M/S. PRECOT MERIDIAN LTD.,COIMBATORE vs. ACIT, COIMBATORE

आदेश /O R D E R

PER MAHAVIR SINGH, VP:

2. At the outset, the ld.counsel for the assessee first of all explained the brief history of the case. The ld.counsel Shri S. Sridhar explained that the assessee filed its return of income for the relevant assessment year 2006-07 on 11.11.2006 and the same was processed u/s.143(1) of the Act on 02.08.2007. Subsequently, the assessee’s case was selected for scrutiny assessment and notice u/s.143(2) of the Act was issued on 26.10.2007. The assessee filed its return of income in the name of existing company at that point of time i.e., Meridian Industries Limited. The assessee company merged with M/s. Precot Mills Limited and was known as Precot Meridian Limited by the amalgamation order passed by Hon’ble High Court of Madras dated 01.09.2006 by specifically stating that the transferor company viz., Meridian Industries Limited be and hereby dissolved and company wound up. The assessee filed copy of the order of Hon’ble High Court amalgamating the assessee company with the Precot Mills Limited by virtue of which it was named as Precot Meridian Ltd., w.e.f. 01.04.2006. The copy of the said order was filed with the AO on 01.11.2006. The copy of this letter is enclosed in assessee’s paper-book at page-1 and this was filed with ACIT, Company Circle 1(2), Coimbatore. As per the office noting of the Income Tax Department, the AO has taken cognizance of this letter and was asked to put up and please update. The case records the relevant letter is part of record of the assessment. The ld.counsel stated that the AO framed the assessment and even notice u/s.143(2) of the Act dated 26.10.2007 was also issued in the name of non- existent company namely Meridian Industries Limited, which is enclosed in assessee’s paper-book at page 3. He stated that the original assessment was framed by the AO u/s.143(3) of the Act vide order dated 30.12.2008 and this fact was not noted by the AO and even the letter was not considered. This matter was carried out in appeal before the CIT(A) in original assessment proceedings and the CIT(A) in Appeal No.257/08-09 passed order dated 23.03.2008 in the name of merged company namely M/s. Precot Meridian Limited. But the CIT(A) despite noting the fact that assessee company amalgamated with Precot Mills Limited to form a new entity M/s. Precot Meridian Limited, which was incorporated by Certificate of Registrar of Companies on 28.09.2006 in the period relevant to assessment year 2007-08 and hence, this is a curable defect u/s.292B of the Act and hence, according to him this being a technical mistake pointed out by the assessee stand corrected. The CIT(A) held that assessment order to be legal and valid. This matter was further carried in appeal before the Income Tax Appellate Tribunal and the Tribunal in the Cross Objection No.101/Mds/2009 arising out of vide order dated 30.08.2011 held that cross objection of the assessee is premature and allowed liberty to the assessee to raise this issue whenever occasion arises. The Tribunal dismissed this ground as premature by observing in Para 4 as under:- “4. The cross objection by the assessee would become premature in view of the fact that we have set aside the finding of the ld.CIT(A) and that of Assessing Officer, but the assessee is at liberty to raise this issue whenever occasion arises. Accordingly, we keep open the issues raised in the cross objection but dismiss the same as premature.”

The assessee carried this matter before Hon’ble Madras High Court and this case was numbered as Tax Case Appeal No.592 of 2011. The ld.counsel for the assessee stated that the assessee has taken up the issue before the Hon’ble Madras High Court on the following substantial question of law:- “1. Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal is right in holding that the issue relating to the validity of assessment as premature in nature when infact, it ought to have been decided first before setting aside the matters relating to additions and disallowances made in the assessment back to the file of the Assessing Officer?

2. Whether in the facts and circumstances of the case, the assessment made in the hands of the non-existent company i.e., M/s. Meridian Industries Ltd. is valid in the eyes of the law since M/s. Meridian Industries Ltd was not in existence when the assessment proceedings were initiated and completed and the fact of amalgamation was also brought to the notice of the learned Respondent even before the initiation of scrutiny assessment proceedings?”

The ld.counsel stated that this Tax Case Appeal No.592 of 2011 filed in November, 2011 is still pending but not admitted yet. However, he stated that this is only numbered as Tax Case Appeal No.592 of 2011. The ld.counsel further stated that the AO to give effect to the Tribunal order in order dated 30.08.2011 passed assessment order u/s.143(3) r.w.s. 254 of the Act vide order dated 11.03.2013. Aggrieved, assessee preferred an appeal before the CIT(A).

The ld.counsel for the assessee stated that this ground was never adjudicated by the CIT(A).

2. The Commissioner of Income Tax (Appeals) has erred in not considering the ground of invalidity of assessment raised by the appellant, as the Assessing Officer had assumed jurisdiction invalidly which is illegal and void-ab-initio.

5.1 The ld.counsel for the assessee further took us to the notings done by the AO on 02.11.2006 “please update the case records IIT, pl. discuss for other formalities if any”. The ld.counsel drew our attention that the AO has noted this fact before the completion of original assessment proceedings. The assessee before first appellate proceedings during original round of litigation also raised this ground and the fact was brought to the notice of CIT(A) that the assessee company had merged with the Precot Mills Ltd., to be known as Precot Meridian Ltd., vide amalgamation order of the Hon’ble High Court of Madras dated 01.09.2006 merging w.e.f. 01.04.2006. In this letter, Hon’ble Madras High Court has subsequently recorded the fact that “the transferor company viz., Meridian Industries Limited be and hereby dissolved and company wound up”. The assessee filed a copy of this order before the AO as well as before the CIT(A) and before Tribunal in first round and even during second round of litigation. But all the authorities below have passed the order not adjudicating the issue or adjudicating the issue on superficial ground ignoring the fact that the company is not in existence. The ld.counsel for the assessee subsequently referred to the findings recorded by the CIT(A) in first round vide para 5.2 as under:- 5.2 The submissions the appellant-company/Id.AR (supra) have been carefully considered. In the instant case, the relevant record shows that the return of income for A.Y.2006-07 filed on 11-11-2006 was in the name of M/s.Meridian Industries Ltd. The record also shows that the appellant-company amalgamated with M/s.Precot Mills Ltd. to form a new entity M/s.Precot Meridian Ltd., which was incorporated by Certificate of the Registrar Companies on 28-9-2006 in the period relevant to A.Y.2007-08. Section 292B clearly speaks that :-

“No return of income, assessment, notice, summons or other proceeding 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.”

In view of the provisions of section 292B, the instant order of assessment passed u/s 143(3) of the I.T.Act, 1961, in the appellant-company’s case for A.Y.2006-07 dated 30-12-2008 would now be read as passed in the name of M/s.Precot Meridian Ltd. (previously known as M/s.Meridian Industries Ltd.) and in these circumstances, the technical mistake pointed out by the appellant stands corrected and I, therefore hold that the said order of assessment to be a legal and valid order and not vitiated by the technical defect pointed out which is curable by the provisions of section 292B. The appellant’s plea is, therefore, rejected.

5.2 The ld.counsel for the assessee stated that the CIT(A) simply ignored the jurisdictional issue by covering the same under the guise of provisions of section 292B of the Act. The Tribunal has not adjudicated the issue. According to him, the Tribunal has simply set aside the matter to the AO and kept the issue open as raised in the cross objection before it. Even in the second round, despite the fact that the CIT(A) noting the ground in its order at page 2, has not adjudicated the issue. He stated that all proceedings emanated from the original assessment order i.e., assessment order dated 30.12.2008 u/s.143(3) of the Act is the base order which was passed on non-existent company, the subsequent proceedings all will not survive in view of the decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki Ltd, 416 ITR 613. The ld.counsel for the assessee took us through the case law, para 31 of the assessee’s paper-book page 13 and read out relevant portion, wherein the Hon’ble Supreme Court held that “notice u/s.143(2) under which jurisdiction was assumed by the Assessing Officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section292B”. The Hon’ble Supreme court has also considered the provision of section 170 of the Act and stated that “it is necessary to advert to the provisions of section 170 which deal with succession to business otherwise than on death”. The Hon’ble Supreme Court considered this issue as under:- “In this case, the notice u/s.143(2) under which jurisdiction was assumed by the Assessing Officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section292B.

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:”

5.3 The ld.counsel for the assessee also stated that the Hon’ble Supreme Court has also relied on the decision of Hon’ble Supreme Court in another case CIT vs. Spice Enfotainment, Civil Appeal No.285 of 2014, dated 02.11.2017. The ld.counsel also stated that in the case of M/s. Maruti Suzuki Ltd., supra, the Hon’ble Supreme Court has noted the fact that the draft assessment order and the final assessment order contained the name of both amalgamated and amalgamating companies but despite the fact both name existed, the Hon’ble Supreme Court held that the assessment framed is on non-existent company and not the primary notice issued u/s.143(2) of the Act, it being a jurisdictional error and not a mere defect or mistake u/s.292B of the Act, suffers from jurisdictional error.

Order pronounced in the court on 31st January, 2022 at Chennai.