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Income Tax Appellate Tribunal, DELHI BENCH - ‘SMC’ NEW DELHI
Before: SHRI BHAVNESH SAINI
This appeal by assessee has been directed against the order of Ld. CIT(A) Gurgaon dated 4th February, 2015 for assessment. Year 2005- 06.
The assessee in the present appeal challenged the initiation of reassessement proceedings u/s 147/148 of the Act on the ground that since assessee company was not in existence,therefore notice u/s 147/148 cannot be served upon a person which is not in existence.
JMD Realtors Pvt. Ltd. vs. ACIT Therefore reassessmet is bad in law. The addition of Rs. 22,75,053/- on merit is also challenged.
Briefly the facts of the case are that return declaring income of Rs. 764810/- was filed on 28th October, 2005. Assessment u/s 143(3) was completed on 28th February, 2007 at an income of Rs. 8,78,970/-.
The Assessing Officer initiated the reassessment proceedings and issued the notice u/s 148 of the Act on 29th March, 2012. The Assessing Officer made addition of Rs. 22,75,053/- by disallowing the claim of standard deduction u/s 24(1) holding the income of the assessee liable to be taxed under the head profit or gains of business instead of income from house property. Assessment u/s 147 / 143(3) was completed vide order dated 28th February, 2013.
The assessee challenged the reopening of the assessment and addition on merit before Ld. CIT(A).It was briefly explained that notice u/s 148 could not be served upon assessee company which were not in existence, which has already been wound up. The assessee relied upon the decision of the Calcutta High Court in the case of I.K. Agencies Pvt. Ltd. v CWT reported 347 ITR 664. It was also submitted that reassessment order is passed on mere change of opinion on the same facts. In assessment year 2004-05 the same deduction has been allowed.
Ld. CIT(A) called for the remand report from the AO which was however not filed.
JMD Realtors Pvt. Ltd. vs. ACIT 6. Ld. CIT(A) noted that it is nowhere mentioned in the impugned order that assessee company ceased to be in existence having wound up business on 1st April, 2005. Even in the original assessment order dated 28th February, 2007 u/s 143(3) for same assessment year, there is no mention of winding up of the operation of the assessee. Ld. CIT(A) therefore rejected legal ground of the assessee regarding reassessment of the assessee. Even on merit the claim of the assessee of deduction u/s 24(1) was not allowed and appeal of assessee has been dismissed.
After considering rival submissions, I am of the view that the matter requires reconsideration at the level of the Assessing Officer. Ld. Counsel for assessee filed copy of the judgment of Hon'ble Delhi High Court dated 15th September, 2006 in Company Petition No. 85 whereby transferor company i.e the assessee and the others has been dissolved without being wound up and the same will be effective from the appointed date i.e 1st April, 2005. Ld. Counsel for the assessee relied upon decision of the Delhi high Court in the case of Rustagi Engineering Udyog P. Ltd. vs. DCIT (2016) 382 ITR 443 (Del) in which it was held that notice issued u/s 148 of the Act were invalid as having been issued to an assessee that had ceased to exist, and decision of Calcutta High Court in the case of I.K. Agencies P. Ltd,. vs. CWT (supra) in which it was held that notice issued upon AP which was not in existence at that time was insufficient to initiate proceedings against the assessee which has taken over the liability of AP prior to the issue of such notice, The reassessment proceedings were not valid and were liable to be quashed
JMD Realtors Pvt. Ltd. vs. ACIT and decision of Hon'ble Delhi High Court in the case of Ritu Investments Pvt. Ltd. vs. DCIT (2012) 345 ITR 214 in which it was held that a change of opinion could not clothe the Assessing Officer with the jurisdiction to initiate the proceedings u/s 147 of the Act.
7.1 Considering the facts of the case in the light of the above decisions, it is clear that either the assessee did not file the judgment of the Hon'ble Delhi High Court and relevant details before the authorities below or the same have not been discussed in the impugned orders.
Even no details were filed before Ld. CIT(A) as per findings of Ld. CIT(A). The Assessing Officer even did not file the remand report as asked for by the Ld. CIT(A). However the material on record clearly suggest that assessee company has been dissolved from the appointed date as per scheme of amalgamation w.e.f. 1st April, 2005. The Assessing Officer however issued notice u/s 148 on 29th March 2012.
Therefore the matter requires reconsideration at the level of Assessing Officer because this issue was not considered and decided by the authorities below. The addition would be independent upon the findings given with respect to initiation of reassessment proceedings. Further it is claimed that on the same facts similar claim of standard deduction u/s 24(1) have been allowed in preceding assessment year as well as in the original assessment order in the case of assessee. Therefore the authorities below shall have to decide the issue regarding reopening of assessment on mere change of opinion as well as to decide the issue by following the rule of consistency.
JMD Realtors Pvt. Ltd. vs. ACIT
In this view of the matter, I set aside the orders of the authorities below and restore both the issues to the file of Assessing Officer with direction to redecide the issue of reopening of assessment and addition of merit strictly in accordance with law by giving reasonable sufficient opportunity of being heard to the assessee. The assessee is directed to produce all above relevant material before Assessing Officer for his perusal and consideration.
In the result appeal of assessee is allowed for statistical purposes.
Pronounced in the Open Court.