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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM: This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)]-52, in short CIT(A), in appeal No. CIT(A)-52/IT/DC-CC-2(3)/270/2016-17 dated 27.10.2016. The Assessment was framed by the Dy. Commissioner of Income 2 Tax, Circle 9, Mumbai (in short DCIT/ITO/ AO) for the A.Y. 2006-07 vide order dated 19.03.2014 under section 143(3) r.w.s 153A of the Income-tax Act, 1961 (hereinafter ‘the Act’)..
The only issue in this appeal of Revenue is against the order of CIT(A) in quashing the assessment as the assessment could not be made in the hands of the assessee who is non-existent and already amalgamated with Mahendra Brothers Exports Pvt. Ltd. For this Revenue has raised the following ground No.1: -
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in quashing the assessment completed under section 143(3) r.w.s 153A of the IT Act, 1961 On 19.03.2014 on the ground that the assessment could not be made in the hands of the assessee as the assessee was amalgamated with M/s Mahendra Brothers Exports Pvt. Ltd. w.e.f 01.04.2010 and erred in following the decision in the case of M/s Spice Infotainment Ltd. vide and 476 of 2011 of Hon’ble Supreme Court has since admitted the appeal against the above referred decision of the Hon’ble Delhi High Court.”
Briefly stated the facts of the case are that the assessee company is engaged in the business of diamonds manufacturing and is also providing job work services of cutting and polishing of diamonds. It is gathered that the business of the assessee commenced in January, 2006. The assessee filed its return of 3 income on 24-10-2006. The original assessment order in this case was passed u/s. 143(3) of the Act on 22/12/2008. In this order the AO estimated the income of the assessee from labour charges at the rate of 5% of the turnover and added the same in the hands of the assessee. It is gathered that the assessee company was merged with a sister concern namely Mahendra Brothers Exports Pvt. Ltd. under a scheme of amalgamation with effect from 1.04.2010 as per Hon'ble Bombay High Court's order dated 29/10/2010. Subsequently a search and seizure action u/s.132(1) of the Act was conducted by the DDIT(Inv.) Unit-IX (3), Mumbai in the case of the Mahendra Brothers Exports Pvt. Ltd, and its associated concerns, directors and related persons (Group) and the assessee was also covered in the said action u/s.133A of the Act on 08/08/2011. Subsequently a notice u/s.153A of the Act was issued to the assessee on 21/09/2012. However, the assessee company objected to issue of notice u/s. 153A vide letter dated 25-10-2012 on the grounds that it was not in existence as on the date of search. However, the assessee filed its return of income in response to notice u/s. 153A of the Act on 06/02/2013 under protest. Consequently, the AO completed the assessment vide order dated 19/03/2014 passed u/s.143(3) r.w.s.153A of the Act. In this assessment order, the A.O. simply followed the original assessment made u/s. 143(3) vide order dated 22112/2008 except the point that the AO estimated income from labour charges at the rate of 20% as against at the rate of 5% estimated in the original assessment order. Aggrieved, assessee preferred appeal before CIT(A).
4 4. The CIT(A) relied on the decision of Hon’ble Delhi High court in the case of Spice Entertainment Ltd. vs. Commissioner Of Service Tax in and 476 of 2011 and considered the issue vide Para 6 and 7 as under: -
I have considered the facts of the case, submissions and contentions of the appellant, as also the assessment order of the AO. It is gathered that the appellant company is merged with Mahendra Brothers Exports Pvt. Ltd. with effect from 04/04/2010. The Hon'ble Mumbai High Court had approved the scheme of merger vide its order dated 29/10/2010 u/s. 390 to 394 of the Companies Act, 1956. The relevant findings of the Hon'ble High Court in this regard are reproduced as under: - "6. From the material on record, the scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. None of the panics concerned have come forward to oppose the scheme.
Since all the requisite statutory compliances have been fulfilled, company scheme PPitition Nos.441 of 2010 to 446 of 2010 are made absolute in terms of prayer clauses (a) to 9 of the respective petitions and Company Scheme rzo.447of2010 is made absolute in terms of pro year clauses (a) to (f)."
5 7. Thus the Hon'ble High Court had approved the scheme of amalgamation w.e.f. appointed date i.e. April, 2010. The order approving amalgamation was passed by Hon'ble High Court vide order dated 29/10/2010 as per which the appellant Misc. Mahendra Brothers Diamond Export Pvt. Ltd, the amalgamating company merged and had been amalgamated with MIs. Mahendra Brothers Exports Pvt. Ltd. which is the amalgamated company. Therefore, the appellant company ceased to exist after 29/10/2010. Therefore, the notice u/s.153A in the name of appellant company issued on 21/09/2012, has been issued after the date of amalgamation when it was no more in existence. The Hon’ble Delhi High Court has considered an identical issue in the case of M/s. Spice Entertainment Ltd, vide and 476/ 2011 wherein the Hon'ble Court held as under:-
After the sanction of the scheme on 11th April, 2004, the spice ceases to exist 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'. Under notice u/s. 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the Assessing Officer. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of 6 M/s. Spice, which was non existing entity on that date. In such proceedings and 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 estoppels against law?”
And finally, quashed the assessment by observing in Para 11 as under:
11. The fact of the present case are identical to the case of MIs. Rijay Dimond Exports Pvt. Ltd. Therefore, following the decision of my IA predecessor (CIT (A)- 48, Mumbai), in the case of group concern M/s. Rijay Diamond Exports P. Ltd and following the decision of Hon'ble Delhi High Court in the case of Mis. Spice Entertainment Ltd and M/s. Images Credit and Portfolio (P)Ltd., Ground No. 1 is decided in favour of appellant.