DCIT-15(1)(2), MUMBAI vs. CARRON INVESTMENT PRIVATE LIMITED, MUMBAI

3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in not considering the fact that the defect in recording the name of a non-existent company in a notice u/s. 148 of the I.T. Act, 1961 was a mistake curable under section 292B of the Act as the final assessment order has been passed on the resulting company.

4. The appellant prays that the order of CIT(A) on the above ground be set- aside and that of the assessing officer be restored.”

“6.1.3 Considering the written submission of the appellant and the supporting documentary evidences furnished, it is found that the appellant's contentions are genuine. While reopening the assessment, the notice u/s.148 was issued on a company which was not existent as on the date of issue of the said notice. The appellant's request for deactivation of the PAN was not taken into consideration and the re-assessment was completed on the merged entity M/s. Carron Investment Pvt. Ltd., for the A.Y.2013-14. 6.1.4 The appellant has quoted decisions of the following judicial authorities in support of its contentions in the form of Ground No.1: 1) Genpact India (P) Ltd., Vs. DCIT ITAT, Delhi [2020] 118 taxmann.com 40 2) ACIT Vs. Vahanvati Consultants (P) Ltd., SC [2022) 135 Taxmann.com 52 6.1.5 It is relevant to bring here the decision rendered by the Hon. Supreme Court in the case of PCIT Vs. Maruti Suzuki India Ltd., (2019) 416 ITR 613 [SC] wherein it was held as under: “33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment (supra) on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment (supra).

6.1.6 To sum up, on the basis of the following facts, the assessment completed on a non-existent company is treated as ab initio void as it has no legal validity: 1) As per the orders passed by the NCLT, Mumbai Bench, Mumbai, dt. 19/07/2017 regarding amalgamation of the companies. 2) Assessee/appellant's submission, dt.21/03/2018 before jurisdictional AO requesting the to deactivate the PAN AABCH4502L consequent on amalgamation of the companies vide order, dt. 19/07/2017 of the NCLT, Mumbai Bench, Mumbai. 3) In spite of the above, notice u/s. 148 of the Act was issued and the assessment reopened u/s.147 on 31/03/2021 on the PAN AABCH4502L in the name of the non-existing company M/s. Modern Trading Business Pvt. Ltd., and subsequently passing the order in the name of the amalgamating Company M/s. Carron Investments Private Limited. 6.1.7 In view of the above, Ground No. 1 is allowed. 6.2 As the impugned assessment order, dt.31/03/2022 by issuing notice u/s.148 on a non-existent company, is treated as ab initio void and has no legality, remaining grounds of appeal raised by the appellant are not adjudicated separately and the appeal filed by the appellant is treated allowed.”

9. At the outset, insofar as the decision of the Hon’ble Supreme Court in Mahagun Realtors Pvt. Ltd. (supra), on which reliance has been placed by the learned DR, we find that in the facts of that case, no intimation regarding the fact of amalgamation was filed before the Revenue and the taxpayer in that case also suppressed the fact of amalgamation in the return filed under section 153A of the Act post amalgamation. The Hon’ble Supreme Court further notes that the conduct of the taxpayer, commencing from the date of the search took place and before all forums reflected that it consistently held itself as the assessee. Thus, in its peculiar facts, the Hon’ble Supreme Court decided the issue against the taxpayer. However, in the present case, as noted in the foregoing paragraphs, after the merger of M/s. Modern Trading Business Pvt. Ltd. with M/s. Carron Investment Pvt. Ltd. vide order dated 19.07.2017 passed by the Hon’ble NCLT, the assessee filed a letter dated 21.03.2018 before the Income Tax Officer, Ward-1(2)(4) Mumbai intimating the fact of merger and requested for deactivation of PAN of non-existing entity, i.e., M/s. Modern Trading Business Pvt. Ltd. No material has been brought on record to controvert the aforesaid factual position. Thus, we are of the considered view that the decision of the Hon’ble Supreme Court in Mahagum Realtors Pvt. Ltd. (supra) is distinguishable on facts and therefore, is not applicable to the present case. As regards the reliance placed upon the decision of the Hon’ble Delhi High Court in Sky Light Hospitality LLP (supra), we find that the Hon’ble Supreme Court in Maruti Suzuki India Ltd. (supra) in paragraph 18(vii) noted the fact that the said decision was rendered in its own peculiar facts, which was further emphasized by the Hon’ble Supreme Court while dismissing the SLP against the decision of Hon’ble Delhi High Court.

8. Although Mr. Mistri has raised several contentions in assailing the impugned notice issued under Section 148 of the Act, his primary contention is that the impugned notice needs to be held invalid and illegal, primarily for the reason that the same has been issued to a non-existent entity (Uber India Research and Development Private Limited). According to him, this is sufficient ground for the notice to be quashed and set aside and more particularly considering the settled position in law as laid down by the Supreme Court in the case of Principal Commissioner of Income Tax, New Delhi v Marut Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC), as also in a decision of this Court in Teleperformance Global Services (P) Ltd. v Assistant Commissioner of Income Tax, Central Circle 25(1), New Delhi [2021] 127 taxmann.com 46/281 Taxman 331/435 ITR 725 (Bombay) Mr. Mistry relying on these decisions, would submit that it is an undisputed position that, in view of the Order passed by the National Company Law Tribunal, the scheme of amalgamation was approved, whereunder the Assessee - Uber India Research and Development Private Limited stood merged with the Petitioner, hence, the Assessee was a non existent entity. He submits that an intimation to this effect furnished to the Assessing Officer has not been taken into consideration before the impugned notice under Section 148 of the Act was issued by Respondent No.1.

10. At the outset, we may observe that Respondent no. 1 is based at Hyderabad in the State of Telangana. Thus, at the outset, we address the issue as to whether this Court can exercise jurisdiction under Article 226 of the Constitution, when Respondent No.1, against whom the relief is sought, is not situated within the territorial jurisdiction of this Court. In this context, we may observe that it is not in dispute that, in the facts of the present case, although the impugned notice is issued to the assessee which is a non-existent company, the same is served on the Petitioner, whose registered office is within the territorial jurisdiction of this Court, and who has received the impugned notice at Mumbai. It is the Petitioner which is required to defend such notice as served on it at Mumbai. The Petitioner is an Assessee within the jurisdiction of the Tax Authorities at Mumbai. In this situation, in our opinion, certainly a part of the cause of action, in terms of clause (2) of Article 226 of the Constitution of India, has arisen within the territorial jurisdiction of this Court, which, in our opinion, entitles the Petitioner to approach this Court invoking its jurisdiction under Article 226 of the Constitution, with a grievance of breach of its legal and constitutional rights. The position of law in this context is also considered and discussed in the decision of this Court in Teleperformance Global Services (P) Ltd. (supra), which is aptly applicable to the case in hand. We are thus inclined to entertain this Petition, considering that a part cause of action has arisen within the territorial jurisdiction of this Court.

11. Now coming to the challenge to the impugned notice as raised by the Petitioner. Having perused the record as also the decisions as relied by Mr. Mistri, we are persuaded to accept Mr. Mistri's contentions that Respondent No.1 could not have issued the impugned notices under section 148 A(b) and pass an order thereon under sub-section (d), as also issue notice under Section 148 of the Act to the assessee as it was a non-existent entity. In such context, Mr. Mistri's reliance on the decision of the Supreme Court in Principal Commissioner of Income Tax, New Delhi v Maruti Suzuki India Ltd.(supra) is apposite. In such decision the Supreme Court has held that once the amalgamating company had ceased to exist as a result of the scheme of amalgamation approved by the NCLT, there was no warrant in law for the Assessing Officer to proceed against a non-existent company. The relevant observations of the Supreme Court in the said decision are required to be noted which reads thus:- 33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment (supra) on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment (supra).

13. In the light of the above discussion, we are of the clear opinion that there was neither a legal basis nor jurisdiction with Respondent No.1 to issue the impugned notice under Section 148 A(b) and pass an order thereon and further to issue the impugned notice under Section 148 to a non-existing entity- "Uber India Research and Development Private Limited". Such notices at the threshold were illegal, invalid and non-est.

12. Having considered the judicial pronouncements as noted above, we are of the considered view that notice under section 148 of the Act is the very foundation of the entire edifice of the re-assessment proceedings, which culminates in the assessment order under section 147 of the Act and therefore, is most germane to the entire re-assessment proceedings being a jurisdictional pre-condition. Since in the present case, the very notice under section 148 of the Act was issued on a non-existing entity, i.e., M/s Modern Trading Business Pvt. Ltd., respectfully following the decision of the Hon’ble Supreme Court in Maruti Suzuki India Ltd. (supra) and Hon’ble Jurisdictional High Court in Uber India Systems Pvt. Ltd. (supra), we are of the considered view that the learned CIT(A) has rightly quashed the re-assessment notice issued under section 148 of the Act since the same is void ab initio. Therefore, consequently, the assessment proceeding has rightly been quashed by the learned CIT(A). Accordingly, the impugned order passed by the learned CIT(A) on this issue is upheld and grounds raised by the Revenue are dismissed.