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Facts
The assessee company, a non-filer, purchased an immovable property and received interest income. The AO initiated assessment proceedings under Section 147 and made additions. The CIT(A) upheld the AO's order. The assessee appealed to the ITAT.
Held
The Tribunal noted the assessee's casual approach and lack of participation in lower proceedings. However, considering the legal ground that assessment cannot be made on a non-existent entity post-amalgamation, and that part of the payment related to a preceding year, the matter was restored to the AO for re-examination.
Key Issues
Whether assessment proceedings can be initiated against a non-existent entity after amalgamation, and whether additions can be made solely in one assessment year when payments span multiple years.
Sections Cited
250, 147, 144, 69, 115BBE, 139, 194A, 148, 142(1), 144B, 394, 2(31), 143(2), 170, 292B, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of NFAC, Delhi dated 15.12.2023 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2016-17. The assessee has raised the following grounds of appeal: -
1. 1. The impugned order passed u/s. 147 r.w.s 144 of the Act dated 30.03.2022 is bad in law and on facts of the case, for want of jurisdiction and for various other statutory reasons and hence, the same may kindly be quashed and in any case, the impugned addition/s be deleted.
2. The Ld.CIT(A) erred in law as well as on the facts of the case in passing an ex parte order dated 15.12.2023 and confirming the action of the AO in framing assessment u/s. 144 r.w.s 147 of the act. The impugned order having been framed u/s. 147 r.w.s 144 of the Act dated 30.03.2022 and appeal order dated 15.12.2023 in gross breach of natural justice, kindly be quashed.
3. The Ld.CIT(A) erred in law as well as on the facts of the case in confirming the action of Ld.AO in making addition of Rs. 87,11,06,018/- under section 69 of the Act. The addition so made is contrary to the law as well as facts and deserves to be deleted.
The Ld.CIT(A) erred in law as well as on the facts of the case in confirming the action of Ld.AO invoking the provisions of section 115BBE of the act, which is contrary to the provisions of law as well as facts and deserves to be quashed.
5. The Ld.CIT(A) erred in law as well as on the facts of the case in confirming the action of Ld.AO in making addition of interest income of Rs. 1,11,372/-. The addition so made is contrary to the law as well as facts and deserves to be deleted.
6. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing.”
The brief facts of the case are that the assessee company is amongst the non-filer of the return u/s. 139 of the Act. As per data available in AIMS/ITBA system of the department, the assessee company has purchased immovable property for Rs. 87,11,06,018/- and also received interest under section 194A of the Act amounting to Rs. 1,11,372/-. In view of this a notice u/s. 148 of the Act was issued to the assessee vide dated: 27.03.2021 for filing of appeal within 30 days. But, no return in response to the same was filed by the assessee. Thereafter, notices u/s. 142(1) of the Act was issued vide dated: 20.11.2021, 16.12.2021, 17.01.2022 and final show cause notice u/s. 144 of the Act vide dated: 10.02.2022. Ultimately, a show-cause alongwith draft assessment order u/s. 144B of the Act was also issued vide dated: 23.03.2022. Same notices were issued through speed post also vide para 3.4 of the assessment order.
As a matter of last resort, the AO assessed the case of the assessee u/s. 144 r.w.s. 144B and 147 of the Act at a figure of Rs. 87,12,17,390/- (Rs. 87,11,06,018/- + Rs. 1,11,372/-) u/s. 69 of the Act chargeable to tax u/s. 115BBE of the Act. The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT (A), NFAC-Delhi, who in turn dismissed the appeal of the assessee. As there was also no compliance by the assessee, on designated dates and notices as mentioned in Para 4 of the appeal order. The assessee being further aggrieved with the order of the Ld. CIT (A) preferred the present appeal before us.
4. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee before us. We have gone through the affidavit also filed under the signature of some Mr. Vinay Chordia as authorized representative of the assessee. It is observed that all the notices pertaining to the assessment proceedings were issued at email-id jugal59@gmail.com (As available in the ITBA System). Moreover, the notices in physical were also issued to the assessee by the designated verification unit of the ReFAC and were duly delivered as demonstrated vide para 3.4 of the assessment order, but none has come forward to participate. Thereafter, the assessee itself provided email-id ravi@pacificindustriesltd.com in Form No. 35 filed before the Ld. CIT (A). Still, the same story repeated again and no participation by the assessee before the Ld. CIT (A). It certainly establishes the casual approach of the assessee and avoidance of participation in the proceedings before the appropriate authorities.
Now, we have to examine the chronology of events considering the affidavit filed by the assessee before us. As per the assessee’s affidavit mentioned (supra), vide stamp dated: 13.08.2024 and prepared and signed on the same date by the person mentioned (supra). Alongwith this affidavit, the assessee also filed copy of the certificate issued by the Registrar, ROC-Jaipur issued on 26.05.2015. As per the affidavit the assessee paid Rs. 38, 44, 06,130/- from its bank account during 14.11.2014 to 31.03.2015 to Jaipur Development Authority (JDA) for plot no. A-6, Airport Enclave Scheme, Durgapura, Tonk Road, Jaipur. Thereafter, the assessee company was converted into LLP vide certificate mentioned (supra) on 26.05.2015 and balance amount (Out of total amount of Rs. 87, 11, 06,018/-) was paid from the bank account of the LLP in F.Y. 2015-16. Now it is confirmed that the total payment falls in two F.Y.s, i.e. A.Y. 2015-16 and 2016-17. It is pertinent to mention here that a major event took place on 26.05.2015; still the assessee neither surrendered the PAN No. pertaining to the assessee company nor informed the department about this development and details about the newly born entity.
As discussed (supra), the assessee received all the notices sent by the AO and there was no response to the same. Based on that order of the AO, the assessee filed an appeal before the Ld. CIT (A), still no response. In its affidavit, vide Para 5, the assessee claimed that funds for the said plot were raised from NBFC, RIICO and directors of the assessee/LLP respectively. As this explanation was never given to any of the authorities below and even before us no document was filed to substantiate the same, which makes the affidavit vague and general in nature and no consideration to the same can be given by us. In addition to this, in such a situation, the assessee was supposed to furnish the details of the LLP, like PAN No., Copies of the ITR, Audited financials of the LLP and the assessee itself reflecting the transaction in their respective books financial year wise. In its affidavit the assessee claimed that T.D.S. of Rs. 87, 11,060.18 was deducted being 1% of the total consideration and paid by the assessee on 01.09.2015.
Relevant facts of the assessee are pin pointed (supra), now we need to discuss the legal ground taken by the Ld. Counsel of the assessee during the arguments before us. The main legal ground raised by the Ld. Counsel of the assessee was that no assessment can be done in the name of non-existing entity and not mentioned but we assume that he was relying on the case of [2019] 107 taxmann.com 375 (SC) PCIT, New Delhi vs. Maruti Suzuki India Ltd., wherein the Hon’ble Apex Court held as under:
it is necessary at the outset to advert to certain significant facets of the present case: (i) The income which is sought to be subjected to the charge of tax for assessment year 2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of Rs. 78.97 crores. (ii) Under the approved scheme of amalgamation, the transferee has assumed the liabilities of the transferor company, including tax liabilities. (iii) The consequence of the scheme of amalgamation approved under section 394 of the Companies Act, 1956 is that the amalgamating company ceased to exist. (iv) Upon the amalgamating company ceasing to exist, it cannot be regarded as a person under section 2(31) against whom assessment proceedings can be initiated or an order of assessment passed; (v) A notice under section 143 (2) was issued on 26-9-2013 to the amalgamating company, SPIL, which was followed by a notice to it under section 142(1); (vi) Prior to the date on which the jurisdictional notice under section 143 (2) was issued, the scheme of amalgamation had been approved on 29-1-2013 by the High Court of Delhi under the Companies Act, 1956 with effect from 1-4-2012; (vii) The Assessing Officer assumed jurisdiction to make an assessment in pursuance of the notice under section 143 (2). The notice was issued in the name of the amalgamating company in spite of the fact that on 2-4- 2013, the amalgamated company MSIL had addressed a communication to the Assessing Officer intimating the fact of amalgamation. In the above conspectus of the facts, the initiation of assessment proceedings against an entity which had ceased to exist was void ab initio. [Para 19] ■ The notice under section 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 section 292B. In this context, it is necessary to advert to the provisions of section 170 which deal with succession to business otherwise than on death.[Para 31] ■ 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 judges which dismissed the appeal of the revenue in CIT v. Spice Enfotainment [Civil Appeal No. 285 of 2014, dated 2- 11-2017]. The decision in Spice Enfotainment Ltd. (supra) has been followed in the case of the assessee while dismissing the Special Leave Petition for assessment year 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment (supra).[Para 33] ■ There is 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 assessment year 2011-12 must be adopted in respect of the present appeal which relates to assessment year 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.[Para 34] ■ For the above reasons, there is no merit in the appeal. The appeal is accordingly dismissed. [Para 35]
In view of the legal ground raised by the assessee and the fact that almost half of the payment made by the assessee pertains to preceding year and balance falls in the year under consideration. These facts needs re-examination by the authorities below, specially the fact that the whole addition can’t be made in this year, as each year is a separate year and to be treated accordingly. Accordingly, the matter is restored back to the file of the AO to rectify the amount of addition made and for balance amount reheard the assessee after giving a proper opportunity of being heard. The assessee is directed to cooperate with the AO without seeking any adjournment and for balance amount produce the documents to establish identity, genuineness and creditworthiness of creditors’ u/s. 68 of the Act. In these terms grounds taken by the assessee are partly allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.