MONSHAH COTTON PVT LTD,WANKANER vs. ASSISTANT COMMISIONER OF I.T. CIRCLE-1(1), RAJKOT

Succinctly, the factual panorama of the case is that assessee before us is a private limited company and did not file his return of income for the assessment year, (AY) 2010-11, despite making cash transactions exceeding Rs. 10,00,000/- in a Month through its bank account. On the basis of information available with the assessing officer, the case of the assessee was reopened u/s 147 of the Act and notice was issued to the assessee u/s 148 of the Act. During the assessment proceedings, the assessing officer noted that the assessee made cash transactions amounting to Rs.35,90,000/- in its bank account. The assessing officer provided many opportunities to the assessee to file return of income and explain nature and source of cash transactions reflecting in its bank accounts. However, the assessee neither filed return of income nor furnished any submission/ explanation regarding cash transactions made in the bank accounts. Therefore, the assessment proceedings u/s 144 of the Act, were completed by the assessing officer, by passing order dated 18/12/2017, wherein the addition of Rs.35,90,000/-, was made on account of unexplained income of the assessee from undisclosed sources.

Aggrieved by the order of the assessing officer, the assessee, carried the matter in appeal, before the learned CIT(A), who has confirmed the action of the assessing officer. The Ld. CIT(A),has reiterated the facts of the assessee and confirmed the addition made by the assessing officer, on merit. Besides, the learned CIT(A) also adjudicated the technical issue raised by the assessee, in respect of reopening, under section 147 of the Act, and held that reopening of assessment under section 147/148 of the Act, was correct, as the assessee did not file the return of income, in response to the notice under section 148 of the Act, therefore, in absence of any return of income, the nature and source of such transaction remained unexplained and hence the assessing officer had reason to believe that there was escapement of income, therefore reasons recorded in writing by the assessing officer, after obtaining prior approval of the competent authority, were good reasons and there were no defects in the reasons recorded by the assessing officer. This way, the learned CIT(A) dismissed the appeal of the assessee.

Shri R. D. Lalchandani, learned Counsel for the assessee argued that assessee has raised a legal ground stating that the assessee- company, was not in existence, when the assessment order was framed by the assessing officer, that is, assessee- company had died. The name of the assessee- company was strike off by the registrar of companies, therefore, the assessing officer cannot frame the assessment order, on the company, which is not in existence. Hence, learnedCounsel submitted that the additional legal ground, raised by the assessee may be admitted in the interest of justice and it should be adjudicated first.

We have heard both the parties on this preliminary issue. We note that assessee did not raise this legal ground before the authorities below. Learned Counsel submits before us that additional ground of appeal may be admitted as it is being purely a legal issue and all facts are already on record. On the other hand, Learned DR for the Revenue pleaded that assessee did not raise this issue during the appellate proceedings, before the ld CIT(A), therefore, at this stage the assessee can not raise additional ground on legal issue. We note that the facts relating to this legal ground, were there before the assessing officer. We also find that it is purely a legal issue and all facts are already on record which goes to the root of the matter and no further inquiry is required for deciding the same as all facts are already on record. Therefore, in the light of ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., vs. CIT (1998) 229 ITR 382 (SC), we admit the additional ground raised by the assessee, and we proceed to adjudicate the same first.

We have heard both the parties on this legal issue. The Learned Counsel for the assessee submitted before us that assessing officer erred in passing an order u/s 143(3) of the Act, on 18.12.2017. Since, the company`s name was struck - off by the order dated 21.06.2017,by the Registrar of Companies, u/s 248 of the Companies Act, 2013, which is prior to the passing of the assessment order, therefore, the assessment order is void- ab initio and deserves to be quashed. On the other hand, learned DR for the revenue, submitted that such legal issue should not be admitted, at this stage, and matter should be remitted back to the file of the assessing officer, for fresh adjudication. We note that assessing officer was not justified in passing the order u/s 143(3) of the Act, on 18.12.2017, as no application was made u/s 252 of the Companies Act, 2013 for revival of the company. The Assessment proceedings concluded against a struck- off company are invalid. Since the company ceased to exist as a legal person, upon being struck -off name of the company, therefore, the assessing officer has no jurisdiction to issue notice, conduct proceedings and pass the order on died company. It is well known fact that company`s birth takes place by way of legal operation and company can die by way of legal operation. The company is a legal entity and separate entity( person) for taxation purpose also. However, when the company's name has been strike -off by the registrar of companies, then company does not remain, as a legal entity, which cannot be sued by others and the company also cannot sue on others. The Ld. Counsel for the assessee submitted before us the evidence in respect of striking off, the name of the company, form the register of Registrar of Companies,( vide page no.1 to 3 of assessee`s paper book). We have examined the same and noted that company`s name was strike-off with effect from 21.06.2017. Whereas the assessment order was framed by the assessing officer on 18.12.2017, on the company which was not in existence on 18.12.2017, (that is, on died company). On these facts, our view is fortified by the Judgment of Hon`ble Supreme Court in the case of Maruti Suzuki India Ltd.[2019] 107 taxmann.com 375 (SC), wherein the Hon`ble Court held that where during pendency of assessment proceedings, assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity, would be without jurisdiction and was to be set aside. Similar view was upheld by the judgement of the Co-ordinate bench of ITAT, Delhi in the case of Chanakaya Export Pvt. Ltd. v. ITO in ITA 539 & 544/Del/2012, vide order dated 19.07.2013,wherein it was held as follows: “The Assessing Officer in his assessment order has noted that company had merged with M/s BS Infratech Pvt. Ltd., w.e.f. 1.4.2008. Therefore, it was very much in the knowledge of Assessing Officer that the assessee was non existent. Therefore, he should have initiated the proceedings against the amalgamated company only. Moreover, the assessee has also indicated on the acknowledgements of returns that returns are being filed under protest. The Ld. CIT (A) after relying upon a number of case laws has rightly held that the assessment order passed on the assessee company was a nullity. During proceedings before us, the Ld. AR has also filed a copy of order passed by Delhi Bench 'G' in 565 to 570Dell/2012 in respect of SPN Milk Product Industries (P) Ltd. The proceedings in this case was also initiated under same circumstances by virtue of search and seizure operation on the same person as in the case of present appeals. Moreover, in this case also the assessee had amalgamated with another company and assessee had participated in assessment proceedings but even then Hon'ble Tribunal had held the assessment proceedings to be null and void after relying upon a number of case laws. The Hon'ble Tribunal in para 5 had also considered the fact that assessee had filed returns of income and had also participated in the proceedings. Therefore, the argument of Ld. DR that assessee had participated in the proceedings and therefore the present appeals were distinguishable cannot be accepted as Tribunal under similar circumstances had already considered this argument and had decided against it. Therefore, following the various judicial pronouncements in this regard we uphold the order of Ld. CIT(A) on this point and reject ground No.1 of the revenue's appeals.C.O.Nos.74 to 79/Del/2012 Since the facts have been the same, we have no alternate but to confirm the order of the CIT (A) by following the aforesaid order of coordinate Bench in the case of Dimension Apparels Pvt. Ltd.

In other grounds of appeals, the revenue has challenged the various additions deleted by the ld. CIT(A) on merits. However, once we have quashed the assessment order itself the various additions made by the Assessing Officer do not survive, therefore, the other grounds of revenue appeals have become infructuous. Accordingly, the same are dismissed."

On these facts and circumstances, we quash the assessment order,passed by the assessing officer on dated 18th December 2017, and allow the appeal of the assessee.

As the assessment order itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

In the result, the appeal of the assessee, is allowed in the terms indicated above.