M/S UNITED SPIRITS LIMITED ,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(3), BANGALORE

Per B.R Baskaran, Accountant Member :

“I have considered the assessment order and the submissions filed by the appellant before the AO as also during the course of appellate proceedings. I have considered the decisions relied by the AR. It is seen that a Composite Scheme of Arrangement was arrived at in between the appellant company and others, where under the appellant company was to merge with United Spritis Ltd. As per the scheme, the merger appointed date was w.e.f. 1.4.2005. The Scheme was approved by the Hon'ble Karnataka High Court vide order dated 23.6.2006 and by the Hon'ble Bombay High Court vide order dated 31.7.2006. As per the orders passed, the appellant company was allowed to be merged with United Spirits Ltd. As no specific date of merger was stipulated by the Hon'ble Courts, the merger is deemed to be w.e.f the effective date specified in the Composite Scheme of Arrangement and from the said date has lost its individual existence, as per the approval of the composite scheme of arrangement by the Hon'ble Courts. The AO hence could not continue with the jurisdiction assumed to assess/reassess the appellant company. The jurisdiction to reassess the income, which has escaped assessment, would be with the jurisdictional officer holding charge over United Spirits Ltd.”

(g) Thereafter, the assessing officer located in Bangalore, viz., The Assistant Commissioner of Income tax, Central Circle-2(3), Bangalore re-opened the assessment of the year under consideration by issuing notice u/s 148 of the Act. The notice was issued to the following name:-

M/s Herbertsons Ltd (Since amalgamated with M/s Mc Dowell & Company Ltd; now renamed as M/s United Spirits Ltd.) UB Tower, 24 Vittal Mallya Road, Bangalore – 560 001.

(h) Accordingly, the assessing officer passed the impugned assessment order u/s 143(3) r.w.s 147 of the Act in the name of M/s Herbertsons Ltd further noting the amalgamation details in bracket as mentioned in the preceding paragraph. (i) Before Ld CIT(A), the assessee contended that the impugned assessment order has been passed on a non- existent company. Accordingly it was submitted that the impugned assessment order cannot be considered as an assessment done in the hands of M/s United Spirits Ltd. The Ld CIT(A), however, rejected the contentions of the assessee with the following observations:-

“3.7 Clearly in the case of the appellant, all the conditions are satisfied. There is a finding based on which the reopening was done and restrictions imposed in subsection 2 are not attracted. Hence, this argument of the appellant is legally not correct. I do not find strength in the argument of the appellant that the company is not existent, the assessment of United Spirits is done by the same officer and the present order on non existent company is bad in law. The merger is with effect from 1.4.2005 pertaining to the assessment year 2006-07. The assessments involved are for AYs 200304 to 2005-06 which are periods prior to date of merger i.e. 1.4.05. The company was in existence in that period and was rightly assessed so by the AO. The only dispute in earlier appeal on which the order was annulled was on the issue of jurisdiction since it was contended on the date of order the officer of United Spirits had jurisdiction on the appellant though the issue pertains to the period prior to merger. The action of the AO is as per Law.

3.8 The next issue of contention of the appellant is regarding absence of any failure on the part of the assessee to initiate proceedings u/s 148. It is fairly established now under the amended provisions, what is required, is reason to believe that any income chargeable to tax has escaped assessment and section 147 is subject to provisions of section 148 to 153 which includes section 150, which by implications means that if there is an escapement of income which is a subject matter of section 150, AO is well within his powers to reopen the assessment. 3.9 The original order u/s 147 was passed within 4 years. So, failure to furnish relevant details is not relevant. The present order is u/s 150(1) taking finding of the CIT(Appeals) that the present AO is the jurisdictional officer. Procedurally the AO has followed the due procedure and has even furnished the reasons recorded. Hence, the legal grounds are not tenable and the order is legally valid and accordingly these grounds are dismiss.”

The Ld CIT(A) has taken the view that the impugned assessment year, being AY 2005-06, is for the period prior to the appointed date of 1.4.2005 and since the company was in existence in that period, the same was rightly assessed by the AO in the hands of M/s Herbertsons Ltd.

(j) The assessee is challenging the above said decision of Ld CIT(A) rendered on this legal issue.

6. On the contrary, the Ld D.R supported the view taken by Ld CIT(A) on this issue.

“4. This appeal was admitted by order dated 21.7.2010 on the substantial questions of law as had been framed in the memo which reads as under : (1) Whether the Tribunal was correct in holding that the order passed by the Assessing Officer on M/s Software & Silicon Systems India Pvt. Ltd., after being intimated about the merger with M/s Intel Technology India Pvt. Ltd., was without jurisdiction against the said company and null and void ? (2) Whether the Tribunal was correct in holding that the provisions of section 292B of the Act will not make the assessment valid as a defect/omission to incorporate the name of M/s Intel Technology India Pvt. Ltd., in the assessment order as the same is not in substance and effect in confirmative with or according to the intend and purpose of this Act? (3) Whether the Tribunal has to examine the matter on merits and record finding on the controversy raised before it both by the revenue as well as the assessee in their separate appeals? 5. The tribunal had rejected the claim of the department on the ground that the assessment proceedings against SSS Limited (which was non-existent on the date of passing of the assessment order) cannot be held to be valid proceedings, learned counsel for the appellant has submitted that the return of income had been filed by the assessee-SSS Limited much prior to the amalgamation order dated 1.4.2004 and as such, the proceedings would continue against the said company even after the amalgamation, especially when the successor company - M/s Intel Technology India Pvt. Ltd. had participated in the proceedings. Learned counsel for the appellant further submits that the department would be entitled to the benefit of Section 292(B) of the Income Tax Act.

7. In the present case also, the proceedings had been initiated against a non-existing company/SSS Limited even after the amalgamation of the said company with M/s Intel Technology India Pvt. Ltd.. We do not see any good ground to differ with the said judgment of the Delhi High Court.

8. Accordingly, for the reasons given in the judgment of the Delhi High Court in the case of Spice Infotainment Ltd. (supra), these appeals are dismissed and we decide the substantial questions of law in favour of the assessee and against the revenue.

9. We may, however, mention that on the basis of the returns filed by SSS Limited for the assessment year 2003-04, the department may proceed for making assessment in accordance with law and in terms of the provisions of the Income Tax Act, 1961. These appeals stand disposed off in the aforesaid terms.”

In view of the above said binding decision of Hon'ble Karnataka High court, the view expressed by Ld CIT(A) that the assessment was pertaining to the period prior to the date of merger is liable to be quashed.

“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 estoppels 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 issuing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the Spice Enfotainment.”