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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI PAVAN KUMAR GADALE
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 16.03.2020 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
The assessee has raised the following grounds of appeal: “1. On the facts and circumstances of the case and in law, the learned CIT Appeal erred in dismissing the ground of reopening the case u/s 148 of the income tax Act 1961. The reopening is bad in law and shall be quashed.
On the facts and circumstances of the case and in law, the issuance of notice u/s 148 of the Act and making reassessment u/s 147 of the Act is bad in law, invalid and ab initio void, as no income is escaped by the appellant, disturbing the finding of
2 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) completed assessment is purely a case of change of opinion and against the principals propounded by the Hon'ble Apex Court in the matter of kelvinator of india (320 ITR 561).
On the facts and circumstances of the case and in law, there was no reason to believe that income had escaped assessment and no tangible material was available with the department at the time of issuing 148 notice.
On the facts and circumstances of the case and in law, the scrutiny was selected u/s. 143(2) under CASS during original assessment with the reason "Large Security Premium received", during original assessment same was thoroughly scrutinized, scrutiny/reopening cannot be done on the same reason again, order passed u/s 147 shall be invalid and kindly be quashed.
On the facts and circumstances of the case and in law, notice u/s 148 of the IT Act 1961 dated 27.03.2019 in which the name of the company is mentioned M/s Stellar Credit and E Trading Pvt Ltd, But the company whose name notice has been issue had been merged with M/s Gyanshankar Investment and Trading Company Pvt. Ltd vide National Company Law Tribunal (NCLT) order dated 29.09.2017 in the scheme of amalgamation (copy enclosed). Therefore, notice in the name of non - existing company is null and void. The appellant had duly informed and submitted the letter for cancellation of pan along with NCLT merger order vide letter dated 13.03.2019 (before issuing reopening notice u/s 148 of the Act) regarding merger of the company. The same is also held in PCIT vs Maruti Suzuki India Ltd S [2019] 107 taxmann.com 375 (Supreme Court) Sumit Balkrishna Gupta vs ACIT, [2019] 112 taxmann.com 93 (Bombay - HC).
On the facts and circumstances of the case and in law, the learned CIT Appeal erred in dismissing the ground that Assessing Officer has erroneously made an addition of Rs.28,80,00,000/- under section 68 of the Income Tax Act, 1961 being amount received on account of Share capital and Share premium, without considering the facts of the case.
On facts and circumstances of the case, the learned CIT Appeal erred in dismissing the ground that the learned Assessing officer has not provided Cross Examination with the alleged parties as categorically asked during the reassessment proceeding.
On facts and circumstances of the case, the learned CIT Appeal erred in dismissing the ground that, the learned Assessing officer has not provided any statement or contrary documentary evidence which was duly asked during the re- assessment proceedings.
The appellant craves leave to add, alter, amend or modify any or all grounds till the disposal of the Appeal.”
First of all we will adjudicate ground no. 5 vide which the assessee has challenged the reopening proceedings as well as
3 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) the consequent assessment framed as invalid and nullity on the ground that the notice under section 148 dated 27.03.2019 was issued in the name of M/s. Stellar Credit E-Trading Pvt. Ltd. which is a non existent company as it has been merged with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. vide order dated 29.09.2017 under the scheme of amalgamation as approved by National company Law Tribunal(hereinafter called as NCLT).
The facts in brief are that the return of income was filed on 15.09.2012 declaring an income of Rs.20,04,960/- which was revised on 25.01.2013 declaring the same income as was returned in the original return of income. Thereafter, the case of the assessee was selected under scrutiny and assessment was framed under section 143(3) of the Act vide order dated 27.03.2015 assessing the total income at Rs.23,67,880/-. Thereafter, a survey action under section 133A of the Act was conducted on the assessee by investigation wing of the department, Mumbai on 21.03.2017 and during the course of survey some evidences were collected and statements were recorded making detailed enquiry about introduction of share capital/share premium in the assesse company. The said information was passed on to the AO of the assessee stating that assessee has received Rs.28,80,00,000/- during the year under consideration by way of share capital/share premium and accordingly the case of the assessee was reopened under section 147 of the Act by issuing notice under section 148 of the Act on 27.03.2019. Pertinent to note that M/s. Stellar Credit E-Trading Pvt. Ltd. with PAN AAFCS 6961G was amalgamated and merged
4 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. on 01.04.2016 in consonance with the order passed by National Company Law Tribunal (hereinafter called as NCLT) dated 29.09.2017 passed in the scheme of amalgamation and the AO was informed by way of an email on 27.11.2018 that M/s. Stellar Credit E-Trading Pvt. Ltd. has been amalgamated and merged with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. and the above order has also been filed with the AO. The assessee – appellant filed on 13.03.2019 a letter to the AO for consideration of PAN of the erstwhile company and same was available before the AO even before reopening the assessment proceedings under section 147 and issuing notice under section 148 of the Act. As stated above the AO issued notice under section 148 of the Act on 27.03.2019 in the name of M/s. Stellar Credit E-Trading Pvt. Ltd. a non existing company cause the same had been merged with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. followed by transfer of all assets and liabilities to the amalgamated company and thus the amalgamating company seized to exist w.e.f. 29.09.2017. With these undisputed facts in the background the case is being adjudicated in the ensuing paras. The Ld. A.R. vehemently submitted before the Bench that the reassessment proceedings have been initiated under section 147 of the Act by issuing notice under section 148 of the Act on 26.04.2019 in the name of a non existent company which has ceased to exist which has been amalgamated and merged w.e.f. 01.04.2016 in accordance with NCLT order dated 29.09.2017 whereby the scheme of amalgamation has been approved w.e.f. 01.04.2016.The issue was also raised before the AO however the AO dismissed the
5 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) plea of the assessee and framed the assessment vide order dated 30.12.2019 under section 143(3) read with section 147 of the Act.
The issue of nullity, the assessment proceedings as well as the consequent reassessment order being invalid and nullity were also raised before the Ld. CIT(A), however, the appeal of the assessee was dismissed by observing and holding as under:
“5.2.18 lt is seen that the NCLT approved the scheme of amalgamation of M/s. Gyanshanker Investment and Trading Co. Private Limited, M/s. Gaji Merecantile Pvt. Ltd. and M/s. Stellar Credit and E-Trading Pvt. Ltd. vide its order dated 29.09.2017. Para number 12(b)(d) of the approved scheme of amalgamation provides for the following:
“The tax implication if any arising out of the scheme is subject to final decision of the Income Tax Authorities. The approval of the scheme by this Hon'ble Court may not deter the Income Tax Authority to scrutinize the tax return filed by the transferee company after giving effect to the scheme. The decision of the Income Tax Authority is binding on the petitioner company."
According to the plain reading of the above order makes it clear that the decision of the Income-tax authority w.r.t. the scrutiny of returns of income is binding. The AC.) has clearly held that the transferor company i.e. M/s Stellar Credit and E-Trading Pvt. Ltd. would continue to be in existence for the purpose of the Income-tax Act till the time limit for completion of assessment: proceedings for A.Y.2017-18 i.e. 31.12.2019. Subsequent, actions, inter alia, such as the payment, of demand raised by the department would be collectible from the amalgamated company viz., M/s Gyanshankar Investment and Trading Co. Private Limited. Thus, the appellant company being Transferor Company would be responsible for its affairs and subject, to assessment or re--assessment for the assessment years prior to amalgamation.
5.2.19 It is also necessary to advert: to the provisions of Section 170 which deal with succession to business otherwise than on death. Section 170 provides as follows:
"170. (1) Where a person carrying on any business or profession (such person hereinafter in this section being referred to as the predecessor) has been succeeded therein by any other person (hereinafter in this section
6 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) referred to as the successor) who continues to carry on that business or profession.—
(a) the predecessor shall be assessed in respect of the income of the previous year in which the succession look 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 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 entitled to recover from the predecessor any sum so paid.
(4) Where any business or profession carried on by a Hindu undivided family is succeeded to, and simultaneously with the succession or after the succession there has been a partition of the joint family property between the members or groups of members, the tax due in respect of the income of the business or profession succeeded to, up to the date of succession, shall be assessed and recovered in the manner provided in section 171, but without prejudice to the provisions of this section.
Explanation.—For the purposes of this section, "income" includes any gain accruing from the transfer, in any manner whatsoever, of the business or profession as a result of the succession"
Thus, as per section 170(l)(a) & (b) of the Act, the predecessor i.e. Stellar Credit And E-Trading Private Limited should be assessed/reassessed for the AY 2012-13 in question which is prior to the PY in which succession took place. Further, in consonance with the provisions of section 170(2) and 170(3), the AO has given a clear cut finding that the predecessor company i.e. M/s Stellar Credit and E-Trading Pvt. Ltd. would continue to be in existence for the purpose of the Income-tax Act till the time limit for completion of assessment proceedings for A.Y.2017-18 i.e. 31.12.2019. Subsequent actions, inter alia, such as the payment of demand raised by the department would be collectible from the successor company viz., M/s Gyanshankar Investment and Trading Co. Private Limited.
7 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) 5.2.20 Further, it is seen that notices issued such as under section 1.48 of the Act was accepted by the appellant and in compliance there to filed a return of income on 26.04.2019. The return of income in response to notice u/s.148 of the Act was filed in the name of Stellar Credit And E-Trading Private Limited under PAN AAFCS6961G. The statutory notices issued under sections 143(2) and 1.42(1) of the Act were accepted by the appellant. The appellant further complied with the notices and submitted the details and evidences called for. The reassessment order dated 30.12.2019 was passed in the name of the transferee company viz., M/s Gyanshankar Investment and Trading Co. Private Limited whjje also mentioning the name of the transferor company viz., M/s Stellar Credit and E-Trading Pvt. Ltd. Moreover, the appellant by filing the present appeal..on 14.01.2020 in the name of M/s. Stellar Credit and E-Trading Pvt. Ltd, has itself accepted the validity of the re- assessment proceedings leading from the issuance of notice u/s 148 to the passing of the reassessment order on 30.12.2019.
5.2.21 In view of the above chronology of facts, it is beyond doubt that the appellant company had understood and was well aware that the notices were meant for it. Therefore, the error or mistake if any, in issuance of notice under section 148 of the Act in the name of M/s. Stellar Credit And E-Trading Pvt. Ltd. is protected and shielded under the provisions of section 292B of the Act which reads as under:
"292-B. Return of Income, etc. not to be invalid on certain grounds.- No return of income, assessment, notice, summons or other proceedings, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions 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 proceedings if such return of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act."
The Hon'ble Delhi High Court in the case of Sky Light Hospitality LLP Vs. Assistant Commissioner of Income Tax, Circle 28(1), New Delhi [2O18] 9O taxmann.com 413 (Delhi) held that notice for re-assessment issued in the name of erstwhile private limited company despite company ceasing to exist as it had been converted into LLP would not invalidate re-assessment proceedings as same was not jurisdictional error, but an irregularity and procedural/technical lapse which could be cured under section 292B of the Act. The Hon'ble Supreme Court dismissed the SLP filed against the aforesaid decision of Hon'ble Delhi High Court vide order elated 06.04.2018 in Sky Light Hospitality LLP Vs. Assistant Commissioner of Income Tax [2018] 92 taxmann.com 93 (SC).
In 90 taxmann.com 413 (Delhi) (supra), the Hon'ble High Court held as under –
The aforesaid provision had come up for consideration before a Division Bench of Hon'ble Delhi High Court in CIT v. Jagat Novel Exhibitors (P.) Ltd.[2013] 356 ITR 559/207 Taxman 243/18 taxmann.com 138 (Delhi). After extensive examination of the case, it was held:—
8 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.)
"28. The aforesaid provision has been enacted to curtail and negate technical pleas due to any defect, mistake or omission in a notice/summons/return. The provision was enacted by Tax Laws (Amendment) Act, 1975 with effect from 1st October. 1975. It has a salutary purpose and ensures that technical objections, without substance and when there is effective compliance or compliance with intent and purpose, do not come in the way or affect the validity of the assessment proceedings..... 29. Object and purpose behind Section 292-B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities. The object and purpose of this Section is to ensure that procedural irregularity(ies) do not vitiate assessments. Notice/summons may be defective or there may be omissions but this would not make the notice/summon a nullity. Validity of a summon/notice has to be examined from the stand point whether in substance or in effect it is in conformity and in accordance with the intent and purpose of the Act. This is the purport of Section 2926. Notice/summons are issued for compliance and informing the person concerned, i.e. the assesses. Defective notice/summon if it serves the intent and purpose of the Act, i.e. to inform the assesses and when there is no confusion in his mind about initiation of proceedings under Section 147/148 of the Act, the defective notice is protected under Section 292B. In such circumstances, the defective notice/summon is in substance and in accordance with the intent and purpose of the Act. The primary requirement is to go into and examine the question of whether any prejudice or confusion was caused to the assessee. If no prejudice/confusion was caused, then the assessment proceedings and their consequent orders cannot and should not be vitiated on the said ground of mistake, defect or omission in the summons/notice."
This judgment had also made reference to decision Venad Properties (P.) Ltd v. CIT [2012] 340 ITR 463/[2013] 212 Taxman 20/[2011] 16 taxmann.com 62 (Delhi) in which Section 282 of the Act relating to service of notices was considered and examined. This section on description/inscription on notice and method/mode of service was held to be procedural in nature and should be interpreted in a practical and pragmatic manner. Procedural rules and requirements were meant to deliver justice and not to hamper cause of justice and lead to miscarriage of justice.
The following paragraphs from Jagat Novel Exhibitors (P.) Ltd. (supra) on objective behind issue of notice, in consequential defect and purpose behind 292-8 of the Act are also relevant:—
'42. In Commissioner of Income Tax v. Anand and Company (1994) 207 ITR 418 (Cal.), it has been observed as under:—
9 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.)
In our view, the Tribunal has taken an unduly technical view of the whole matter. The judiciary in this country has never gone on technical triviality. Even in the litigation of private parties, the courts have shown a wide measure of forgiveness in similar acts of omission or failure as pointed out by learned counsel for the Revenue. 43. In Hind Samachar Limited v. Union of lndia(2011) 330 ITR 266 (P&H) reference was made to Section 292B and Section 139(9) of the Act. In the said case, return of income, filed by the company was signed by someone other than the authorized person. It was observed that the question was of removal of defect, which could be rectified. Reference was made to another decision of the Punjab and Haryana High Court in CIT v. Norton Motors [2005] 275 ITR 595. 44. Bombay High Court in Prime Securities Ltd. v. Varinder Mehta, Assistant Commissioner of Income-tax (2009) 317 ITR 27 (Bom.) has observed that Section 292B of the Act makes it clear that a return of income shall not be treated as invalid merely by reason of any mistake, defect or omission .if the return of income is in substance and effect in conformity with or according to the intent and purpose of the Act The return of income, if not signed by the authomed signatory, as contemplated under Section 140 of the Act, would be a mistake, defect or omission stated in Section 2928 of the Act. 45. We may note, observations of the Supreme Court in Balchand v. ITO(1969) 72 ITR 197 (SC) wherein it was held that in construing a statutory notice, extraneous evidence may be looked into to find out whether the technical defects or lacuna had any effect on the validity of the notice. The facts had revealed that though there were defects in drafting the preamble of the notice, it did not affect its validity as the notice itself clearly informed the assessee that he had to file a return of income for the relevant year. 46. In Chief Forest Conservator, Government of Andhra Pradesh v. Collector (2003) 3 SCC 472 the Supreme Court examined the question of misdescription or misnomers of parties and the effect thereof and it was held as under:— "12. It needs to be noted here that a legal entity - a natural person or an artificial person - can sue or be sued in his/its own name in a court of law or a tribunal It is not merely a procedural formality but is essentially a matter of substance and considerable significance. That is why there are special provisions in the Constitution and the Code of Civil Procedure as to how the Central Government or the Government of a State may sue or be sued. So also there are special provisions in regard to other juristic persons specifying as to how they can sue or be sued. In giving description of a party it will be useful to remember the distinction between misdescription or misnomer of a party and misjoinder or non-joinder of a party suing or being sued. In the case of misdescription of a party, the court may at any stage of the suit/proceedings permit correction of the cause- title so that the party before the court is correctly described,
10 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) however, a misdescription of a party will not be fatal to the maintainability of the suit/proceedings. Though Rule 9 of Order 1 CPC mandates the that no suit shall be defeated by reason of the misjoinder or non-joinder of parties, it is important to notice that the proviso thereto clarifies that nothing in that Rule shall apply to nonjoinder of a necessary party. Therefore, care must be taken to ensure that the necessary party is before the court, be it a plaintiff or a defendant, otherwise, the suit or the proceedings will have to fail. Rule 10 of Order 1 CPC provides remedy when a suit is filed in the name of the wrong plaintiff and empowers the court to strike out any party improperly joined or to implead a necessary party at any stage of the proceedings." 47 One of the questions, which arises for consideration, in such cases is whether there was prejudice. The test to be applied is whether the party receiving the notice would be in doubt whether the said notice is meant for him or not. If the recipient of notice was not in doubt that it was meant for him the misnomer or misdescription is not fatal. Thus failure to mention the words "Principal Officer" on the notices is not fatal.'
In Jagat Novel Exhibitors Pvt. Ltd. (supra) reference was made to MahadevGovindGhargev. Special Land Acquisiton Officer Upper Krishna Project [2011] 6 SCO 321. SardarAmarjit Smgh Kalara v. Pramod Gupta [2003] 3 SCO 212 and State of Punjab v. ShamlalMurari [1976] 1 SCO 719. Several decisions including CIT v. K. Adinarayana Murthy [1967165 1TR 607 (SC) and CIT v. Kurban Hussain IbrahirnjiMithibotwala f1971J 82 /TR 821 (SC) referred to by the assesses to support his contention that Section 292B of the Act should not be invoked as the notices issued were defective and had not correctly described the assessee. were dealt with and distinguished.
In the context of the present writ petition, the aforesaid ratio is a complete answer to the contention raised on validity of the notice under Section 147/148 of the Act as it was addressed to the erstwhile company and not to the limited liability partnership. There was no doubt and debate that the notice was meant for the petitioner and no one else. Legal error and mistake was made in addressing the notice. Noticeably, the appellant having received the said notice, had filed without prejudice reply/letter dated 11.04.2017. They had objected to the notice being issued in the name of the Company, which had ceased to exist. However, the residing of the said letter indicates that they had understood and were aware, that the notice was for them. It was replied and dealt with by them The fact that notice was addressed to M/s Sky Light Hospitality Pvt. Ltd.. a company which had been dissolved, was an error and technical lapse on the part of the respondent No prejudice was caused.
18.Petitioner relies on Spice Infotainment Ltd v. CIT [2012] 247 CTR 500 (Delhi). Sp/ce Corp. Ltd., the company that had filed the return, had amalgamated with another company. After notice under Section 147/148 of the Act was issued and received in the name of Spice Corp. Ltd., the
11 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) Assessing Officer was informed about amalgamation but the Assessment Order was passed in the name of the amalgamated company and not in the name of amalgamating company. In the said situation, the amalgamating company had filed an appeal and issue of validity of Assessment Order was raised and examined. It was held that the assessment order was invalid. This was not a case wherein notice under Section 147/148 of the Act was declared to be void and invalid but a case in which assessment order was passed in the name of and against a juristic person which had ceased to exist and stood dissolved as per provisions of the Companies Act. Order was in the name of non-existing person and hence void and illegal.
Spice Infotainment Ltd. (supra) refers to decision of Allahabad High Court in Sri Nath Suresh Chand Ram Naresh v. CIT (2006] 280 ITR 396/[2005] 145 Taxman 186 (All.). We have examined the decision in Sri Nath Suresh Chand Ram Naresh (supra) and would observe that facts were peculiar. There was oral partition of the Hindu undivided family, M/s Munna La! Moti Lal. on death of the 'Karta' Moti Lal. Capital was divided amongst three brothers, who were the coparceners. Controversy was regarding legality of oral partition that was not recognized by the Revenue. Re-assessment notices were issued, in the name of M/s Sri Nath Suresh Chand Ram Naresh, Karta Shri Nath. 'Nil' return was filed along with letter stating that no business was conducted in the name of the assessee and notices were wrongly issued. Revenue had asserted that this notice was meant to assess M/s Munna Lal Moti Lal though the notice was to another assessee, who was also existing in law. Recording this factual matrix, the notice under Section 148 and assessments made were held to be invalid.
CIT v Dimension Apparels (P.) Ltd. [20151 370 ITR 288/[2014] 52 taxmann.com 356 (Delhi) and CIT v. Intel Technology India Ltd. [2016] 380 ITR 272/232 Taxman 279/57 taxmann.com 159 (Kar.) follow the ratio and decision in the case of Spice Infotainment Ltd. (supra), as assessment orders had been passed in the name of the non-existing assessee These cases are therefore distinguishable.
21 Our attention was drawn to Parashuram Pottery Works Co Ltd. v. /TO [1977] 106 ITR 1 (SC) which records that the Assessing Officer entrusted with the task of calculating and realising tax should familiarise themselves with the relevant provisions and become well versed with the law on the subject. This is a salutary advise. Indeed there have been lapses and faults resulting in the present litigation. Notice under Section 147/148 of the Act was issued at the end of the limitation period. Noticeably, Assessment Order for the assessment year 2013-2014 was passed on 31.03.2016, one year earlier. Second lapse is also apparent. Despite correctly noting the background, notice under Section 147/148 of the Act was not addressed in the correct name and even the PAN Number mentioned was incorrect. Nevertheless, human errors and mistakes cannot and should not nullify proceedings which are otherwise valid and no prejudice had been caused. This is the effect and mandate of Section 292B of the Act. "
12 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) 5.2.22 The appellant has relied upon the case law in the case of PCIT vs Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC) and Sumit Balkrishna Gupta us ACIT [2019] 112 taxmann.com 93 (Bombay HC) both of which are clearly distinguishable on the facts of the instant case.
• In the case of PCIT vs Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC), the assessment order was passed in the name of an entity that had ceased to exist on the date of the assessment order. The Hon'ble Apex Court held such assessment order passed in the name of the amalgamating company to be a substantive illegality and not a procedural violation of the nature adverted to in section 292B. However, in the instant case the reassessment order has been passed in the name of the amalgamated entity viz., M/s Gyanshankar Investment and Trading Co. Private Limited. Hence, the facts are clearly distinguishable. • In the case of Sumil Balkrishna Gupta vs ACIT [2019] 112 taxmann.com 93 (Bombay HC), it was held that the notice u/s 143(2) issued in the name of the deceased individual assessee is null and void. While rendering the said judgment, the Hon'ble Bombay High Court has not considered the case of Sky Light Hospitality LLP Vs. Assistant Commissioner of Income Tox[2018] 92 taxmann.com 93 (SC) which is squarely applicable to the facts of the instant case and which is that of a company assessee. Therefore, the facts are clearly distinguishable from the facts of the instant case.
5.2.23 Accordingly, the objection of the appellant regarding validity of the notice being issued in the name of M/s Stellar Credit and E-Trading Pvt. Ltd. is rejected. Hence, Ground of appeal no. 3 is dismissed.”
The Ld. A.R. stated that the AO has issued notice in the name of a company which is non existent on the date of issue of notice and submitted that in view of the said fatal and incurable defect which goes to the route of the reopening proceeding as well as the consequent reassessment order framed under section 143(3) read with section 147 of the Act dated 30.12.2019 and thjerefore the same are bad in law and nullity and may kindly be quashed. In defense of his argument the Ld. A.R. relied on the following decisions: 1. PCIT vs. Maruti Suzuki India Ltd. (2019) 107 taxmann.com 375 (SC) 2. Sumit Balkrishna Gupta vs. ACIT (2019) 107 taxmann.com 93 (Bombay-HC)
13 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) 3. PCIT vs. Transcend MT Services (P.) Ltd. (2019) 109 taxmann.com 421 (Delhi-HC) 4. Techpac Holdings Ltd. vs. Dy. CIT (2016) 135 DTR (Bombay HC) 322 5. IPSOS Research (P.) Ltd. vs. Add. CIT 6. CIT vs. Indu Surveyors & Loss Assessors Pvt. Ltd. (Delhi HC) 7. Jitendra Chandralal Navlani vs. UOI (Bombay HC) 8. Pesak Ventures Ltd. vs. DCIT (ITAT Delhi) 9. Computer Engineering Services India (P) Ltd. vs. ACIT (ITAT Delhi) 10. CIT vs. Dimension Apparels Ltd. (Delhi HC) 11. I.K. Agencies Pvt. Ltd. vs. WTO (Calcutta HC)
The Ld .A.R. therefore, prayed that in view of these facts the reassessment proceedings as well as the consequent assessment framed may kindly be quashed as being invalid, wrong and nullity.
The Ld. D.R., on the other hand, relied heavily on the order of authorities below. The Ld. D.R. by referring to the notice issued under section 148 of the Act as well as return filed in response thereto submitted that assessee itself accepted the reassessment proceedings in the name of M/s. Stellar Credit E- Trading Pvt. Ltd. by filing the return of income in the name of very same company and also thereafter attending assessment proceedings from time to time and making submissions and replies in the name of that company. The Ld. D.R. also referred to the observations of the AO in para 10.1 at page No.4 of the assessment order wherein the AO referred to the scheme of amalgamation particularly in para No.12(b)(d) which states that the tax implication if any arising out of scheme of amalgamation is subject to final decision of the Income Tax Authorities and also the observations of the NCLT wherein it is stated that the
14 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) approval of the scheme by this Hon’ble forum may not deter the Income Tax Authorities to scrutinize the tax returns filed by the transferee company after giving effect to the scheme and the decision of the Income Tax Authorities is binding on the petitioner company. The Ld. D.R. referred to the observations of the AO in para 10.4 wherein the AO stated that the issuance of notice under section 148 of the Act in the name of M/s. Stellar Credit E-Trading Pvt. Ltd. is directed and shielded under the provisions of section 292B of the Act. Finally, the Ld. D.R. relied heavily on the order of AO and Ld. CIT(A) on this issue and prayed that the ground raised by the assessee raising this issue of notice under section 148 on non existent company and consequent assessment as such in the name of non existent entity may kindly be dismissed.
We have heard the rival submissions and perused the material on record. The undisputed facts are that M/s. Stellar Credit E-Trading Pvt. Ltd. was amalgamated with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. vide order of NCLT dated 29.09.2017 w.e.f. 01.04.2016. With the merger of the amalgamating company M/s. Stellar Credit E-Trading Pvt. Ltd. with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. it ceased to exist with all the assets and liability vesting in the amalgamated company w.e.f. 01.04.2016. The fact has been informed to the AO by way of mail sent to the AO on 27.11.2018 along with copy of order dated 29.09.2017. Thereafter, a survey was conducted on the assessee on 21.03.2017 by the Investigation Wing of Income Tax, Mumbai and during the course of survey, the survey team found that assessee has
15 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) credited a sum of Rs.27,80,00,000/- during the year in its books of accounts by way of share capital and share premium account. Thereafter a notice under section 148 of the Act was issued on 27.03.2019 by the AO to the assesse on the ground that amount of Rs.27,80,00,000/- has escaped assessment. The assessee complied with the said notice by filing a return of income on 26.04.2009 in the name of M/s. Stellar Credit E-Trading Pvt. Ltd. The assessee also filed objections to reopening of assessment u/s 147 of the Act on 19.11.2019 and also on 06.12.2019. In the submission dated 06.12.2019, the assessee specifically stated in the subject that this letter is filed as objection against the reopening of assessment under section 147 r.w.s. 148 of the Act in continuation of earlier objection dated 19.11.2019 and in para 1 it has been specifically stated that notice under section 148 of the Act has been issued in the name of M/s. Stellar Credit E-Trading Pvt. Ltd. which has since been merged with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. vide NCLT order dated 29.09.2017 and thus this notice issued in the name of non existing company is null and void. However, the AO went ahead with the reassessment proceeding by justifying the reassessment proceedings in the name of non existing company by citing various reasons such as reference to para 12(b)(d) of NCLT order wherein it is stated that tax implication if any arising out of the scheme of amalgamation would be subject to final decision of Income Tax Authorities and also the fact that assessee has filed return in the name of non existing entity and also attended the scrutiny proceedings from time to time. The AO also observed that issue is covered by the provisions of section 292B of the Act. The AO also relied on a
16 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) series of decisions as discussed from para 10.5 to 10.6 of the assessment order. The Ld. CIT(A) dismissed the appeal of the assessee on this issue citing various reasons as discussed in the appellate order as reproduced hereinabove. Having considered these facts, we are of the view that undoubtedly the proceedings were initiated in the name of a company which was non existent on the date of issue of notice under section 148 of the Act meaning thereby that reassessment proceedings were initiated in the name of a person who is not in existence however the assessment has been framed vide order dated 30.12.2019 passed under section 143(3) reads with section 147 of the Act in the name of M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. Now the issue before us is whether the proceedings initiated in the name of non existing company by issuing notice under section 148 of the Act followed by notices issued under section 143(2) and 142(1) of the Act in the same manner would render the reassessment proceedings as invalid and nullity. We also note that the fact of amalgamating company ceasing to exist w.e.f. 01.04.2016 was brought to the notice of the AO but despite that the AO instead of issuing notice in the correct name went ahead with the proceedings justifying the re-opening in the name of amalgamating company which was admittedly and arguably non existent on the date of issue iof notice u/s 148 of the Act dated 27.03.2019. In our considered view the initiation of proceedings in the name of non existent entity is a substantive illegality and is wrong and hence cannot be justified. The instant case is squarely covered by a series of decision which are discussed as under:
17 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) • In the case of PCIT vs. Maruti Suzuki India Ltd. (supra) the Hon’ble Apex Court has held that issue of notice under section 148 of the Act and consequent assessment order passed in the name of the non existing company is a substantive illegality and not a procedural violation of the nature adverted to in section 292B of the Act. • In the case of Sumit Balkrishna Gupta vs. ACIT (supra) the Hon’ble Jurisdictional High Court has held that where a notice under section 143(2) was issued in the name of wrong person is not a procedural or clerical error but a substantive defect. • In the case of Jitendra Chandralal Navlani vs. UOI (Bombay HC) (supra) the Hon’ble Bombay High Court has held that notice issued under section 148 of the Act on non existing unit which was dissolved much before the issue of such notice and assessment framed consequent to such notice was without jurisdiction. In this case the reopening notice under section 148 of the Act was received by the chartered accountant and accepted but immediately after that by a letter pointed that the company to whom the notice has been issued is no longer in existence as it has been dissolved, however, the AO went ahead with the framing of assessment in the name of the dissolved entity. The Hon’ble Bombay High Court has held that defect in issuing reopening notice to a non existing company and framing assessment consequent thereto is an issue which goes to the
18 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) route of the jurisdiction of the AO to assess the non existing company and both notice as well as the assessment order were held to be without jurisdiction.
We note that in the present case before us the notice has been issued in the name of M/s. Stellar Credit E-Trading Pvt. Ltd. which has been merged with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. w.e.f. 01.04.2016 despite the fact that it has also been informed to the AO by on 27.112018 and also thereafter by filing a specific objection to the issue of notice under section 148 of the Act in the name of non existing company that the said company has been merged with M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. and therefore the notice is invalid and nonest. However, the AO in the assessment order tired to justify the issuance of notice in the name of nonexistent company. So much so that notices under section 143(2) of the Act and under section 142(1) were also issued in the name of that company though the assessment was framed in the name of M/s. Gyanshankar Investment and Trading Co. Pvt. Ltd. vide order dated 27.03.2015. Under these facts and circumstances and in view of the ratio laid down by the Apex Court and various other decisions of various judicial forums we are inclined to hold that the notice issued under section 148 of the Act is invalid as the issue of notice in then name of non existent entity is a substantive defect and illegality and so is the consequent assessment framed. Respectfully following the ratio laid down by the Hon’ble Apex Court and various other High courts, we are inclined to quash the re- assessment proceedings and also the consequent assessment
19 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) order. Consequently, ground No.5 raised by the assessee is allowed.
The assessee has challenged the reopening of assessment proceedings on the ground that change of opinion and also on the ground that this being a reopening of assessment after expiry of four year from the end of assessment year and there being no failure on the part of the assessee to disclose fully and truly of material facts necessary for assessment and therefore the reopening of assessment under section 147 of the Act is bad in law. In the instant case the scrutiny assessment under section 143(3) of the Act was framed vide order dated 27.03.2015 assessing the total income at Rs.23,67,880/-.
In the original assessment proceedings the case was selected for scrutiny for the reason that assessee has received large amount of share premium during the year and during the course of assessment proceedings vide order sheet entry dated 07.10.2014 the assessee was specifically asked to justify the share premium received and also give confirmation from shareholders. Accordingly, the assessee filed exhaustive details of shares along with confirmations and various other documents and the scrutiny proceedings culminated in framing of assessment under section 143(3) of the Act vide order dated 27.03.2015 and no addition was made by the AO on account of share premium as the same was accepted after examining the records/evidences furnished by the assesse. Again the assessment was reopened under section 147 of the Act on the ground that assessee has received bogus share premium to the tune of Rs.27.80 crore after the AO received information from
20 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) the Addl. DIT (Inv.) Wing, Mumbai-4. A survey action was also conducted on the assessee and it was found that assessee is beneficiary of bogus entries of share premium, however, we note that all this issues of shares at share premium were examined at length during the original assessment proceedings and therefore on the same ground the reopening of assessment can not be allowed as it amounts to review of earlier assessment order which is not permissible under the Act. The case of the assessee is covered by a plethora of judgments namely; > CIT vs Kelvinator of India (2010) 187 Taxman 312 (SC) > Aventies Pharma Ltd vs. ACIT (2010) 323 ITR 570 (Bom- HC) > Jashan Textile Mills (P.) Ltd. v. Dy. CIT [2006] 284 ITR 542/[2007] 164 Taxman 243 (Bom). > German Remedies Ltd. v. Dy. CIT [2006] 287 ITR 494/152 Taxman 269 (Bom) > CIT vs. Former Finance (2003) 264 ITR 566 (SC) > Balakrishna Hiralal Wani vs. ITO (2010) 321 ITR 519 (Bom.) > CIT vs Purolator India Ltd ITA No. 489 of 2011 (Delhi HC)
Similarly, the reopening has been made after a period of four year from the end of assessment year and in order to reopen the assessment under section 147 read with section 148 of the Act there has to be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment but in the present case. We note that the assessee has duly disclosed the share premium receipt upon issue of shares during the year in the return of income filed. Therefore the reopening can only be made under section 147 read with section 148 of the Act if the conditions as envisaged in 1st proviso to section 147 of the Act but apparently these conditions are not satisfied as there is no failure on the part of the assessee as envisaged in the said proviso. Therefore, on this count also
21 ITA No.1584/M/2020 M/s. Gyanshankar Investment & Tradinv Co. Pvt. Ltd. (Before Amalgamation M/s. Stellar Credit & E-Trading Pvt. Ltd.) the reopening is bad in law and cannot be sustained. The case of the assessee finds support from the following cases: > LSG Sky Chefs (India)(P) Ltd vs. ACIT Circle 2(2)(1)(2019) 102 taxmann.com 325(Bombay HC) > Hindustan Lever Ltd. vs R.B. Wadkar (2004) 137 taxmann.com 479 (Bombay-HC) > Akshar Annual Construction LLP vs ACIT 28(1) (2019) 104 taxmann.com 94 (Bombay HC) > Raychem RPG (P) Ltd vs ACIT (2019) taxmann.com 377 (Bombay HC) > Pr.CIT vs. Vaman Estate (2020) 113 taxmann.com 406 (Supreme Court) > Nezone Foods (P) Ltd vs ACIT (2015) 59 taxmann.com 71(Guwahati -Trib)
Therefore, considering all these facts and circumstances in the light of various decisions as noted above, we are inclined to hold that even the reopening of assessment proceedings under section 147 of the Act is invalid and so is the consequential assessment framed.
Since we have allowed the appeal of the assessee on legal issues, therefore, we are not adjudicating the merits of the case.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29th October, 2021.
Sd/- Sd/- (Pavan Kumar Gadale) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 29.10.2021. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order
Dy/Asstt. Registrar, ITAT, Mumbai.