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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI B.P.JAIN & SHRI SUDHANSHU SRIVASTAVA
This appeal has been preferred by the revenue against the order dated 12.09.2014 passed by the Ld. Commissioner of Income Tax(A)- V, New Delhi. The relevant assessment year is AY 2005-06.
The brief facts of the case are that the return of income was filed at an income of Rs. 32,74,805/- and the return of income was initially processed under section 143 (1) of the Income Tax Act, 1961 (hereinafter called “the Act”). Subsequently, the assessee’s case was reopened under section 148 of the Act vide notice dated 07/03/2011 and the reassessment was completed under section 144 of the Act at an income of Rs. 80,34,150/- vide order dated 09/12/2011. It is also noteworthy that the assessee company was amalgamated with M/s Cummins Generator Technologies (India) Ltd w.e.f. 01/04/2007 vide order of the Hon’ble Bombay High Court dated 04/07/2008. The reason for reopening was that the assessee had shown contract income amounting to Rs. 4,08,256/- in the profit and loss account but as per the TDS certificates, the gross receipts worked out to Rs. 88,41,910/- thus resulting in a short assessment. The reassessment proceedings were completed ex-parte and the AO has mentioned in the assessment order that the assessee did not respond to any of the statutory notices.
2.1 Aggrieved, the assessee preferred an appeal before the Ld. First Appellate Authority and raised numerous grounds. The Ld. CIT (A) held that as the assessee company had ceased to exist in the eyes of law upon amalgamation with Cummins Generator Technologies (India) Ltd w.e.f. 01/04/2007, the subsequent notice under section 148 of the Act issued on 07/03/2011 became a case of notice on a non- existent company. The Ld. CIT (Appeals) proceeded to hold the reassessment order as void ab initio. The Ld. CIT (Appeals) also noted that the AO had proceeded to serve the notice under section 148 of the Act to the assessee at a wrong address although the Department was very much aware of the new address as the assessee had filed the return of income for AY 07-08 mentioning the new address.
2.2 Now, the Department has approached the ITAT and has challenged the adjudication of the Ld. CIT (Appeals) by raising the following grounds of appeal –
“1. Whether, the ld. Commissioner of Income Tax(A) has erred in holding the re-opening of the assessment proceedings as null and void. 2. Whether the Ld. Commissioner of Income Tax(A)(A) has erred in not deciding the case on merits. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the course of hearing of the appeal.
None was present for the assessee/respondent when the appeal was called out for hearing and no application for adjournment has also been received on behalf of the assessee/respondent. Looking into the facts of the case, we deem it appropriate to proceed with the hearing of the appeal ex parte qua the assessee.
The Ld. departmental representative read out extensively from the order of assessment and submitted that there was a valid reason for the issuance of notice under section 148 of the Act as there was a mismatch between the gross receipts as shown by the assessee in its return of income and the gross receipts as per the TDS certificates. The Ld. DR vehemently argued that the same was a fit case for initiation of reassessment proceedings. However, the Ld. departmental representative could not point out any factual error in the adjudication by the Ld. CIT (Appeals) that the reassessment proceedings had been initiated against a non-existent entity and further that the Department had failed to serve the notice on the assessee at the last known address of the assessee although the assessee had filed its return of income for 4 | P a g e AY 07 – 08 from the new address.
We have heard the Ld. departmental representative and have also perused the material on record. The facts of the case are undisputed. It is undisputed that at the material time when the notice under section 148 of the Act was issued in the name of the assessee M/s AVK SEG (India) Private Limited, the assessee company had ceased to exist. It is on record that the assessee company was amalgamated with M/s Cummins Generator Technologies (India) Ltd w.e.f. 01/04/2007 vide order of the Hon’ble Bombay High Court dated 04/07/2008. Thus, the notice for re-assessment issued on 07/03/2011 was issued to a non- existent company. It is seen that the issue is squarely covered by the order of the Hon’ble Delhi High Court in the case of Spice Infotainment Ltd. vs. CIT in & 476 of 2011 wherein an identical issue was settled in favour of the assessee. The Hon'ble Jurisdictional High Court held as follows:-
"16. When we apply the ratio of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of s. 292B of the Act are not applicable in such a case. The framing of assessment against a non- existing entity/person goes to the root of the matter 5 | P a g e which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a 'dead person'.
5.1 Thus, the dicta laid down by the Hon’ble High Court is that the provisions of section 292B of the Act are not applicable in such a case where the assessment has been framed in the name of a non-existent amalgamated company. Their Lordships have further held that the framing of assessment against non-existent entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person.
5.2 Further, the Hon’ble Delhi High Court in the case of CIT versus Dimension Apparels Private Limited, reported in 370 ITR 288 (Delhi), has held that while section 292B could cure technical defects, it could not cure jurisdictional defect in assessment notice. The Hon’ble High Court therein held that framing of assessment against non-existing entity/person was a jurisdictional defect and participation by the amalgamated company in the assessment proceedings could not cure the defect because there could be no estoppel in law.
5.4 Respectfully following the ratio of the judgments of the Hon'ble Delhi High Court as above, we are inclined to hold that the re- assessment in the name of the non-existent amalgamating company was an incurable jurisdictional defect and the Ld. CIT (A) was justified in holding such re-assessment to be void ab initio.
In the final result, the appeal of the department is dismissed.
Order is pronounced in the open court on 27th December, 2017.