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TMI Blog2019 (5) TMI 1968X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was amalgamated w.e.f. 01 January 2014 vide scheme of amalgamation between assessee company and M/s. Value First Digital Media Private Limited and their respective shareholders and creditors under sections 391 and 394 of the Companies Act, 1956. The scheme has been sanctioned by the Honourable High Court of Delhi, vide its order dated 11th August 2014 and 19 August 2014. Consequent to the scheme become effective w.e.f. 01st January 2014 the Assessee company stands dissolved without being wound up and was not having legal existence from that date. Therefore, the assessment completed on a non-existent company is not legally valid. 4. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer in making the addition on account of mismatch of the 26 AS figure and the income declared in the return of income. So far as the argument of the assessee that the assessment has been framed of a nonexistent company is concerned he rejected the same on the ground that the assessee itself had filed the appeal in the case of a nonexistent company and directed the Assessing Officer to bring the amount to tax in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions dated and Application u/s 250(5) seeking permission to raise Additional Grounds, which are reproduced above in Para 7.2 and 7.3. 8.12 The Order Sheet Entry made in the appellate proceedings on 06.09.17 is as under: "06.09.17 1. Sh. Ram Avtar Sharma, CA, attended and filed. i) Letter dated 06.09.17 ii) Application u/s 250 (5) seeking permission to raise Additional Grounds. iii) Written Submissions dated 06.09.17. 2. It was pointed out to the Learned Counsel that the issue of the Appeal being filed by a Non existing Company was raised by the undersigned on when the Appeal was party discussed. Now, rather than answering that issue, Additional Grounds are being raised. Case discussed." 8.13 It is seen that once the Learned Counsels Sh. Umesh Chand Goyal, CA and Sh. Ram Avtar Sharma, CA were confronted with the contradiction that on one hand, they claimed that the Appellant Company stood Dissolved and was not having any Legal Existence from 01.01.14, but on the other hand they were vehemently arguing regarding the Appeal filed by a non existing Company ; the Learned Counsels, rather than replying to that query, have sought permission to raise Additional Grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .0 Addition of business income not pertaining to the Appellant 3.1 Without prejudice to the above, on the facts and circumstances of the case the Ld. AO erred in computing the taxable income of the appellant at Rs. 11,47,346 as against returned loss of Rs. 33,88,009 claimed by the appellant. 3.2 Without prejudice to the above, on the facts and circumstances of the case the Ld. AO erred in making addition amounting to Rs 45,35,355 by treating Business Income of the appellant of AY 2014-15 for rendering services whereas the same does not pertain to the appellant. 4.0 Setting off of unabsorbed depreciation against the assessed income 4.1 Without prejudice to the above, the Ld. AO erred in not setting off unabsorbed depreciation of Rs 48,32,999 with the assessed income of Rs 11,47,346 for AY 2014-15. 6. The Ld. Counsel for the assessee at the outset submitted that the Hon'ble Delhi High Court in the case of Spice Entertainment Limited Vs. CIT vide ITA No.475 and 476 / Del/2011 order dated 03.08.2011 has decided an identical issue and has held that the framing of assessment against the nonexistent entity / person goes to the root of the matter which is not a procedural irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Delhi High Court vide order dated 11.08.2014 and 19.08.2014 which is effective from 01.01.2014 the assessee in my opinion cannot argue that assessment has been framed on a dead company or a nonexistent company. 9. I find the Hon'ble Delhi High Court in the case of M/s. Spice Infotainment Ltd. (supra) relied on by Ld. Counsel for the assessee has observed as under :- 8. 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. This position is even accepted by the Tribunal in para-14 of its order extracted above. Having regard this consequence provided in law, in number of cases, the Supreme Court held that assessment upon a dissolved company is impermissible as there is no provision in Income-Tax to make an assessment thereupon. In the case of Saraswati Industrial Syndicate Ltd. Vs. CIT, 186 ITR 278 the legal position is explained in the following terms: '"The question is whether on the amalgamation of the Indian Sugar Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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. 9. Section 481 of the Companies Act provides for dissolution of the company. The Company Judge in the High Court can order dissolution of a company on the grounds stated therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. Smith (Plant Hire) Ltd. Vs. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342 (CA) that "once a company is dissolved it becomes a non-existent party and therefore no action can be brought in its name. Thus an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter had been dissolved". 10. 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to Section 292 B. 13. The issue again cropped up before the Court in CIT Vs. Harjinder Kaur (2009) 222 CTR 254 (P&H). That was a case where return in question filed by the assessee was neither signed by the assessee nor verified in terms of the mandate of Section 140 of the Act. The Court was of the opinion that such a return cannot be treated as return even a return filed by the assessee and this inherent defect could not be cured inspite of the deeming effect of Section 292B of the Act. Therefore, the return was absolutely invalid and assessment could not be made on a invalid return. In the process, the Court observed as undersaving given our thoughtful consideration to the submission advanced by the learned Counsel for the appellant, we are of the view that the provisions of Section 292B of the 1961 Act do not authorize the AO to ignore a defect of a substantive nature and it is, therefore, that the aforesaid provision categorically records that a return would not be treated as invalid, if the same "in substance and effect is in conformity with or accor ..... X X X X Extracts X X X X X X X X Extracts X X X X .....
17. We may, however, point out that the returns were filed by M/s Spice on the day when it was in existence it would be permissible to carry out the assessment on the basis of those returns after taking the proceedings afresh from the stage of issuance of notice under Section 143 (2) of the Act. In these circumstances, it would be incumbent upon the AO to first substitute the name of the appellant in place of M/s Spice and then issue notice to the appellant. However, such a course of action can be taken by the AO only if it is still permissible as per law and has not become time barred.
10. I, therefore, deem it proper to restore the issue to the file of the Assessing Officer with a direction to pass appropriate order in the light of the decision of Hon'ble Delhi High Court in the case of Spice Infotainment Limited (supra). Since the ld. Counsel for the assessee did not argue the other grounds on merit, therefore, these grounds are dismissed. The appeal filed by the assessee is accordingly allowed for statistical purpose.
11. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 02.05.2019. X X X X Extracts X X X X X X X X Extracts X X X X
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