INCOME TAX OFFICER WARD 5(3)(2), MUMBAI vs. SHREEPATI INFRA REALTY LIMITED, MUMBAI

AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:

In these two appeals one by the assessee and one by the Revenue are arising out of the different orders of Commissioner of Income Tax (Appeals)-21 & 10, Mumbai [in short CIT(A)], in Appeal No. CIT(A)- 21/ITO-13(3)(1)/IT-245/2015-16, CIT(A)-10/ITO-5(1)(1)/282/2015-16 vide orders dated 24.03.2016 & 22.03.2017. The Assessments were framed by the Income Tax Officer, Ward 13(3)(1) & 5(1)(1), Mumbai (in short ‘ITO’/ AO’) for the A.Y. 2007-08 vide order dated 31-03-2015 & 27.03.2015 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).

1. On the facts and circumstances of the case and the provision of law, the learned CIT(A) grossly erred in upholding the proceedings completed under Section 147 of ITAs No. 4133 & 4610/Mum/2017 the Income Tax Act, 1961 on the non-existent company. The Appellant prays that reassessment framed upon and in the name of a non-existent entity is bad inn law and void ab initio and deserves to be quashed.”

M/s Reliant Viniyog Pvt. Ltd. (RVPL)

RVPL has also amalgamated with the assessee company w.e.f 01.11.2009. It is also one of the shell companies floated for the purpose of providing entries for the re-routing ill- gotten monies into business circumventing taxation. Prior to amalgamation, as on 31.03.2008, RVPL had 56 shareholders, mostly Kolkatta based shell corporate entities, 2,62,250 shares of face value of Rs.10/- each. RVPl had issued 2,52,250 shares at a premium of ₹ 390/- per share thereby an amount of ₹ 9,83,77,500/- was received by them. This ‘share premium’ received was in turn invested in various private limited companies, including PURTI Group companies, and the investments was at ₹ 10,87,00,000/- as on 31.03.2009. These investments were liquidated before 31.10.2009 ad the investments stood at ₹ Nil as on 31.10.2009. As on 31.03.2009 there were only two shareholders, M/s Aasma Mercantile Pvt. Ltd. holding 1,40,000 shares and M/s Tanishka ITAs No. 4133 & 4610/Mum/2017 Mercantile Pvt. Ltd holding 1,22,250 shares of RVPL. Subsequently, during theperiod 01.04.2009 to 31.10.2009, Mr. Rajendra a Chaturvedi acquired 1,22,250 shares and Mr. Tapas R Chaturvedi acquired 1,40,000 shares of RVPL, at par.

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In view of the findings given by the AO vide his assessment order in the case of M/s Shreepati Infra Realty Ltd. for AY 2010-11 regarding the fact that prior to amalgamation, as on 31.03.2008,RVPL had 56 shareholders, mostly Kolkata based shell corporate entities, holding 2,62,250 shares of face value of ₹ 10/- each and RVPL had issued 2,52,250 shares at a premium of ₹ 390/- per share thereby receiving an amount of ₹ 9,83,77,500/- as share premium. Also on verification of record of RVPL, it is seen that the assessee has shown share premium to the extent of ₹ 9,83,77,500/- in the previous year 2006-07 relevant to AY 2007-08 which is not in conformity with its net worth and it was not having any business activity also. In view of this and reasoned discussion made in the order of SIRL as memtioed above, I have ITAs No. 4133 & 4610/Mum/2017 reason to believe that t income chargeable to tax amounting to ₹ 9,83,77,500/- has escaped assessment within the meaning of provisions of sec. 147 of the IT Act for reopening the assessment for AY 2007-08. Notice under section 148 of the Act is being issued accordingly after taking prior approval from the Ld.CIT.”

No 1 is in respect of issue of notice and proceedings u/s 147. The appellant submitted that M/s Reliant Viniyog Pvt. Ltd (RVPL), was incorporated on 17.02.2006. During the FY 2006-07 the appellant company had issued 2,52,250 shares of face value of 10/- each at a premium of Rs.390/-. In the F.Y. 2009- 10, the appellant company was merged with M/s ITAs No. 4133 & 4610/Mum/2017 Shreepati Infra Realty Limited ('SIRL') w.e.f. 01.11.2009 vide High Court order dt. 25.06.2010. It was contended that despite being informed that the appellant company is not in existence, the AO did not drop the proceedings and went ahead with the framing of the order in the name of M/s Reliant Viniyog Pvt. Ltd. A company incorporated under the Indian Companies Act is a juristic person. On amalgamation, the amalgamating company seizes to exist in the eyes of law. The assessment in the name of the company which has been amalgamated with another company and stands dissolved is null and void. This is a jurisdictional defect. The assessment order should be quashed. Reliance was placed on the decision of the Apex Court in the case of Saraswati Industrial Syndicate Ltd. V/s CIT in (Civil Appeal No.91 of 1976 decided on September 4, 1990, in the case of General Radio and Appliances Co.Ltd. vs. M. Akhader (1986)

60. Comp Cas 1013, in the case of Orbit Corporation Limited (Successor of Orbit Buildcon& Realty Pvt.Ltd.) V/s DCIT, CC 47 [ITA No.2411/M/2013, ITA 6928/M/2010, decided on 21.03.2016 and in the case of Hon'ble Delhi High Court in case of CIT v/s Micra India Pvt. Ltd. ITAs No. 4133 & 4610/Mum/2017 4.2. In this case it is seen that the assessment order has been passed in the name of M/s Reliant ViniyogPvt.Ltd., clearly referred to by mentioning" now known as M/s Shreepati Infra Realty Ltd."Thus the assessing officer has taken corrective action and has so addressed all his notices to M/ s Shreepati Infra Realty Ltd.in the assessment proceedings. There is no manner of any doubt as to the assessee whose assessment has been made. At the relevant period of time i.e. AY 2007-08 quite clearly M/s Reliant Viniyog Pvt.Ltd., had not amalgamated with M/s Shreepati Infra Realty Limited. Thus to refer to the tax payer as M/s Shreepati Infra Realty Limited only for AY 2007-08 would have been confusing in as much as M/s Shreepati Infra Realty Limited.may itself have existed for AY 2007-08 independently. Thus by making clear mention that M/s Reliant Viniyog Pvt.Ltd., is the entity which is now known as M/s Shreepati Infra Realty Ltd, there is no manner of doubt as to the entity whose assessment has been completed by the AO. There can be opinions as how best the correct situation should be depicted. That would be semantics but does not alter the essential fact. In somewhat similar facts in the case of M Corp Global (P) Ltd. Vs. DCIT - A.Y. 2002-03, where the final ITAs No. 4133 & 4610/Mum/2017 succeeding company name was not mentioned, in the order of the Hon'ble ITAT dated 29.0 1.2008, it was treated as a mere procedural defect. It is also noted this appeal before me has been preferred by M/s Shreepati Infra Realty Ltd. (in respect of Reliant Viniyog P. Ltd. amalgamated with Shreepati Infra Realty Ltd. w.e.f. 1.11.2009).The entity after amalgamation is still liable for actions and liabilities fastened on the entity that amalgamates and in this case the entity after amalgamation was always aware of the issue being examined. Further, the facts discussed in respect of ground 2 and 3 later in this order clearly brings out the clever artifice adopted to evade taxes and therefore hyper technical contentions adopted by the appellant cannot be allowed to frustrate the law. The case laws cited by the appellant do not apply to the facts of this case. In this view of the matter the grounds of appeal No.1 is not legally sustainable and is dismissed.”

6. Now coming to the appeal of Revenue in Shreepati Infra Realty Ltd. (earlier named Aim Merchants Pvt. Ltd.) got amalgamated with Shreepati Infra Realty Limited with effect from 01.11.2009 vide order of Hon’ble Bombay High court dated 25.06.2010. Similarly, in this case also the AO issued noticed under section 148 of the Act dated 27.03.2014 and reopened the assessment. The original assessment was completed under section 143(3) of the Act ITAs No. 4133 & 4610/Mum/2017 dated 08.10.2009. The assessee company was amalgamated with Aim Merchants Pvt. Ltd. and is engaged in the activity of investment in shares and securities. The assessee namely Shreepati Infra Realty Limited informed the AO vide letter dated 15.10.2012 that Aim Merchants Pvt. Ltd. has already merged with Shreepati Infra Realty Limited vide the order of Hon’ble High court dated 25.06.2010 with effect from 01.11.2009. But the AO similarly in the above case completed the assessment under section 143(3) read with section 147 of the Act dated 27.03.2015. Aggrieved, assessee preferred the appeal before CIT(A). Before CIT(A), assessee challenged the very jurisdiction of issuance of notice under section 148 of the Act on non-existent company and CIT(A) after considering all the submissions of the assessee, quashed the reopening by observing in Para 4.2 as under: - “4.2 I have carefully considered the facts and submissions made by the ld. AR. I have also considered, the decisions relied on by the AO and ld. Ar. As seen from the facts of the case, the AO has issued notice under section 148 on 27.03.2014 in the name of AMPL and also passed the assessment order under section 143(3) read with section. 147 on 27/03/2015 only in the name of AMPL without making a mention of SIRL. It is trite law that after merger AMPL will not be in the roles of ROC as it was dissolved with effect from 01.11.2009 as per High court order dated 25.06.2010 for all practical purposes. As is evident from the above decisions, appropriately relied on by the ld. AR, ITAs No. 4133 & 4610/Mum/2017 notice under section 148 cannot be issued and re-assessment cannot be done on a non- existent company. Since, AMPL has got merged with SIRL with effect from 01.11.2009, I hold that the reassessment made by the AO is unsustainable. I, therefore, quash the re- assessment done by the AO as void ab initio. The ground is allowed.”

7. Aggrieved, assessee came in appeal in the case of Reliant Viniyog Pvt. Ltd. in against the order of CIT(A) confirming the action of the AO in reopening the assessment under section 148 of the Act before Tribunal. Similarly, Revenue came in appeal in the case of Aims Merchants Pvt. Ltd in CIT(A) quashing the action of the AO in reopening the assessment under section 148 of the Act before Tribunal.

"In the light of the discussions made above, we, therefore, hold that the assessment made by the AO, in substance and effect, is not against the non-existent amalgamating company. However, we do agree with the proposition or ratio decided in the various cases relied upon by the learned counsel for the assessee that the assessment made against non-existent person would be invalid and liable to be struck down. But, in the present case, we find that the assessment, in substance and effect, has been made against amalgamated company in respect of assessment of income of amalgamating company for the period prior to amalgamation and mere omission to mention the name of ITAs No. 4133 & 4610/Mum/2017 amalgamated company along with the name of amalgamating company in the body of assessment against the item 'name of the assessee' is not fatal to the validity of assessment but is a procedural defect covered by s. 292B of the Act. We hold accordingly.