M/S BASUNDHARA GOODS (P) LTD.,NEW DELHI vs. ITO, WD-5(4), KOLKATA, KOLKATA

This appeal filed by the assessee is directed against the order of Ld. CIT(A) – 6, Kolkata dated 29.02.2016.

The relevant facts of the case giving rise to this appeal are that the assessee is a company which is engaged in the business of share dealing and investment. The return of income for the year under consideration was filed by it on 14.08.2008 declaring a total income of Rs. 749/-. In the assessment originally completed under section 147/143(3) vide an order dated 30.04.2010, the total income of the assessee was determined by the A.O. at Rs. 17,720/-. The said assessment was subsequently set aside by the Ld. CIT vide an order

Against the order passed by the A.O. under section 143(3)/263/147/143(3), an appeal was preferred by the assessee before the Ld. CIT(A) and vide his appellate order dated 29.02.2016 passed ex-parte, the Ld. CIT(A) confirmed the entire addition of Rs. 15.38 crores made by the A.O. to the total income of the assessee under section 68 by treating the share capital contribution including the share premium received by the assessee during the year under consideration as unexplained cash credits. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

In Ground No. 12 of this appeal, the assessee has raised a preliminary issue challenging the validity of the order of the A.O.

The learned counsel for the assessee submitted that the return of income of the assessee for the year under consideration was filed on 14.08.2008 in the name of M/s. Basundhara Goods Pvt. Ltd. and even the assessment 147/143(3) was originally completed by the A.O. on 30.04.2010 in the same name. He submitted that the said company namely M/s. Basundhara Goods Pvt. Ltd. was merged with M/s. Lokseva Textrade Pvt. Ltd. with effect from 19.03.2012 as per the order of the Hon’ble Calcutta High Court passed on 19.03.2012. He submitted that even M/s. Lokseva Text Trade Pvt. Ltd. thereafter was merged with M/s. Param Mitra Investments Pvt. Ltd. with effect from 01.04.2013 as per the order passed by Hon’ble Delhi High Court on 17.12.2013. He contended that even though the Assessing Officer while passing the assessment order under section 143(3)/263/147/143(3) on 25.03.2014 took cognizance of the first amalgamation of M/s. Basundhara Goods Pvt. Ltd. with M/s. Lokseva Textrade Pvt. Ltd., he failed to take into consideration the amalgamation of M/s. Lokseva Textrade Pvt. Ltd. with M/s. Param Mitra Investments Pvt. Ltd. with effect from 01.04.2013. He contended that the order of the A.O. under section 143(3)/263/147/143(3) dated 25.03.2014 thus came to be passed in the name of M/s. Lokseva Textrade Pvt. Ltd. which was not in existence as on 25.03.2014 having already amalgamated with M/s. Param Mitra Investments Pvt. Ltd. with effect from 01.04.2013 as per the order of the Hon’ble Delhi High Court passed on 17.12.2013. He

The Ld. CIT DR, on the other hand, contended that since amalgamated entity had participated in the assessment proceedings without raising any objection, it should be precluded from raising this issue now at this stage before the Tribunal for the first time. He also contended that the defect in passing the assessment order by the A.O. in the name of amalgamating company instead of amalgamated company is curable being a procedural one. He also contended that it is a mere procedural irregularity which can be cured by invoking the provisions of section 292B of the Act.

We have considered the rival submissions on this preliminary issue in the light of the relevant facts of the case as well as the material available on record including the judicial pronouncements cited by the learned counsel for the assessee. It is observed that although the return of income for the year under consideration was originally filed in this case on 14.08.2008 in the name of M/s. Basundhara Goods Pvt. Ltd. and even the assessment under section Assessment Year: 2008-09 M/s. Basundhara Goods (P) Ltd.

In the case of M/s. Saraswati Industrial Syndicate Ltd. (supra) cited by the learned counsel for the assessee, the issue of effect of amalgamation or merger of two or more companies was considered by the Hon’ble Supreme Court and it was held that the amalgamation is a blending of two or more existing undertakings into one undertaking and when one is absorbed into or blended with another, the amalgamating company loses its entity. It was held that when two companies amalgamate and merge into one, their respective rights or liabilities are determined under the scheme of amalgamation but the corporate entity of the transferee company ceases to exist with effect from the date, the amalgamation is made effective.

In the case of Spice Infotainment Ltd. (supra), the issue that arose was in the context of the A.O. having framed the assessment in the name of “Spice Corp Limited” after the said entity was dissolved consequent to its amalgamation with “MCorp Private Limited” with effect from 1st July 2003. Like in the present case, even there it was urged by the revenue that this was a procedural defect and since the amalgamated entity had participated in the assessment proceedings without raising any objection, it should be precluded from raising it thereafter. This contention of the revenue however was not accepted by the Hon’ble Delhi High Court. It was held by their Lordships that the assessment order passed in the name of Spice Cork Ltd. after it had ceased to exist with effect from 1st July 2003 after the sanction of the scheme of amalgamation on 11th April, 2004 was void and such a defect could not be treated as a procedural defect. It was held that mere participation by the appellant would be of no effect as there was no estoppel against law. To the similar effect is another decision of Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd. (supra) wherein it was held that once it is found that the assessment is framed in the name of non- existent entity, it does not remain only a procedural irregularity of the nature which can be cured by invoking the provisions of section 292B of the Act.

The Delhi Bench of this Tribunal also encountered a similar situation in the case of M/s. Garuda Imagining & Diagnostics (P) Ltd., a company which was merged with M/s. Bhandari Consultancy & Finance Ltd. w.e.f. 1st April, 2009. A search, however, was conducted in the case of the said company and not only a notice under section 153A was issued on 23rd October, 2013 in the same name but even the assessment order under section 153A/143(3) was passed on 30th March, 2015. The said assessment framed under section 153A/143(3) was quashed by the Tribunal vide its order dated 05.01.2018 passed in holding that the entire proceedings initiated against the assessee company, which did not exist, was void abinitio and bad in law. It was also held by the Tribunal that the fact that the department came to know later on about the merger of the assessee company with the transferee company would not make any difference.

Keeping in view the legal position emanating from the various judicial pronouncements discussed above, we are of the view that the assessment made in the present case under section 143(3)/263/147/143(3) in the name of M/s. Lokseva Textrade Pvt. Ltd. on 25.03.2014 when the said company was not in existence having already merged / amalgamated with M/s. Param Mitra Investments Pvt. Ltd. with effect from 01.04.2013 as per the order of the Delhi High Court on 17.12.2013 is a nullity being bad in law and the same is liable to be cancelled. We order accordingly and allow ground no. 12 of the assessee’s appeal.

At the time of hearing, the learned DR has contended that the A.O. may be directed to pass a fresh assessment order for the year under consideration in the name of the amalgamated company by following the due process of law. In our opinion, the Assessing Officer is at liberty to have such alternative recourse. However, as held by the Delhi High Court in the case of M/s. Spice Infotainment Ltd. (supra) such a course of action can be taken by the A.O. only if it is still permissible as per law and has not become time barred.

Keeping in view our decision rendered on the preliminary issue raised by the assessee in ground no 12 cancelling the order passed by the A.O. under section 143(3)/263/147/143(3) by holding the same to be illegal, other grounds raised in this appeal have become infructuous and we do not consider it necessary or expedient to adjudicate upon the same.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 23rd March, 2018.