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TMI Blog2023 (6) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... not the one in which the search is conducted or requisition is made. 2. That Ld.CIT(A) erred in law is not taking note of the amendment in u/s 153C of the I.T. Act which had already been made w.e.f. 01.04.2017, clarifying that the assessments are to be made "for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. 3. The Ld. CIT(A) failed to appreciate that, if his reasoning is applied, it would lead to the peculiar situation where the assessment/s for the years subsequent to the year of the search would have to made u/s 153C (where there would be not incriminating material) and some of the six assessment years prior to the year of the search would be left out, thereby frustrating the scheme of assessment contained in section 153C r.w.s. 153A of the I.T. Act. 4. The Ld. CIT(A) has erred in law and facts in quashing the assessment order holding that the assessment order is framed in the name of BJN Holdings Ltd. and overlooked the fact that the assessment order was passed in the name of M/s. BJN Holdings (1) Ltd. (the successor company) which is clearly mentioned in the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hereby deleted. 3. The Ld. CIT(A) has erred in law and facts in quashing the assessment order holding that the assessment order is framed in the name of BJN Holdings Ltd. and overlooked the fact that the assessment order was passed in the name of M/s. BJN Holdings (I) Ltd. (the successor company) which is clearly mentioned in the assessment order. 4. The Ld. CIT(A) has also ignored the fact that such winding up of the company was never brought to notice of the AO prior to 10.10.2018 and therefore the notices issued initiating the proceedings u/s 153C were valid. In addition, the following case law may kindly be considered:- Principal Commissioner of Income Tax Vs. M/s. Mahagun realtors (P.) Ltd. (Supreme Court) wherein the Hon'ble Supreme Court held: "In the light of the facts, what is overwhelmingly evident is that the amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group. A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL. Though that ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the facts of each case. 6. In the present case, the decision rendered in the above case will squarely apply and not the judgment in Maruti Suzuki Ltd. relied upon the Ld. CIT(A) as the assessee himself has been responding to notices of the AO and has also profiled a writ petition W.P. (C) No. 1708/2014 before the Hon'ble Delhi High Court against the assessment proceedings u/s 153C of the I.T. Act under the name of M/s. BJN Holdings Ltd. although by his own admission the company seized to exist prior to the date of filing the writ petition." 8. Heard the arguments of both the parties and perused the material available on record. 9. On the facts of the case and the order passed by the revenue authorities, the applicability of the decision of the Hon'ble Apex Court in the case of PCIT Vs. Maruti Suzuki India Ltd. in Civil Appeal No. 5409 of 2019 vide order dated 25.07.2019 is examined. The said judgment reads as under: "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 affir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 Delhi12 ("Skylight Hospitality LLP"), which was confirmed by this Court on 6 April 2018 dealt with a situation where a notice under Section 148 was issued in the name of a non-existent private limited company. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956. The amalgamating company ceases to exist in the eyes of law [Saraswati Industrial Syndicate Ltd. v CIT16 ("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. -PCIT v Nokia Solutions & Network India (P) Ltd. ("Nokia Solutions") -Spice Entertainment -Similarly, a notice to the amalgamating company, subsequent to the amalgamation becoming effective and despite the fact of the amalgamation having been brought to the notice of the assessing officer, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. (Revenue's SLP dismissed against the same vide order dated 19 November 201828 passed in SLP(C) Diary No. 40486 of 2018). -Nokia Solutions (vii) The judgment of the Delhi High Court in Skylight Hospitality LLP is distinguishable and is not applicable to the facts of the present case: * The judgment was rendered on its own peculiar facts. * In that case, the tax evasion petition mentioned the factum of conversion of the company into a Limited Liability Partnership29, which was also noticed in the reasons to believe and approval of the Principal Commissioner (before issuance of a notice under Section 148 of the Act). However, only because of a clerical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal 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. See: Halsbury's Laws of England (4th edition volume 7 para 1539). Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity." (iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, the Delhi High Court quashed assessment orders which were framed in the name of the amalgamating company in: (i) Dimension Apparels; (ii) Micron Steels; and (iii) Micra India. 21. In Dimension Apparels, a Division Bench of the Delhi High Court affirmed the quashing of an assessment order dated 31 December 2010. The Respondent had amalgamated with another company and thus, ceased to exist from 7 December 2009. The Court rejected the argument of the Revenue that the assessment was in substance and effect in conformity with the Act by reason of the fact that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 learned Senior Counsel appearing for the parties. We do not find any reason to interfere with the impugned judgment(s) passed by the High Court. In view of this, we find no merit in the appeals and special leave petitions. Accordingly, the appeals and special leave petitions are dismissed." 25. The doctrine of merger results in the settled legal position that the judgment of the Delhi High Court stands affirmed by the above decision in the Civil Appeals. 26. The order of assessment in the case of the respondent for AY 2011-12 was set aside on the same ground. This resulted in a Special Leave Petition by the Principal Commissioner of Income Tax-6 Delhi. The Special Leave Petition was dismissed by a two judge Bench of this Court consisting of Hon'ble Mr. Justice Rohinton Fali Nariman and Hon'ble Ms Justice Indu Malhotra on 16 July 2018 in view of the order dated 2 November 2017 governing Civil Appeal No. 285 of 2014 in Spice Enfotainment and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Delhi High Court. Skylight Hospitality, an LLP, had taken over on 13 May 2016 and acquired the rights and liabilities of Skylight Hospitality Pvt. Ltd. upon conversion under the Limited Liability Partnership Act 2008. It instituted writ proceedings for challenging a notice under Sections 147/148 of the Act 1961 dated 30 March 2017 for AY 2010-2011. The "reasons to believe" made a reference to a tax evasion report received from the investigation unit of the income tax department. The facts were ascertained by the investigation unit. The reasons to believe referred to the assessment order for AY 2013-2014 and the findings recorded in it. Though the notice under Sections 147/148 was issued in the name of Skylight Hospitality Pvt. Ltd. (which had ceased to exist upon conversion into an LLP), there was, as the Delhi High Court held "substantial and affirmative material and evidence on record" to show that the issuance of the notice in the name of the dissolved company was a mistake. The tax evasion report adverted to the conversion of the private limited company into an LLP. Moreover, the reasons to believe recorded by the assessing officer adverted to the approval of the Princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenge, it is evident that the peculiar facts of the case weighed with this Court in coming to this conclusion that there was only a clerical mistake within the meaning of Section 292B. The decision in Skylight Hospitality LLP has been distinguished by the Delhi, Gujarat and Madras High Courts in: (i) Rajender Kumar Sehgal; (ii) Chandreshbhai Jayantibhai Patel; and (iii) Alamelu Veerappan. 30. There is no conflict between the decisions of this Court in Spice Enfotainment (dated 2 November 2017) 36 and in Skylight Hospitality LLP (dated 6 April 201837). 31. Mr. Zoheb Hossain, learned Counsel appearing on behalf of the Revenue urged during the course of his submissions that the notice that was in issue in Skylight Hospitality Pvt. Ltd. was under Sections 147 and 148. Hence, he urged that despite the fact that the notice is of a jurisdictional nature for reopening an assessment, this Court did not find any infirmity in the decision of the Delhi High Court holding that the issuance of a notice to an erstwhile private limited company which had since been dissolved was only a mistake curable under Section 292B. A close reading of the order of this Court dated 6 April 2018, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... predecessor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession; (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor, and all the provisions of this Act shall, so far as may be, apply accordingly. (3) When any sum payable under this section in respect of the income of such business or profession for the previous year in which the succession took place up to the date of succession or for the previous year preceding that year, assessed on the predecessor, cannot be recovered from him, the 99[Assessing] Officer shall record a finding to that effect and the sum payable by the predecessor shall thereafter be payable by and recoverable from the successor and the successor shall be ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess and the liability to pay tax are not conditional on the validity of the notice: the liability to pay tax is founded in the charging sections and not in the machinery provisions to determine the amount of tax. Reliance was also placed on the decision in Maharaja of Patiala v CIT ("Maharaja of Patiala"). That was a case where two notices were issued after the death of the assessee in his name, requiring him to make a return of income. The notices were served upon the successor Maharaja and the assessment order was passed describing the assessee as "His Highness...late Maharaja of Patiala". The successor appealed against the assessment contending that since the notices were sent in the name of the Maharaja of Patiala and not to him as the legal representative of the Maharaja of Patiala, the assessments were illegal. The Bombay High Court held that the successor Maharaja was a legal representative of the deceased and while it would have been better to so describe him in the notice, the notice was not bad merely because it omitted to state that it was served in that capacity. Following these two decisions, this Court in Jai Prakash Singh held that an omission to serve or any defec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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