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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Sanjay Garg & Shri Rajesh Kumar]
ORDER
Per Shri Rajesh Kumar, AM:
This appeal by the revenue and the cross-objection by the assessee are directed against the order of the Commissioner of Income Tax(Appeals)-22, Kolkata [hereinafter referred to as ‘Ld. CIT(A)’] dated 28.06.2019 for the assessment year 2014-15.
Though the Registry has pointed out that the appeal is time barred, however, in view of the decision of the Hon’ble Supreme Court in the case of Miscellaneous Application No. 665 of 2021 in SMW(C ) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the C.O. No. 28/Kol/2020 AY: 2014-15 M/s IFGL Refractories Ltd. limitation period. In view of this, the appeal is treated as filed within the limitation period.
The common issue raised in all the grounds of appeal by revenue is against the order of ld. CIT(A) in cancelling and quashing the assessment framed by the AO u/s 143(3) of the Act on the ground that order was passed in the name of amalgamating company which is a non non-existent company on the date of passing the order.
The facts in brief are that the assessee company M/S IFGL Refractories Ltd having PAN No. AAACI6003L was amalgamated with M/s. IFGL Exports Ltd. vide order dated 3.08.2017 passed by the NCLT and consequently M/S IFGL Refractories Ltd has ceased to exist. The said amalgamating entity filed its return of income for A.Y. 2014-15 on 28.11.2014 declaring a total income of Rs. 40,57,33,530/- which was revised on 12.05.2015 at the same income. The case of the said company was selected for scrutiny and assessment u/s 143(3) of the Act dated 06.02.2018 was framed by the AO in the name of M/S IFGL Refractories Ltd with PAN No. AAACI6003L which was a non existent company. Pertinent to state that it was intimated to the AO vide letter dated 12.11.2017 that M/S IFGL Refractories Ltd has merged and amalgamated with M/s. IFGL Exports Ltd. vide order of NCLT dated 03.08.2017. The PAN of the amalgamating company/ceased company was also surrendered and the AO was requested to transfer all the assessment records in relation to the amalgamating company to the AO having jurisdiction over the amalgamated company with PAN AABCI7391C and make all correspondences in future at the address of amalgamated company i.e. M/s. IFGL Exports Ltd. Thereafter the name of the amalgamated company M/s. IFGL Exports Ltd. was changed to M/S IFGL Refractories Ltd and AO was informed accordingly vide letter dated 1212.2017. The assessment was framed by the AO u/s 143(3) of the Act in the name of M/S IFGL Refractories Ltd with PAN AAACI6003L being a non- existent company.
The assessee aggrieved by the order of AO preferred an appeal before the ld CIT(A) and ld CIT(A) allowed the appeal of the assessee by cancelling and quashing
C.O. No. 28/Kol/2020 AY: 2014-15 M/s IFGL Refractories Ltd. the assessment order on the ground that assessment order was passed in the name of non -existent entity by observing and holding as under:-
FINDINGS & DECISION: [Grounds 1 to 3 ] 1. I have carefully considered, the submissions of the Ld. AR of the appellant in the backdrop of the impugned assessment order. In these grounds the appellant has objected to the validity of the impugned order on the premise that the order dated 06.02,2018 was passed in the name of M/s IFGL Refractories Ltd, a company which did not exist on the day of passing of the impugned order. From the material on record, it is noted M/s IFGL Refractories Ltd stood amalgamated with IFGL Exports Ltd. vide order of Hon. National Company Law Tribunal dated 03.08.2017 made effective from IFGL Refractories Ltd. On 12.11.2017 the successor company i.e, IFGL Exports Ltd duly informed the Ld. AO about the amalgamation of IFGL Refractories Ltd with IFGL Exports Ltd. Along with its letter dated 12.11.2017 copies of the scheme of arrangement and the certified copies of the orders passed by the NCLT were filed. On these facts the appellant submitted that at the time of passing of the assessment the AO was well aware of the amalgamation of M/s IFGL . Refractories Ltd with IFGL Exports Ltd. In spite of his full knowledge, the Ld. AO chose to proceed against the amalgamating .company, i.e M/s IFGL Refractories Ltd which was no longer in existence. Referring to several judicial precedents, the Ld.AR of the appellant contended that the Ld, AO was legally unjustified in framing assessment in the name of a non-existent company and also passing the assessment order in the name of M/s IFGL Refractories Ltd. 2. After giving a careful consideration to the facts of the case and the material available on record, it is noted that the Ld. AO was duly informed about amalgamation of M/s. IFGL. Refractories Ltd and its consequent winding up without liquidation. However M/s IGFL Exports Ltd-i.e. the successor company appears to have been never impleaded by the Ld, AO in the assessment proceedings. It is relevant to note that the orderof the assessment was passed in the name of M/s IFGL Refractories Ltd even though in November 2017, the AO was given proper information along with relevant documents substantiating the winding up of M/s IFGL Refractories Ltd. Hence it can be safely concluded that prior to passing of the assessment order the Ld. AO was duly informed that M/s IGFL Exports Limited was the lawful successor of M/s IFGL Refractories Ltd on account of order of the NCLT approving amalgamation. It is-observed that the Hon'ble Supreme Court as well as various Hon'ble High Courts have, time and again held that on dissolution or winding up, amalgamating .company, loses its legal identity and no longer enjoys legal existence. Accordingly any assessment of the predecessor company is required to be made on and in the name of the successor company. The Courts, further held, that any order passed against or in the name of a .non-existent person is a nullity. Once an order of amalgamation becomes .effective and The amalgamating company dissolves. .and. its name is struck off from, the Register of .Companies by The Registrar, of Companies; then any order made in the name of amalgamating company amounts to. a fundamental infirmity and such order is ab-initio void and does not have any legal sanctity. 3. Useful reference is made to the judgment of the Hon'ble jurisdictional Calcutta High Court on the case of I.K, Agencies (P) Ltd Vs CWT (347 ITR 664). In the decided case the assessee company had been wound up by virtue of the order of the Court and was amalgamated with the another company with effect from 01.04.1995. Thereafter the AO issued a notice u/s 17 in the name of amalgamating company on 20.01.1997 directing it to file wealth tax return. The. successor filed the return of income and also intimated the AO: that the assessee company had C.O. No. 28/Kol/2020 AY: 2014-15 M/s IFGL Refractories Ltd.
been amalgamated. The AO completed the wealth tax assessment u/s 16(3)/17 in the name of the amalgamating company. The validity of the impugned notice u/s 17 and. the assessment order was challenged before the High Court in writ proceeding. The High Court on the facts observed that the notice was issued to-a person who was no longer in existence at the time of issuing of the notice. It was therefore held the proceedings, for reassessment was vitiated for not giving proper notice under Section 17 of the WT Act and the notice issued in the name of the amalgamating company which was not in existence at that time was legally Untenable.- Accordingly both the notice and the wealth tax assessment order were held to be bad in law and ab initio void. The relevant, observations of the Hon'ble High Court are reproduced hereunder: 23. We, therefore, find that in the cases before us, the authorities below totally overlooked the fact that initiation of the proceedings for reassessment was vitiated for not giving notice under, s. 17 of the WT Act to the appellant and the notice issued upon M/s Abhudey Properties (P) Ltd. which was not in existence .at that time was insufficient to initiate proceedings against the appellant who had taken over the liability of M/s Abhudey Properties (P) Ltd. earlier to the issue of such notice and such fact was also made known to the Revenue.
We, thus, set aside the reassessment proceedings on that ground alone. In view of our aforesaid finding, there is no necessity of going into the other grounds of appeal
on merit.
25. Appeals are thus allowed on the aforesaid ground atone and the reassessment proceedings are quashed. " .
4. Following the above judgment, I note that the coordinate Bench .of the Hon'ble Calcutta High Court in the case: of C1T Vs Aarcee Holdings Pvt-Ltd (GA No. 1921 of 2014) dated 10.09.2014 upheld the order of the Tribunal quashing the revisionary order passed u/s 253 in the name of amalgamating company instead of the successor company. The relevant extracts of the judgment is as. follows: "This appeal under section 260A of the Income. Tax Act has been preferred against the order dated 10th January, 2014 passed, by the Income Tax Appellate Tribunal ’C Bench, Kolkata in IT A No. 570/Kol/2011 for the assessment year 2006-2007 on the following question : "Whether, on the facts and in the circumstances of the case, the. Tribunal was justified in law. to allow the appeal of the assessee by relying upon a decision of this Hon'ble High Court in the case of IK agencies Private Limited vs. CIT reported in (2012) 347 ITR 664 Calcutta) on the alleged ground that the revisional Order passed on a don existent company does not stand". Heard Ms. Das De, learned advocate for the appellant-revenue. We find from the impugned order of the learned Tribunal that the issue has been dealt with by holding as under : "In view-of the above, the Id. Counsel for the assessee stated that no company in the name of Aarcee Holdings Pvt. Ltd. was in existence as on the date of show cause notice dated 23.12.2010 initiating revision proceeding u/s. 263 of the Act., id. Counsel for the assessee before us filed copy of the decision of Hon’ble Delhi High Court in the case of Spice Infotainment Ltd. vs. CIT (2012) 247 CTR (Del) 500, wherein it is C.O. No. 28/Kol/2020 AY: 2014-15 M/s IFGL Refractories Ltd. held that assessment in the name of the company which has been amalgamated with another company and stands dissolved is null and void; assessment framed in the name of a non- existing entity is a jurisdictional defect and not merely a procedural, irregularity of the nature which can be cured by invoking the provisions of S.292B, In the present case also the amalgamation took place vide the order of the Hon’ble Calcutta High Court dated 17.04.2008 w.e.f. 01.04.2007 and this Company Aarcee Holdings Pvt. Ltd. has amalgamated with Padmavati Properties & Trust Ltd., and no revision order-can be passed on a nonexistent company. Hence, the very premise of the revenue that revision order passed on a non-existent company does not stand. Moreover, the issue is also covered by the decision of the Hon'ble Calcutta High Court in the case-of I.K.Agencies P. Ltd. vs. CIT (2012) 347ITR 664 (Cal)". Since, we find that the issue is a question of fact and/or a technical question, and not a substantial question of law, the application and the appeal are dismissed."
5. I find that the facts involved in the present’ case are pari materia with the facts, involved in the case before the jurisdictional Calcutta High Court. In the appellant's case, M/s IGFL Refractories Ltdstood merged with M/s IGFL Exports Ltd by the order of NCLT dated 03.08.2017; The information about the amalgamation was given on 12.11.2017. In spite of the fact that the AO at the material time was aware of the amalgamation the assessment u/s 143(3} was still framed in the name of M/s IGFL Refractories Ltd. In my considered view therefore the assessment order dated 06.02.2018 passed in the name of M/s IGFL Refractories Ltd suffered from inherent jurisdictional defect and was null and void. Following the binding precedent set by the Calcutta High Court, the impugned order passed u/s 143(3) is hereby cancelled. In effect, Ground Nos. 1 to 3 stands allowed. Since the Ground Nos. 1 to 3 challenging the validity of the order passed u/s 144C/143(3) is allowed,, other Ground Nos. 4 to Hand additional grounds objecting to the merits of the additions/disallowances have become academic in nature and are therefore dismissed as infructuous. In the final result, appeal filed by the appellant is treated as partly allowed”.
The Ld. DR vehemently argued before the bench that admittedly the assessee was merged and amalgamated with the another company vide order of NCLT dated 03.08.2017 which was also filed by the assessee before the AO during the assessment proceeding and the assessment was made in the name of company which was also named as M/S IFGL Refractories Ltd but with the old PAN of the amalgamating company. The ld DR submitted that it was mere a clerical mistake on the part of the AO and is fatal to the extent of rendering the assessment framed as invalid on the ground of being in the name of non-existent company. The Ld. DR , though admitting that the assessee has informed the AO regarding the merger vide communication dated 12.11.2017 which was part of the records before the AO, however strongly
C.O. No. 28/Kol/2020 AY: 2014-15 M/s IFGL Refractories Ltd. opposed that the conclusion drawn by the ld CIT(A) qua framing of assessment in the name of non-existent entity to be incurable and a substantive illegality which goes to the root of the matter. The ld DR contended that the assessment order passed only suffered from the vice of procedural defects which could be rectified if the matter is restored to the file of the AO with the direction to pass the fresh assessment correctly. The ld DR also referred to the provisions of section 292B of the Act and submitted that since the assessee has participated and attended the assessment proceedings but did not point out this fact to the AO and as the provisions of section 292B of the Act unequivocally and in clear terms provides that any such procedures irregularities or lapses committed by the AO are curable if the assessee has participated in the proceedings and was allowed sufficient opportunity of hearing. The ld DR therefore prayed that the appeal of the revenue may be allowed by revering the order passed by ld. CIT(A). The ld DR also referred to the provisions of section 292B of the Act and submitted that since the assessee has participated and attended the assessment proceedings but did not point out this fact to the AO , therefore the assessee cannot be allowed to take advantage of this lapse on the part of the AO as the provisions of section 292B of the Act unequivocally and in clear terms provides that any such procedures irregularities or lapses committed by the AO or any other authority has no implications if the assessee has participated in the proceedings and is allowed sufficient opportunity of hearing. The ld DR submitted that taking into accounts all these facts the order passed by the ld CIT(A) is incorrect and prayed that the same may be reversed by allowing the appeal of the revenue or alternatively restored to the AO to pass the correct order.
7. The Ld. AR, while opposing the arguments as made by the ld DR, contended that the assessment was framed in the name of the non-existent company with old PAN AAACI6003L which has already merged with another entity vide order dated 03.08.2017 and consequently the assessment in the name of non-existent company is invalid and void ab-initio and has rightly been quashed by ld CIT(A). The Ld. AR submitted that the fact of M/S IFGL Refractories Ltd having merged with M/S IFGL
C.O. No. 28/Kol/2020 AY: 2014-15 M/s IFGL Refractories Ltd. Exports Ltd was duly intimated to AO vide letter dated 12.11.2017. The Ld. AR submitted that the action of the ld.AO passing the assessment order in the name of non-existent company is a substantive illegality which is not curable at all and renders the assessment order as invalid and nullity. The ld. AR argued that this is not a procedural irregularity which can be rectified by then ld. AO. The Ld. AR relied on a couple of decisions in defense of his arguments namely i) PCIT Vs Maruti Suzuki India Limited (2019) 107 taxmann.com 375 (SC) and ii) BASF India Ltd. Vs DCIT (2020) 121 taxmann.com 129. The Ld. AR finally prayed before the bench that assessment order was rightly cancelled by the first appellate authority as being nullity and invalid in the eyes of law and therefore the appeal of the revenue may be dismissed by upholding the order of ld CIT(A).
We have heard the rival parties and perused the material on record including the decisions cited before us by the ld Sr Counsel Shri S.K. Tulsiyan. The undisputed facts are that M/s. M/S IFGL Refractories Ltd with PAN AAACI6003L was merged with M/s. IFGL Exports Ltd with PAN AABCI7391C vide order of NCLT dated 03.08.2017. The assessee has also intimated the AO about the said amalgamation vide letter dated 12.11.2017 and also requested to transfer all the assessment records to the AO of the amalgamated company. There is no dispute as to that communication by the assessee to the AO which is part of the assessment records. Now the issue before us is whether the assessment framed in the name of a non-existent company is valid or suffers from the vice of illegality or this is just a curable procedural mistake on the part of the AO while passing the order Considering the facts as placed before us vis a vis the provisions of the Act including that of section 292B of the Act and the various decisions cited before us , we are certainly of the considered opinion that assessment framed in the name of non-existent company is nullity. In our considered view , the assessment order in the name of non-existent company suffers from the substantive illegality and is invalid in the eyes of law. The case of the assessee is squarely covered by the decision of Hon’ble Supreme Court in the case of PCIT vs Maruti Suzuki India Limited (supra) wherein it has been held that the assessment order in the C.O. No. 28/Kol/2020 AY: 2014-15 M/s IFGL Refractories Ltd. name of non existent entity is to be set aside as this is a substantive illegality and not procedural irregularity of the nature as referred to in section 292B of the Act. The Hon’ble Apex Court held that mere fact that the assessee has participated in the proceedings before the AO will not cure this substantive illegality and the mere participation of the assessee in the assessment proceedings cannot debar the assessee from challenging the proceedings on this ground as there is no estoppel against law. The Hon’ble Court has followed the decision of the coordinate bench of two judges in the case of CIT Vs Spice Infotainment Ltd. (2012) 247 CTR 500(Delhi) wherein similar ratio has been laid down by the Hon’ble Apex Court. The assessee has also relied on the decision of tribunal in the case of BASF Ltd Vs DCIT(supra) wherein it has been held that that assessment in the name of non existent entity is invalid and has to be quashed and the tribunal has followed the decisions of the Hon’ble Apex court in the case of PCIT vs Maruti Suzuki India Limited and CIT Vs Spice Infotainment Ltd.(supra). Considering the facts and circumstances of the instant case , we do not find any infirmity in the order of ld CIT(A) and accordingly uphold order of ld CIT(A). The appeal of the revenue is dismissed.
The assessee has also filed cross objection No.28/Kol/2020 which becomes infructuous in view of our upholding the order of ld CIT(A) and is dismissing the appeal of the revenue and consequently the cross objection of the assessee is dismissed.
In the result, the appeal of the revenue as well as cross objection of the assessee are dismissed.
Order is pronounced in the open court on 28th June, 2022