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Facts
A search operation under Section 132 revealed the assessee was part of a group providing accommodation entries through paper companies. Assessment proceedings were initiated under Section 153C/144, resulting in an addition of Rs. 2.22 crore as unexplained income under Section 68. The assessee argued that its name had been struck off by the ROC on 16.01.2017, prior to the assessment order dated 26.12.2018, rendering the assessment against a non-existent entity.
Held
The Tribunal found that the Assessing Officer was aware of the company's non-existence when the assessment order was passed. The assessment proceedings initiated and finalized against a company that had been struck off the register by the ROC suffered from a fundamental jurisdictional error. Consequently, the entire assessment proceedings were vitiated and quashed.
Key Issues
Whether assessment proceedings initiated and concluded against a company whose name has been struck off by the Registrar of Companies (ROC) are legally valid.
Sections Cited
153C, 144, 139(1), 132, 68, 153A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: MS. MADHUMITA ROY & SH. NAVEEN CHANDRA
Appellant by : Ms. Shilpi Jain, C.A. Respondent by : Ms. Monika Dhami, CIT-D.R. Date of Hearing 07.05.2024 Date of Pronouncement 15.05.2024 O R D E R PER BENCH : The instant bunch of appeals and cross objections filed by the Revenue and the assessee respectively are directed against the orders , 9644 & 9645/Del/2019 CO Nos. 30, 31 & 32/Del/2023 KCJ Buildtech Pvt. Ltd. Asst.Years –2012-13, 2013-14 & 2014-15 - 2 - dated 16.10.2019 (for A.Ys. 2012-13, 2013-14 & 2014-15) passed by the Commissioner of Income Tax (Appeals)-29, New Delhi under section 153C r.w.s 144 of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) arising out of the orders dated 26.12.2018 passed by the Asst. Commissioner of Income Tax, Central Circle – 26, New Delhi for the Assessment Years 2012-13, 2013-14 & 2014-15 respectively.
Since all the appeals relate to the same assessee and the facts of the case are identical, the same are heard analogously and are being disposed of by a common order for the sake of convenience.
At the time of hearing of the instant case, the assessee before us, raised objection against the order passed by Learned AO on the jurisdictional issue to this effect that the order impugned was passed in the name of a non-existing company. In that view of the matter, the entire proceeding is vitiated and thus liable to be quashed as the crux of the argument advanced by the Learned Counsel appearing for the assessee.
Since the maintainability of the proceeding has been challenged by the assessee before us, which in our considered opinion, should be decided at the very threshold of the matter. We thus, would like to proceed with the cross objections filed by the assessee wherein such ground has been raised.
ITA Nos. 9643, 9644 & 9645/Del/2019 CO Nos. 30, 31 & 32/Del/2023 KCJ Buildtech Pvt. Ltd. Asst.Years –2012-13, 2013-14 & 2014-15 - 3 - 5. CO No. 30/Del/2023 (arising out of for A.Y. 2012-13 is, therefore, taken as a lead case.
The brief facts leading to this case is this that the assessee before us filed its return of income under section 139(1) of the Act on 26.09.2012 declaring income at Rs.5,883/-. Subsequently, a search under section 132 of the Act was carried out in the case of Anand Kumar Jain and Naresh Kumar Jain (Jain Group) on 17.12.2015, wherein various documents/books of account were found and seized. Upon examination of those seized materials, it was found that the said Anand Kumar Jain and Naresh Kumar Jain were engaged in the business of providing accommodation entries to various beneficiaries through various dummy/paper companies including the assessee company controlled and managed by those Jain brothers in order to provide accommodation entries to such beneficiaries in lieu of cash received by them and after relating the cash money from one company to the other and so on. It was further found by the Revenue that the Bank accounts of those companies were also managed and controlled by those Jain brothers.
As the assessee was found to be one of those paper companies of Jain brothers, on the basis of the entries in the coded name of the assessee found in the seized documents being Annexure No.13, Tally Data (Hard Disk) ledger name AJ and AJ1, satisfaction note was recorded by the Learned AO of the searched person and also by the Learned AO of the person other than the searched person notice under section 153A/153C of , 9644 & 9645/Del/2019 CO Nos. 30, 31 & 32/Del/2023 KCJ Buildtech Pvt. Ltd. Asst.Years –2012-13, 2013-14 & 2014-15 - 4 - the Act was issued on 28.03.2018 directing the assessee to file return of income within 15 days from the date of receipt of the said notice. However, since nothing was forthcoming, further notice dated 20.09.2018 was served upon the assessee by affixing on the premises of the assessee. However, since no compliance was made by the assessee, the reassessment proceeding was finalized upon making addition of Rs.2,22,96,490/-, the amount credited in the Bank account of the assessee received from shell/paper concerns and from various beneficiaries of accommodation entries upon treating the same as unexplained entries and added to the total income of the assessee under Section 68 of the Act as assessee’s income from undisclosed sources on protective basis. It was further mentioned in the said order that substantive addition to be made in the hands of the beneficiaries. The said order was passed by the Learned AO on 26.12.2018.
The case of the assessee is this that the company name was struck off by the ROC on 16.01.2017 by and under application dated 06.07.2016 before the order of Learned AO and therefore, the order passed by the Learned AO is admittedly issued on non-existing company. The entire proceeding is therefore, vitiated and thus liable to be quashed. In this regard, the Learned Counsel appearing for the assessee has drawn our attention to one order passed by the same ACIT, Central Circle – 26, New Delhi dated 19.12.2018 in the case of another assessee namely M/s. Nine corporate Inception Pvt. Ltd. wherein the fact of striking of the name of the assessee in the instant case by ROC has been mentioned. In , 9644 & 9645/Del/2019 CO Nos. 30, 31 & 32/Del/2023 KCJ Buildtech Pvt. Ltd. Asst.Years –2012-13, 2013-14 & 2014-15 - 5 - that view of the matter, it has been contended by the Learned AR though admittedly, the Assessing Officer was of the knowledge that the assessee’s name has been struck off by the role of ROC in spite of the same, assessment order was finalized on 26.12.2018 in the name of KCJ Buildtech Pvt. Ltd. Such contention made by the Learned AR has not been able to controverted by the Learned DR.
We have heard the respective parties and also perused the relevant materials available on record including the orders passed by authorities below. We have further considered the fact of striking of by the ROC on 16.01.2016 which is appearing at page 1 filed by the assessee on 03.08.2023. It is an admitted position that though the initiation of the proceeding was made by issuance of notice under section 153A/153C of the Act dated 28.03.2018 on the assessee, namely; M/s. KCJ Buildtech Pvt. Ltd., during the pendency of such proceedings, the name of the assessee was struck off by the role of ROC on 16.01.2017 by its application dated 06.07.2016 at page 1 of the paper book and knowledge whereof with AO is evident from assessee at pages 17-18 in the assessment order dated 19.12.2018 in the case of different assessee M/s. Nine Corporate Inception Pvt. Ltd. (formerly known as M/s. SKM creation Pvt. Ltd.) noted by the same Assessing Officer being ACIT, Central Circle – 26, New Delhi, the contents whereof is as follows:
“6.3 During the course of assessment proceedings it is noticed that in the following concerns assessment proceedings are pending and following companies are struck off by Sh. Anand KumarJain and Sh. Naresh Kumar Jain out of above 53 concerns.
, 9644 & 9645/Del/2019 CO Nos. 30, 31 & 32/Del/2023 KCJ Buildtech Pvt. Ltd. Asst.Years –2012-13, 2013-14 & 2014-15 - 6 - S.No. Name of the assessee PAN 1. Ceram Sales Pvt. Ltd. AADCC0084A 2. Chandra Buildcon Pvt. Ltd. AACCC5263G 3. CVH Sea Lifes Ltd. AACCC5820B 4. Gomati Consultants Pvt. Ltd. AACCG3616M 5. Jai Maa Bhawani Overseas Pvt. Ltd. AABCJ0239L 6. JKS Impex Pvt. Ltd. AABCJ6878R 7. Karda Traders Pvt. Ltd. AADCK7802Q 8. KCJ Buildtech Pvt. Ltd. AACCK8322Q 9. M3M Traders Pvt. Ltd. AACCD3923E 10. Macro IT System Pvt. Ltd. AAECM7259E 11. Next Generation Exim Pvt. Ltd. AACCN9821B 12. Sai Infoweb Pvt. Ltd. AALCS5794H 13. Shivij Garments Pvt. Ltd. AALCS3760M 14. Sunshine Inn Pvt. Ltd. AAACS2056D 15. Yunan Sales Pvt Ltd. AAACY2963R 16. Zeus Inpex Pvt. Ltd. AAACZ3569Q 17. Shivangi Garments Pvt. Ltd. AALCS3265J 18. Kanu Peripherals Pvt. Ltd. AADCK3958P 19. New Era Tradeexpo Pvt. Ltd. AACCN8169N 20. Sapphire Polyvinyl Pvt. Ltd. AARCS2813D 21. Jay Enn Infotech Pvt. Ltd. AAACJ9991N
In the light of the above facts, it is crystal clear that the knowledge of the sticking of the name of the assessee from ROC was with Assessing Officer as on 19.12.2018 being the date of assessment order in respect of the other assessee which under any circumstances cannot be denied by the Revenue authorities, in spite of that, the Assessing Officer in the instant case as proceeded with the assessment proceedings and finalized the same under section 153C r.w.s 144 of the Act dated 26.12.2018. Therefore, order in the case of KCJ Buildtech Pvt. Ltd. is not sustainable in the eyes of law since the said company was not in existence at that material point of time at all. The assessment proceeding, is, thus found to be not maintainable as the assessment , 9644 & 9645/Del/2019 CO Nos. 30, 31 & 32/Del/2023 KCJ Buildtech Pvt. Ltd. Asst.Years –2012-13, 2013-14 & 2014-15 - 7 - order suffers from jurisdictional error. The order is, therefore, admittedly being issued in the name of a non-existing company which has no value in the eyes of law; in fact such irregularities vitiated the entire proceedings and therefore, the same is liable to be quashed. We, thus, with the above observation quash the entire assessment proceedings initiated against the assessee. In the result, Cross objections is allowed.
In the result, all the Cross Objections are allowed. , 9644 & 9645/Del/2019 for A.Ys. 2012-13, 2013-14 & 2014- 15 :
The appeals filed by the Revenue arising out of the CIT(A)’s 12. order passed in the said proceedings are, therefore, also found to be not maintainable and, hence dismissed.
In the combined result, all the Cross Objections filed by assessee in CO Nos.30, 31 & 32/Del/2023 are allowed and all the appeals filed by Revenue in 9644 & 9645/Del/2019 are dismissed.