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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI S.K. YADAV & SHRI O.P. KANT
These cross appeals by the assessee and the Revenue are directed against order dated 10/06/2016 passed by the Ld. Commissioner of Income-tax (Appeals)-3, Delhi [ in short the Ld. CIT(A)] for assessment year 2012-13. Both the appeals being arose from the same impugned order, were heard together and disposed off by this consolidated order for convenience. 2. The grounds of appeal raised by the assessee in are reproduced as under: 1. “That on the facts and in the circumstances of the case, the learned CIT(Appeals) has erred in upholding disallowance of Rs. 30,62,470/- out of legal & professional charges on the ground that the appellant company has not been able to justify the same.
2. That on the facts and in the circumstances of the case, the learned CIT(Appeals) has erred in not allowing deduction of Rs. 1,61,419/- in respect of depreciation claimed as per income-tax rules and deduction u/s 35D allowable to the appellant company.
3. That any relief due to the company in consequence of the foregoing grounds and any other relief, to which it is entitled under the law, may be directed to be granted to it.
4. That the above grounds of appeal are without prejudice to one another.
5. The appellant craves leave to add to, or vary, any of the grounds of appeal if it becomes necessary to do so in the interest of justice.”
The grounds of appeal
raised by the Revenue in 1. “That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 16,14,675/-, on account of expenditure made by the assessee company w.r.t. payment to auditors, sitting fees, security of the premises and travelling expenses incurred by the Directors of the company without appreciating the fact that no business activity was carried out by the assessee company and the said expenses are not attributable to it.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the additions of Rs. 11,16,350/- and Rs. 11,500/- paid to M/s. Khaitan & Co. Without appreciating the fact and no business activity was carried out by the assessee company and the said expenses are not attributable to it.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the additions of Rs. 9,49,969/- regarding CSR expenses without appreciating the fact that CSR is a charge on profits rather than a charge on revenue.
4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing deduction for various expenses without appreciating the fact that the assessee was in the process of setting up green field cement plant and was required to capitalized all the pre-operational expenses.
5. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law.
That the grounds of appeal
are without prejudice to each other
7. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.”
4. At the outset, the Ld. Counsel drawn attention of the bench to the additional ground filed by the assessee on 01/05/2018, which reads as under: “That the AO erred in law in framing an assessment on a non-existent company, i.e. the original assessee amalgamating company which is liable to be declared a nullity and hence quashed.”
5. The assessee also filed a copy of letter dated 22/09/2014 addressed to the Assessing Officer informing that the “Dalmia Cement Ventures Limited” merged with the Dalmia Cement (Bharat) Limited by the order dated 13/11/2013 of Hon’ble High Court of the Madras w.e.f. 01/04/2012 .
6. The Ld. Counsel submitted that the additional ground raised by the assessee goes to the root of the matter and does not entail any verification of the facts or bringing on record any fresh material or additional evidence and thus, the ground might be admitted for adjudication. In support the Ld. Counsel relied on the decision of the Hon’ble Supreme Court in the case of National Thermal Power Corporation Ltd. vs. CIT (1998) 229 ITR 383 (SC).
The Ld. DR on the other hand objected admission of the additional ground stating that this ground was not raised in first appellate proceeding before the Ld. CIT(A) and, therefore, the assessee may not be allowed to raise any ground which has not been adjudicated by the first appellate authority.
We have heard the submission of the parties on the issue of admissibility of the additional ground. We find that the issue as to whether an assessment can be made on non-existent entity, is only of the legal nature, it can be raised it any stage of the appellate proceedings unless investigation of fresh facts is required as held by the Hon’ble Supreme Court in the case of National Thermal Power Corporation Limited (supra). In view of above decision & facts of the case we admit the additional ground and the parties were directed to argue the said additional ground. 9. The Ld. Counsel of the assessee submitted that assessment in the case has been made on M/s Dalmia Cement Ventures Limited i.e the assessee on 13/02/2015 and on said date the company already stood amalgamated with M/s Dalmia Cement (Bharat) Ltd. The Ld. Counsel submitted that in view of the decision of the Hon’ble Delhi High Court in the case of CIT Vs Spice Infotainment Ltd (2012) 247 CTR 500 (Delhi) , which has been confirmed by the Hon’ble Supreme Court in Civil Appeal No. 285 of 2014 and others, assessment cannot be made on non-existent entity and thus the assessment order passed by the Assessing Officer is void ab initio. 10. The Ld. DR on the other hand submitted that in view of the recent decision of the Hon’ble Supreme Court in the case of Skylight Hospitality LLP vs. ACIT dated 06/04/2018 wherein it held that wrong name given in the notice was merely clerical error which could be corrected u/s 292B of the Income Tax Act, 1962 (in short the Act), the mentioning of earlier name of the company was a mistake which could be corrected u/s 292B of the Act.
In the rejoinder, the Ld. Counsel submitted that Hon’ble Delhi High Court in the case of Skylight Hospitality LLP reported in (2018) 90 taxmann.com 413 (Delhi) held that reassessment notice issued in the name of erstwhile private limited company despite company ceasing to exist as it had been converted to into LLP, would not invalidate reassessment proceeding is same was not a jurisdictional error, but a irregularity and procedural/technical lapse which could be cured u/s 292B of the Act and the SLP filed against the same has been dismissed by the Hon’ble Supreme Court .
The Ld. Counsel also submitted that the decision of the Spice Infotainment Ltd. (supra) was also duly discussed by the Hon’ble Delhi High Court in the case of Skylight Hospitality LLP (supra) and was distinguished.
13. We have heard the rival submission and perused the relevant material on record. We find that in the instant case the assessee filed return of income on 28/09/2012 and subsequently the case was selected for scrutiny and notice u/s 143(2) of the Act was issued and served upon the assessee. The authorised representative of the assessee attended and complied the assessment proceeding. The assessment u/s 143(3) of that was completed on 13/02/2015 in the name of “Dalmia Cement Ventures Limited” i.e. the assessee. Aggrieved with the assessment order, the assessee filed appeal before the Ld. CIT(A) in the name of M/s Dalmia Cement (Bharat) Limited and it was claimed that M/s Dalmia Cement Venture Limited had merged with M/s Dalmia Cement (Bharat) limited. The Ld. CIT(A) passed the order in the name of M/s Dalmia Cement (Bharat) Ltd. Aggrieved with the order of the Ld. CIT(A), both the assessee and the Revenue are in appeal before the Tribunal. Before the Tribunal, the assessee has raised the issue for the first time that the assessee company got merged with M/s Dalmia Cement (Bharat) Limited vide order dated 13/11/2013 of the Hon’ble High Court of Madras and ,therefore, on the date of passing of the assessment order, the company was not in existence and, therefore, the order passed by the Assessing Officer is void ab initio. The assessee has claimed that the Assessing Officer was informed on 22/09/2014 about the merger of the assessee company with M/s Dalmia Cement (Bharat) Limited and despite that the Assessing Officer has made assessment on non- existent entity.
The issue before us is whether assessment can be made on a non-existent entity. In the case of Spice Infotainment Limited (supra) , Hon’ble Supreme Court observed that assessment framed in the name of a non-existent entity, is not a procedural irregularity. The relevant observation of the Hon’ble High Court are reproduced as under: “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. Section 292B of the Act reads as under:- "292B. No return of income assessment, notice, summons or other proceedings furnished or made or issue 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 reasons of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding 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."
The Punjab &Haryana High Court stated the effect of this provision in CIT Vs. Norton Motors, 275 ITR 595 in the following manner:- "A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, Section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to Section 292B.” 15. The Hon’ble High Court in para 16 of the order concluded that the framing of the assessment on a non-existent entity goes to the root of the matter and which is not a procedural irregularity but a jurisdictional defect, as there cannot be any assessment against dead person. 16. The Hon’ble Supreme Court in civil appeal No. 285 of 2014 alongwith other civil appeals, upheld the finding of the Hon’ble Delhi High Court in the case of Spice Infotainment Limited (supra).
In the case of Skylight Hospitality LLP (supra), the issue involved was of issue of notice under section 148 of the Act in the name of the erstwhile entity and the Hon’ble Delhi High Court has held that same was a procedural irregularity or defect which could be cured under section 292B of the Act. The Hon’ble High Court noted the decision in the case of Spice Infotainment Limited (supra) and held that in said case assessment was made on a non-existent entity, which being a jurisdictional error, the assessment was void ab initio.
In our opinion, there is no contradiction in the two judgements and judgement in the case of Spice Infotainment Ltd (supra) is a valid decision despite subsequent decision in the case of Skylight Hospitality LLP (supra) as an illegality of framing assessment on non- existent entity cannot be cured u/s 292B of the Act. 19. However, in the instant case, the Ld. Counsel has produced before us letter dated 22/09/2014 addressed to the Assessing Officer informing the merger of the assessee with M/s Dalmia Cement (Bharat) Ltd. On perusal of the said letter, we find that though the letter is having stamp of the office of the Assessing Officer, but it is not bearing in the receipt or diary Number. There is no reference of this letter in the assessment order also. The assessee has also not produced any copy of the order sheet of the assessment proceedings to support that said letter was filed before the Assessing Officer in the course of assessment proceedings. In our opinion, verification of the fact whether this letter was filed before the Assessing Officer during assessment proceeding is very important. If the letter has not been filed before the Assessing Officer during the assessment proceeding, in those circumstances the Assessing Officer cannot be faulted for passing assessment order on M/s Dalmia Cement Venture Limited. In such circumstances, the assessment need to be restored to the file of the Assessing Officer for passing a fresh assessment order. But if the evidences establish that said letter has been filed before the Assessing Officer during assessment proceeding , then the Assessing Officer is at fault for passing assessment order on the non-existent entity knowingly.
In the facts and circumstances of the case, we feel it appropriate to restore the matter to the file of the Ld. CIT(A) with the direction for verification of letter dated 22/09/2014 addressed to the Assessing Officer, had been filed before the Assessing Officer and the fact of merger has been brought to his knowledge and then pass order on the issue of nullity of the assessment in view of our finding above and in accordance with law. The Ld. CIT(A) may call for record from the Assessing Officer or call for a remand report from the Assessing Officer. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard on the issue. The additional ground of the appeal is accordingly allowed for statistical purposes. As the additional ground goes to the root of the proceedings and which has already been restored to the file of the Ld. CIT(A), other grounds of the appeal of the assessee as well as Revenue are not adjudicated at this stage.
In the result, both the appeal of the assessee and the Revenue are allowed for statistical purposes. This decision was pronounced in the Open Court on 16th November, 2018.