ITO 23 (3)(2), MUMBAI vs. SANDHYA ENTERPRISES, MUMBAI

Date of Hearing : 23.05.2022 Date of Pronouncement : 28.06.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. The appeals and cross objections are filed by the revenue and assessee in the case of M/s. Sandhya Enterprises against common order of the Learned Commissioner of Income Tax (Appeals)-34, [hereinafter in 3 7724, 7767 & 7729/MUM/2019 M/s. Sandhya Enterprises & M/s. Sankeshwar Enterprises short “Ld.CIT(A)”] dated 12.09.2019 for the A.Y. 2007-08 and 2008-09. In the case of M/s. Sankeshwar Enterprises, cross appeals are filed by the revenue and assessee; and cross objection is filed by the assessee, against order of the Learned Commissioner of Income Tax (Appeals)-12, Mumbai dated 12.09.2019 for the A.Y. 2009-10.

5 7724, 7767 & 7729/MUM/2019 M/s. Sandhya Enterprises & M/s. Sankeshwar Enterprises 6. Considered the rival submissions and material placed on record, we observe that the partnership was dissolved and the Ex-partner Shri Sushil M. Mehta continued the erstwhile business of partnership as proprietorship. The assessee has intimated the same to the Assessing Officer when he reopened the assessment even then Assessing Officer completed the assessment in the name of the erstwhile partnership firm. It is also brought to our notice that the proprietor Shri Sushil M. Mehta has declared the relevant transactions relating to past dissolution of firm and offered the same to taxation in the existing proprietorship business. It amounts to double taxation. Therefore, in the similar situation ITAT Calcutta Bench in the case of DCIT v. Mani Square Ltd., (supra) has passed the order in favour of the assessee, for the sake of clarity it is reproduced below: - “From a reading of the reply of assessee, it is discernible that the Assessing Officer admitted the fact that according to his understanding the action taken by him is correct, as reopening proceedings are being initiated against NPPL and not in the name of the assessee company. The Assessing Officer by doing so, has not understood the legal implication when NPPL has already merged with the assessee company. The Assessing Officer failed to take note that, by merger NPPL has lost its independent identity and from the date of amalgamation, ie, on 01-04-2008 it does not exist in the eyes of law and only the successor company, ie, in this case MSI, that is the assessee-company only exists. It is a trite law that after amalgamation, amalgamating company does not remain in existence and income up to the date of amalgamation should be assessed in the hands of the amalgamated company, ie, successor company in like manner and to the same expenditure as it would have been assessed in the hands of the amalgamating company, [Para 8)

6 7724, 7767 & 7729/MUM/2019 M/s. Sandhya Enterprises & M/s. Sankeshwar Enterprises Where the notice for reopening under section 148 was issued in the name of a person who is not existing in the eyes of law and when undisputedly no notice was issued under section 148 against the successor company before passing the reassessment order, vitiates the entire actions and being per se itself illegal. [Para 12] Where the Assessing Officer issued notice for reopening under section 148 only against the amalgamating company NPPL and not against the assessee-company which was the amalgamated/ successor company, the assessment though made in the name of assessee company is void because, even after the Assessing Officer came to know that NPPL got amalgamated with the assessee company he did not care to issue 148 and 143(2) notices to the assessee company which is sine qua non and, therefore, the omission in following the law clearly goes to the root of the matter and makes the order 'null' in the eyes of law. [Para 15] The main issue of the revenue was as to whether section 2928 comes to the rescue of the Assessing Officer, though the Assessing Officer issued only notice of reopening under section 148 to the amalgamating company NPPL [Para 16] In simple words, section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, the same cannot be relied upon for curing a jurisdictional defect in the notice. In other words, if the notice, summons or other proceeding initiated by an authority suffers from an inherent lacuna affecting jurisdiction, the same cannot be cured by having resort to section 2928, section 292B can be resorted to only in the case of procedural irregularity and not jurisdictional defect. [Para 16] In the present case, the notice under section 148 was issued in the name of a non-existent company which is clearly a case of jurisdictional defect and not a mere procedural irregularity. [Para 17]

8 7724, 7767 & 7729/MUM/2019 M/s. Sandhya Enterprises & M/s. Sankeshwar Enterprises in the non-existing firm is bad in law and we do not see any reason to interfere with the findings of the Ld.CIT(A). Accordingly, the appeals filed by the Revenue are dismissed and appeal/cross objections filed by the assessee are allowed.

Order pronounced in the open court on 28th June, 2022