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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND Dr. M.L. MEENA
आदेश /O R D E R
PER BENCH: This appeal by the Revenue and cross objection by the assessee, both are arising out of the order of Commissioner of Income Tax (Appeals)-8, Chennai in vide order dated 10.02.2017. The assessment was framed by the ACIT, Corporate Circle 4(2), Chennai u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 22.03.2016 for the assessment year 2013-14.
At the outset, the ld.councel for the assessee Shri N.V. Balaji pointed out that the assessee has raised cross objection and in its cross objection, the first issue is as regards to the order of CIT(A) confirming the action of AO in making assessment in the hands of non-existent company, which is without jurisdiction and bad in law. The ld.counsel drew our attention to the first issue raised vide ground Nos. 2 to 4 as under:- Issue 1: Assessment made in the hands of a non-existent company is without jurisdiction
C.O No.66/Chny/2017 2. The learned AO has failed to appreciate that NICE has already been dissolved without the process of winding up on account of its merger with L&T Infrastructure Development Projects Limited with effect from 1 April 2013 (‘the effective date’).
3. The learned AO ought to have appreciated that the proceedings/orders against a non-existent person would be invalid.
4. The learned AO has hence erred in framing the assessment under section 143(3) of the Income-tax Act, 1961 (‘the Act’) on 22 March 2016 in the hands of NICE after the effective date and the order would not stand in the eyes of law.
The ld.counsel for the assessee first of all took us through the assessee’s paper-book and stated that the assessee filed a letter dated 04.09.2014 before the AO i.e., the DCIT, Company Circle IV(4), Chennai informing the merger of Narmada Infrastructure Construction Enterprise Ltd., with L&T Infrastructure Development Projects Limited w.e.f. 01.04.2013. The ld.counsel for the assessee stated that the assessment was framed by the AO for the assessment year 2013-14 vide his order dated 22.03.2016 in the name of “M/s. Narmada Infrastructure Construction Enterprises Limited”. According to him, this assessment was framed u/s.143(3) of the Act. The ld.counsel took us through the assessee’s paper- book pages 95 to 112, wherein the AO was informed about the merger and it was requested that upon the scheme coming into
C.O No.66/Chny/2017 effect, all proceedings of income tax against Narmada Infrastructure Construction Enterprise Ltd., whether pending or arising after the effect date shall be continued / enforced in the name of L&T Infrastructure Development Projects Limited, as the same have merged w.e.f. 01.04.2013. The ld.counsel for the assessee drew our attention to the order of Hon’ble Madras High Court in the Comp.Petition Nos. 16 and 17 (this relates to present assessee) of 2014, order dated 26.03.2014 in assessee’s paper-book pages 97 to 101. The scheme was approved by the Hon’ble Madras High Court w.e.f. 01.04.2013 vide order dated 26.03.2014. Further, the ld.counsel drew our attention to the order of Hon’ble Bombay High Court in Company Scheme Petition No.235 of 2014 connected with company summons for Direction No.23 of 2014, vide order dated 08.08.2014 wherein the scheme approved by Hon’ble Madras High Court was also considered and approved the scheme w.e.f. 01.04.2013. The ld.counsel for the assessee drew our attention to assessee’s letter dated 04.09.2014 (which is enclosed at page 112 of assessee’s PB), wherein even the Commissioner of Income Tax (Appeals)-IV, Chennai was informed and the relevant text of the letter reads as under:-
C.O No.66/Chny/2017 Sub: Narmada Infrastructure Construction Enterprise Limited ('NICE’, ‘the Company’ or ‘the assessee’) - Intimation of merger Ref:Merger of NICE, L&T Transco Limited and International Seaports (India) Private Limited (collectively ‘Transferor Companies’) with L&T Infrastructure Development Projects Limited (‘L&T IDPL’) with effect from 1 April 2013 1. Background We wish to submit before your good self that the Hon‘ble High Court (’HC’) of Judicature at Madras and the Hon’ble HC of Judicature at Bombay vide their orders dated 28th March 2014 and 20th August 2014 respectively, sanctioned the scheme of merger of the Transferor Companies with L&T IDPL (’the Scheme’). We have attached the order of the Hon’ble HCs of Judicature at Madras and the Hon’ble HC of Judicature at Bombay as Annexure 1A and 1B respectively.
2. Our Prayer Upon the Scheme coming into effect, all proceedings (including tax proceedings) against NICE whether pending or arising after the effective date shall be continued/ enforced in the hands of L&T IDPL in same manner as it would have been continued/ enforced in the hands of NICE In view of the above, all proceedings pending before your goodself In connection with NICE (list provided as Annexure 2 for ready reference) shall be continued in the hands of L&T IDPL We request your goodself to issue relevant notices, intimations, orders etc relating to NICE to the following address: L&T Infrastructure Development Projects Limited PO Box No 979 Mount Poonamalle Road Manapakkam Chennai - 600 089 We request you to kindly take the above on record. We would be glad to provide any further information/ document that you may require in this regard. Yours faithfully, L&T Infrastructure Development Projects Limited Authorized Signatory
C.O No.66/Chny/2017 Even the same thing was informed to the AO during assessment proceedings and the relevant text reads as under:- Sub: Narmada Infrastructure Construction Enterprise Limited ('NICE’, ‘the Company’ or ‘the assessee’) - Intimation of merger Ref:Merger of NICE, L&T Transco Pvt. Limited and International Seaports (India) Private Limited (collectively ’Transferor Companies’) with L&T Infrastructure Development Projects Limited (‘L&T IDPL’) with effect from 1 April 2013 1. Background During the subject AY, the Hon‘ble High Court (’HC’) of Judicature at Madras and the Hon’ble HC of Judicature at Bombay vide their orders dated 28th March 2014 and 20th August 2014 respectively, sanctioned the scheme of merger of the Transferor Companies with L&T IDPL (‘the Scheme’). We have attached the order of the Hon’ble HCs of Judicature at Madras and the Hon’ble HC of Judicature at Bombay as Annexure 1A and 1B respectively. 2.Address of issue of notices Pursuant to the Scheme becoming effective, NICE would be dissolved without winding up. Upon the Scheme coming into effect, all proceedings (including tax proceedings) against NICE whether pending or arising after the effective date shall be continued/ enforced in the hands of L&T IDPL in same manner as it would have been continued/ enforced in the hands of NICE In view of the above, we request your goodself to issue relevant notices, intimations, orders etc relating to NICE to the following address: L&T Infrastructure Development Projects Limited PO Box No 979 Mount Poonamalle Road Manapakkam, Chennai - 600 089 We request you to kindly take the above on record. We would be glad to provide any further information/ document that you may require in this regard. Yours faithfully, L&T Infrastructure Development Projects Limited Authorized Signatory
C.O No.66/Chny/2017 In view of the above, the ld.counsel for the assessee stated that the issue is covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd., [2019] 416 ITR 613 (SC).
On the other hand, the ld.Senior DR vehemently opposed the ground raised by assessee but he could not controvert the case law of Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd., supra, wherein the decision of CIT vs. Spice Enfortainment, Civil Appeal No.285 of 2014, dated 02.11.2017 was followed.
We have heard rival contentions and gone through the facts and circumstances of the case. Admitted facts are that in this case, the assessee informed both the AO as well as the CIT(A) that erstwhile assessee Narmada Infrastructure Construction Enterprise Ltd., was merged with L&T Infrastructure Development Projects Limited w.e.f. 01.04.2013, vide letters along with order of Hon’ble Jurisdictional High Court i.e., Madras and Hon’ble Bombay High Court vide orders dated 28.03.2014 and 20.08.2014, sanctioning the scheme of merger of the transferor companies with L&T Infrastructure Development Projects Limited. It was claimed that C.O No.66/Chny/2017 pursuant to the scheme becoming effective Narmada Infrastructure Construction Enterprise Ltd., is disallowed without winding up and upon the scheme coming into effect, all proceedings (including tax proceedings) against the erstwhile company, whether pending or arising after the effective date shall be continued/enforced in the hands of present company i.e., L&T Infrastructure Development Projects Limited in the same manner as it would have been continued / enforced in the hands of erstwhile company Narmada Infrastructure Construction Enterprise Ltd. The assessment was completed vide order dated 22.03.2016 and CIT(A) also decided the appeal vide order dated 10.02.2017 as against the information given vide letter dated 04.09.2014 to the AO and also CIT(A) vide letter dated 04.09.2014. The terms of the approved scheme provided that all liabilities and duties of Transferor Company shall stand transferred to the Transferee Company without any further act or deed. On the scheme coming into effect, the transferor has to stand disallowed without winding up. The scheme stipulated that the order of amalgamation will not be constituted as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable, in accordance with law. Admittedly, Narmada Infrastructure Construction Enterprise Ltd., participated in C.O No.66/Chny/2017 the proceedings before the AO as well as the CIT(A) but informed to both the parties that merger has taken place and the transferee company is now L&T Infrastructure Development Projects Limited w.e.f. 01.04.2013. We noted that this issue has been considered in great detail by Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd., supra, and the relevant paras reads as under:-
In Spice Entertainment, a Division Bench of the Delhi High Court dealt with the question as to whether an assessment in the name of a company which has been amalgamated and has been dissolved is null and void or, whether the framing of an assessment in the name of such company is merely a procedural defect which can be cured. The High Court held that upon a notice under Section 143 (2) being addressed, the amalgamated company had brought the fact of the amalgamation to the notice of the assessing officer. Despite this, the assessing officer did not substitute the name of the amalgamated company and proceeded to make an assessment in the name of a non-existent company which renders it void. This, in the view of the High Court, was not merely a procedural defect. Moreover, the participation by the amalgamated company would have no effect since there could be no estoppel against law : “11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exit w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said „dead person‟. When notice under Section 143 (2) was sent, the appellant/amalgamated company appeared and 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 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
C.O No.66/Chny/2017 assessment orders which were framed in the name of the amalgamating company in: (i) Dimension Apparels; (ii) Micron Steels; and (iii) Micra India.
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 Delhi32. 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 connected batch of cases. Though, leave was not granted by this Court, reasons have been assigned by this Court for rejecting the Special Leave Petition. The law declared would attract the applicability of Article 141 of the Constitution. For, as this Court has held in Kunhayammed:
“40…Where the order rejecting an SLP is a speaking order, that is, where reasons have been assigned by this Court for rejecting the petition for special leave and are stated in the order still the order remains the one rejecting prayer for the grant of leave to appeal. The petitioner has been turned away at the threshold without having been allowed to enter in the appellate jurisdiction of this Court. Here also the doctrine of merger would not apply. But the law stated or declared by this Court in its order shall attract applicability of Article 141 of the Constitution. The reasons assigned by this Court in its order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other court, tribunal or authority to express any opinion in conflict with or in departure from the view taken by this Court because permitting to do so would be subversive of judicial discipline and an affront to the order of this Court. However this would be so not by reference to the doctrine of merger.”
C.O No.66/Chny/2017 In this context, it is 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 referred to as the successor) who continues to carry on that business or profession,— (a) the predecessor shall be assesseed 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 assesseed 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, assesseed 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 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 assesseed and recovered in the manner provided in section 171, but without prejudice to the provisions of this section. Explanation.—For the C.O No.66/Chny/2017 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”
Now, in the present case, learned Counsel appearing on behalf of the respondent submitted that SPIL ceased to be an eligible assessee in terms of the provisions of Section 144C read with clause (b) of sub section 15. Moreover, it has been urged that in consequence, the final assessment order dated 31 October 2016 was beyond limitation in terms of Section 153(1) read with Section 153 (4). For the purposes of the present proceeding, we do not consider it necessary to delve into that aspect of the matter having regard to the reasons which have weighed us in the earlier part of this judgment.
33 In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment.
34 We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable.
C.O No.66/Chny/2017 The facts being identical in the present case before us also, as held by the Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd., supra, we quash the orders of lower authorities i.e., CIT(A) and that of the AO which has been made on non-existent company and allow the jurisdictional issue in favour of assessee.
As regards to other grounds on merits in the cross objection and the issues raised in Revenue’s appeal, we need not to adjudicate as the very assumption of jurisdiction is held as bad. Hence, the Cross Objection of the assessee is allowed and the appeal of the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is allowed.
Order pronounced in the court on 31st March, 2022 at Chennai.