the ld. CIT, DR in the present case. Relying upon the provisions of Section 292B of the Act and the decision rendered in the case of Skylight Hospitality Ltd. Vs. Asst. CIT (supra), the Revenue contended that the mistake of issuance of notice in the name of non-existent person was a curable defect. For the sake of convenience, the relevant extracts of the Revenue's submissions are set out below, 17. Mr. Zoheb Hussain further submitted that the facts of the present case were distinguishable from the cases relied upon by the petitioner wherein Courts had quashed notices sent to non-existent entities, as in all such cases the information of such non-existence was available with the Assessing Officer prior to the issuance of notice. In support of his submission, he relied upon the decision in the case of Pr. Commissioner of Income-tax v. Maruti Suzuki India Limited [2019] 416 ITR 613 (SC), wherein the Supreme Court had rendered the proceedings null and void on the basis of the following observation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting company. In that case, Department by very nature of transaction was aware about the amalgamation. However, the said judgment nowhere states that there is an obligation upon the legal representative to inform the Income-tax Department about the death of the assessee or to surrender the PAN of the deceased assessee. 35. This Court is of the opinion that issuance of notice upon a dead person and non-service of notice does not come under the ambit of mistake, defect or omission. Consequently, Section 292B of the Act, 1961 does not apply to the present case. 36. In Skylight Hospitality (supra) notice was issued to Skylight Hospitality Pvt. Ltd. instead of Skylight Hospitality LLP. In that factual context, this Court had observed, Noticeably, the appellant having received the said notice, had filed without prejudice reply/letter dated April 11, 2017. They had objected to the notice being issued in the name of the company, which had ceased to exist. However, the reading of the said letter indicates that they had understood and were aware, that the notice was for them. It was relied and dealt with by them. The Supreme Court while dismissing the SLP had also observed In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provision 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. The jurisdiction assumed by the Assessing Officer to issue notice under Section 148 of the Act to non-existing company is substantive illegality and not the procedural violation of the nature adverted to in Section 292-B of the Act. The substantive defective notice issued against a non-existing company is not curable. On this ground alone, without adjudicating upon the other issues raised by the petitioner inasmuch as the limitation aspect, change of opinion, non-existence of tangible material and non-failure on the part of the assessee disclosing full and true material facts need not be examined. Without going into these aspects, the writ petition requires to be allowed on the ground of issua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment. Under these circumstances, we have to hold that the re-opening of assessment is bad in law. 4.2. This Kolkata 'A' Bench of the Tribunal in the case of M/s. Beekay Steel Industries Ltd. vs. DCIT, CC-XXX, Kolkata in ITA No. 105/Kol/2015, order dated 31.05.2017 considered the legal issue and the propositions of law laid down by various High Courts and held as follows: 4.4. The Hon'ble Bombay High Court in the case of Tao Publishing (P) Ltd. v. Dy. CIT reported in (2015) 370 ITR 135 (Bom.), has held as follows:- 10. As stated above, the reasons supplied to the Petitioner do not disclose that there was any failure on the part of the Petitioner to provide all the material facts. That being the position, this ground could not have been taken up against the Petitioner at the time of disposing of the objections. Once this was not the basis for issuance of notice for Reassessment, it cannot be held against the Petitioner that the Petitioner had failed to make a true and full disclosure. It will have to be held that the Petitioner did not fail to make full and true disclosure of all material facts. The jurisdictional requirement for carrying out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to Section 147 of the Act. In this case no tangible materials have come to the possession of the Assessing Officer subsequent to the Assessment Order u/s. 143(3). Re-opening is done based on the same material and record and hence it is bad in law. As far as the contention, that there is a change in opinion is concerned, we are unable to agree with the ld. Counsel for the assessee as there was neither a query on this issue by the Assessing Officer during the original assessment proceedings, nor there was a reply by the assessee. Hence there was no opinion formed. Thus, the question of change of opinion does not arise. 4.9. In any event, as we have held that the re-opening is bad in law as it does not fulfil the requirement of the Proviso to Section 147 of the Act, and as no tangible material has come to the possession of the Assessing Officer, we quash the assessment and allow the appeal of the assessee. 5. In the result, the appeal of the assessee is allowed. 5.1. Applying the propositions of law laid down in the above referred case-law to the facts of the case on hand, I hold that the re-opening of assessment is bad in law. 6. In the result appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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