RRJ INFRA INDUSTRIES PVT LTD vs. PRINCIPAL COMMISSIONER OF INCOME TAX AND 4 OTHERS

Heard Shri Shashi Nandan, Senior Advocate, assisted by Shri Suyash Agarwal, learned counsel for the petitioner and Shri Krishna Agarwal, learned counsel for the revenue.

Challenge has been raised to the re-assessment order dated 29.3.2022 passed in the case of the assessee M/s Kanpur Builders Pvt. Ltd. whereby it has been assessed to tax on alleged escaped income Rs. 189,15,91,521/-. Undisputedly, that re-assessment proceeding had been drawn up under Section 147 and 148 of the Income Tax Act 1961 (hereinafter referred to as the Act), on certain information received by the assessing officer arising from the transaction of sale of immovable property of value Rs. 68 crores.

Undisputedly, re-assessment notice was issued on 28.3.2021 in the name and at the address of the company M/s Kanpur Builders Pvt. Ltd. It remained unresponded. Consequently, re-assessment order was also passed ex-parte. In such facts, submission of learned senior counsel for the petitioner is, earlier, there existed two companies M/s Kanpur Builders Pvt. Ltd. (hereinafter referred to as the 'transferor') and M/s Kanpur Constructions Pvt. Ltd. (hereinafter referred to as the 'transferee'). Those two companies

Consequently, the assessing authority of the transferor company has passed the impugned re-assessment order taking a view that is in conflict with the opinion formed by the assessing authority of the present petitioner in the original assessment proceedings, for the same Assessment Year, vide assessment order dated 30.12.2017. 9. In such facts, it has been submitted, in the first place, the transferor company was not in existence on the date of issue of the re-assessment notice dated 28.3.2021. Therefore, the re-assessment proceedings lack in juri iction. Second, no re-assessment notice or procedural notice ever came to be served on the present assessee as may have given rise to a valid juri iction with the assessing authority to reassess either the petitioner or the transferor company. Third, it has been submitted, in face of the original assessment order dated 30.12.2017 passed in the case of the present petitioner, a different view may never have been taken on a simple change of opinion that too without considering the material and reasoning contained in the original assessment order dated 30.12.2017. 10. On the other hand, learned counsel for the revenue would contend, the transferor company never surrendered its PAN identity and it never informed the revenue about the merger. Second, referring to the existence of the material to indicate escapement of income (in the original assessment order dated

2017), it has been submitted, there exists material to subject the petitioner to tax. Third, inasmuch as the present petitioner did not appear and participate in the re-assessment proceedings, it cannot be permitted to seek indulgence of the Court in exercise of extra-ordinary juri iction of this Court under Article 226 of the Constitution of India. It may be relegated to the forum of alternative remedy. Last, it has been submitted, in any case, provisions of Section 150 of the Act would protect the revenue. To that extent, learned counsel for the revenue prays leave of the Court to issue fresh re-assessment notice to the petitioner company for A.Y. 2015-16. He has also placed reliance on the decision of the Supreme Court in Principal Commissioner of Income Tax (Central)-2 Vs. Mahagun Realtors (P) Ltd., (2022) SCCOnline SC 407. 11. Having heard learned counsel for the parties and having perused the record, it is a sine qua non that a re-assessment proceedings may arise only on a valid assumption of juri iction. There is no plenary power to reassess an assessee. In the present case, it is undisputed to the revenue that on 28.3.2021, there did not exist the transferor company i.e. M/s Kanpur Builders Pvt. Ltd., in that status or corporate identity. That corporate entity stood merged in the transferee company i.e. the present petitioner, with effect from 1.4.2014 i.e. with effect from "previous year" 2014-15 as would relate to the A.Y. 2015-16. 12. Consequently, the decision being relied upon by learned counsel for revenue would rather support the petitioner's case. In that decision, merger took place with effect from 01.04.2006 whereas assessment year in dispute was A.Y. 2007-08 ("previous year" 2006-07). Thus, the facts of the present case are similar to those involved in the decision relied upon by the learned counsel for the revenue. In paragraph 17 of the said decision, it was observed as below:

The relevant provision of the Act is Section 170. It inter alia, provides that where a person carries on any business or profession and is succeeded (to such business) by some other person (i.e., the successor), the predecessor shall be assessed to the extent of income accruing in the previous year in which the succession took place, and the successor shall be assessed in respect of income of the previous year in respect of the income of the previous year after the date of succession."

Consequently, it must be noted, the income for the A.Y. 2015- 16 had to be assessed at the hands of the petitioner/transferee company and not the transferor. In fact, that was also done by means of the assessment order dated 30.12.2017. 14. What prompted the assessing authority of the transferor company to subsequently issue the reassessment notice to that company, well after the completion of the original assessment order against the present petitioner as also well after the effective date 01.04.2014 is not for the Court to speculate. As a direct consequence in law, that notice was inherently and fundamentally defective. The reasoning contained in Commissioner of Income Tax (Central)-2 Vs. Mahagun Realtors (P) Ltd. (supra) relied upon by learned counsel for the revenue is inapposite to the facts of the present case. There proceedings had arisen from the regular assessment and not by way of reassessment. It also does not appear, in that case, the assessee/transferee company had no notice of such proceedings.

Since issue of lack of juri iction was not involved in that case, the reasoning had emerged that no fundamental or inherent lack of juri iction in the assessment proceedings may be concluded against the transferor company. Here, proceedings being

In the present case involving reassessment, it has material bearing that the reassessment notice was never issued against the transferee company i.e. the present petitioner. In fact, no notice was ever issued to the petitioner company at its email address etc.

Also, in the context of reasssessment proceedings, the assessing authority is always required to act mindful of the earlier assessment, if any. On the own showing of the revenue, the assessing authority of the transferor company has proceeded to issue the reassessment notice without examining the record of that assessee and without taking note of the event of merger and the subsequent order dated 30.12.2017 passed in the case of the merged entity i.e. the present petitioner. Unless that assessment order had been first examined by the assessing authority, it is difficult to visualize a situation where he may have entertained any "reason to believe" that any income had escaped assessment. The present observation has been made conscious of the discussion in the original assessment order dated 30.12.2017 wherein not only the fact of the merger of the two entities had been taken note of but also that assessing authority had taken note of the transaction of sale of immovable property at Rs. 68 crores. That transaction alone appears to have given rise to re-assessment proceedings against the transferor company. Therefore, it does appear, it has escaped the attention of assessing authority to examine the effect of original assessment order dated 30.12.2017. 18. What exact inference the assessing authority may draw on such material is left to be considered by that authority. Any observation made in this order may not bind that authority to that extent.

However, for the reason noted above, it must be concluded, at present, the assessment order made against the transferor company is without juri iction. It deserves to be set aside.

Since, the inherent juri iction is lacking and the impugned order has arisen thereon without opportunity of hearing granted to the petitioner, no useful purpose would be served in relegating the petitioner to the forum of alternative remedy, that too after exchange of affidavits. Accordingly, writ petition is allowed and the impugned order dated 29.3.2022 is set aside leaving it open to the revenue to proceed in accordance with law keeping in mind the provision contained in Section 150 of the Act as also the observations made herein. Order Date :- 17.2.2023 Prakhar (Saumitra Dayal Singh, J.) (Pritinker Diwaker, Acting Chief Justice) PRAKHAR SRIVASTAVA High Court of Judicature at Allahabad