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Income Tax Appellate Tribunal, MUMBAI BENCH “L”, MUMBAI
Before: SHRI C.N.PRASAD & SHRI ASHWANI TANEJA
आदेश / O R D E R
PER C.N.PRASAD (JM) These appeals are filed by the Assessee for the assessment years 2009-10 and 2010-11 and cross appeal by Revenue for the assessment year 2009-10. The Assessee in both these appeals filed grounds against disallowance made u/s 40(a)(i) of the Act. The Assessee also filed an additional ground before us which reads as under : “On the facts and the circumstances of the case the learned Commissioner of Income Tax (Appeals) and the Assessing Officer have erred in law in passing an order in favour of a non-existing entity and accordingly the order passed by the Assessing Officer and CIT (A) is null and void and is bad in law.” 2. The Ld. Counsel for the Assessee submits that the assessment orders passed u/s 143(3) of the Act by the Assessing Officer in both these assessment years is bad in law and void ab initio as these assessment orders were passed on a non-existent entity. He submits that as on the date of passing the assessment orders the Assessee namely DSP Merrill Lynch Securities Trading Ltd amalgamated with DSP Merrill Lynch Ltd and therefore the assessments were made on a non-existent company. The Ld. Counsel submits that the additional ground being a legal ground and necessary facts are already on record and no fresh investigations are required in respect of the facts, the same may be admitted for adjudication.
The Ld. DR objected for admission of additional ground. He submitted that this ground was never raised before the lower authorities and therefore cannot be admitted at this stage.
4. Heard both the parties on admission of additional ground. It is not disputed by the Ld. DR that it is a legal ground and a fresh investigation of facts are not required in this case to adjudicate the additional ground. Therefore, following the ratio of judgement of the Hon’ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT [229 ITR 383], the additional ground is admitted for adjudication as the aforesaid ground goes to the root of the very jurisdiction of the assessment orders passed by the Assessing Officer.
Briefly stated, the facts are Assessee filed return of income for the assessment year 2009-10 on 25.9.2009 and for the assessment year 2010-11 on 20.9.2010 in the name of DSP Merrill Lynch Securities Trading Ltd. Subsequently, this company was amalgamated with DSP Merrill Lynch Ltd. by way of scheme of amalgamation w.e.f. 1.4.2010, approved by the Hon’ble Bombay High Court, by order dated 7.5.2010. On 1.7.2010, the Assessee filed a letter dated 30.6.2010 before the DCIT Rg.4(1), Mumbai informing that the Hon’ble Bombay High Court vide order dated 7.5.2010 approved the amalgamation of DSP Merrill Lynch Securities Trading Ltd. with DSP Merrill Lynch Ltd. and the amalgamation is operative from the appointed date i.e. 1.4.2010. It was further intimated that DSP Merrill Lynch Securities Trading Ltd. is assessed to tax by DCIT Cir 3(1), Mumbai. The Assessing Officer, i.e. DCIT Cir 3(1) issued notice u/s 143(2) in connection with assessment proceedings for the assessment year 2009-10 requiring the Assessee to attend his office on 1.9.2010. In response to the said notice, the Assessee by letter dated 10.9.2010 informed the jurisdictional Assessing Officer i.e. DCIT Cir3(1) that DSP Merrill Lynch Securities Trading Ltd. has already been amalgamated with DSP Merrill Lynch Ltd. w.e.f. 01.04.2010. A copy of the letter filed before DCIT 4(1) informing of amalgamation was also enclosed. However, the Assessing Officer by orders dated 15.3.2013 and 27.2.2014 completed the assessments u/s 143(3) r.w.s.92CA(4) of I.T. Act for both these assessment years. These facts are undisputed. On these facts, the question now to be addressed is whether the assessments made by the Assessing Officer are valid or void ab initio as they were made on a non- existent company namely DSP Merrill Lynch Securities Trading Ltd. which was amalgamated with DSP Merrill Lynch Ltd. w.e.f. 1.4.2010. As on the date of passing of the assessment orders, the Assessee namely DSP Merrill Lynch Securities Trading Ltd. is a non-existent company. In support of the contentions that the assessment made on a non-existent company is void ab initio, the Ld. Counsel for the Assessee placed reliance on the following decisions. (i) CIT Vs. Dimension Apparels Pvt. Ltd. [370 ITR 288] (Del) (ii) CIT Vs. Intel Technology India Pvt. Ltd. [380 ITR 272] (Kar) (iii) Siemens Technology Services Pvt. Ltd. Vs. ACIT in dated 16.11.2016 (iv) Westlife Development Ltd. Vs. Pr.CIT in ITA No.688/Mum/2016
We have heard both the parties, perused the orders of the authorities below and the decisions relied on. The Coordinate Bench in the case of Siemens Technology Services Pvt. Ltd. (supra) considered the above decisions of the Hon’ble Delhi and Karnataka High Courts, which the Ld. Counsel relied on and also taking note of the decision of the Hon’ble Bombay High Court in the case of Jitendra Chandralal Navlani & Anr., in Writ Petition No.1069 of 2016 dated 08.06.2016 held that framing of assessment in respect of a non-existent entity goes to the root of the jurisdiction of the Assessing Officer and an order passed in the name of non-existent entity is nullity in the eyes of law. Therefore it was held that assessments are invalid and void ab initio. While coming to such conclusion, the Coordinate Bench observed as under: “8. We have carefully considered the rival submissions. The fact- situation in the present appeal clearly brings out that at the time of finalization of assessment order in the name of Siemens Corporate Finance Pvt. Ltd. on 16/08/2012, the said concern was non-existent as it stood amalgamated with Siemens Technology and Services Pvt. Ltd. consequent to the scheme of amalgamation approved by the Hon'ble Bombay High Court vide order dated 26/08/2011(supra). It is also a fact that the assessee brought to the notice of the Assessing Officer the factum of its amalgamation with Siemens Technology Pvt. Ltd. vide communication dated 6/12/2011, a copy of which is also placed on record. In fact, such a position was also in the knowledge of the DRP, which was approached by the assessee by filing Form No.35A containing objections with respect to the draft assessment order, and in such Form No.35A, the name of the correct entity was mentioned. In this context, the decision of the Mumbai Tribunal in the case of Instant Holdings Ltd.(supra), relied upon by the assessee before us is squarely applicable. The following discussion in the order of the Tribunal is relevant:- 7. We have carefully considered the rival submissions. The crux of the controversy in the present appeal revolves around the validity of the action of the Assessing Officer in finalizing the assessment order on 19.12.2008 in the name of IT/CL, a company which was non-existent as on that date, since it stood amalgamated with IHL w.e.f. 1.4.2007 and stood dissolved and struck-off from the records of the Registrar of Companies on 5.2.2008 consequent to the scheme of amalgamation approved by the Hon 'ble Bombay High Court on 14.12.2007.
8. In the case of Spice Infotainment Ltd. (supra), the facts were that a return was filed for Assessment Year 2002- 03 on 30.10.2002 by M/s. Spice Corp Ltd., i.e., the amalgamating company. Subsequently, vide order dated 11.2.2004 passed by the Hon'ble High Court, the said company stood amalgamated with M/s. MCorp Private Ltd., i.e., the amalgamated company w.e.f. 1.7.2003. The return so filed was picked up for scrutiny assessment vide notice u/s. 143(2) of the Act dated 18.10.2003 in the name of M/s. Spice Corp Ltd., i.e., the amalgamating company. In the course of assessment proceedings, the factum of M/s. Spice Corp Ltd. having been dissolved as a result of amalgamation with M/s. MCorp Private Ltd. was brought to the notice of the Assessing Officer. However, the Assessing Officer vide order dated 28.3.2005 passed u/s. 143(3) of the Act framed the assessment on M/s. Spice Corp Ltd., i.e., the amalgamating company. In this factual background, the plea raised by the assessee before the Hon 'ble High Court was that the assessment was framed against a non-existing entity as M/s. Spice Corp Ltd. had already amalgamated with M/s. MCorp Private Ltd., and therefore, the assessment order dated 28.3 .2005 suffered from a jurisdictional defect. In that case, the Tribunal had taken a view that the action of the Assessing Officer in framing assessment in the name of M/s. Spice Corp Ltd. even after the said entity stood dissolved consequent upon its amalgamation with M/s. MCorp Private Ltd. w.e.f. 1.7.2003 was a mere procedural defect. In this background, the Hon'ble Delhi High Court formulated the following questions of law: "(i) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the action of the Assessing Officer in framing assessment in the name of "Spice Corp Ltd.", after the said entity stood dissolved consequent upon its amalgamation with Mcorp Private Limited w.e.f 01.07.2003, was a mere "procedural defect"? (ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that in view of the provisions of section 292B of the Act, the assessment, having in substance and effect, been framed on the amalgamated company which could not be regarded as null and void?"
9. The Hon'ble Delhi High Court after referring to the judgement of the Hon'ble Supreme Court in the case of (i) Saraswati Industrial Syndicate v. CIT, 186 ITR 278 and (ii) General Radio and Appliances Co. Ltd. v. M.A. Khader (1986) 60 Comp Case 1013 held that framing of assessment against a nonexisting entity goes to the root of the matter, which did not constitute a procedural irregularity but a jurisdictional defect. Accordingly, it answered the aforesaid questions of law in favour of the assessee and against the Revenue and allowed the stand of the assessee.
10. Similarly, even in the case of Intel Technology India Pvt. Ltd. (supra) the Hon'ble Karnataka High Court has reached to a similar conclusion. In the case before the Hon'ble Karnataka High Court, one M/s. SSS Ltd. stood amalgamated with Intel Technology India Pvt. Ltd. w.e.f. 1.4.2004; prior to that, it filed a return of income on 28.11.2003 for Assessment Year 2003-04 and an assessment order was passed on 2 7.3.2006 in the name of the predecessor amalgamating company, i.e., M/s. SSS Ltd. This assessment order was sought to be challenged on the ground that as on 27.3.2006, i.e., the date of passing of assessment order, the said concern had ceased to exist upon its amalgamation with the successor company. In this factual background, the Hon 'ble Karnataka High Court, following the judgement of the Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. (supra), answered the following questions of law in favour of the assessee and against the Revenue. "(1) Whether the Tribunal was correct in holding that the order passed by the Assessing Officer on M/s Software & Silicon Systems India Pvt. Ltd., after being intimated about the merger with M/s Intel Technology India Pvt. Ltd., was without jurisdiction against the said company and null and void? (2) Whether the Tribunal was correct in holding that the provisions of section 292B of the Act will not make the assessment valid as a defect/omission to incorporate the name of M/s Intel Technology India Pvt. Ltd., in the assessment order as the same is not in substance and effect in confirmative with or according to the intend and purpose of this Act? (3) Whether the Tribunal has to examine the matter on merits and record finding on the controversy raised before it both by the revenue as well as the assessee in their separate appeals ?"
To the similar effect are the judgements of the Hon 'ble Delhi High Court in the case of Dimensions Apparel Pvt. Ltd. and Micro India Pvt. Ltd. (supra). Apart therefrom, the judgement of the Hon'ble Calcutta High Court in the case of I.K. Agencies (P) Ltd. v. Commissioner of Wealth Tax, 347 ITR 664 also supports the proposition sought to be canvassed by the assessee before us. In sum and substance, it is safe to deduce that an order of assessment made on an entity which is otherwise non-existent on the date of such assessment is invalid.
Factually speaking, in the present case the aforesaid proposition applies on all fours, as before the finalization of the impugned assessment on 19.12.2008, it was brought to the notice of the Assessing Officer that IT! CL stood amalgamated with IHL w.e.f. 1.4.2007 in terms of a scheme of amalgamation approved by the Hon'ble High Court vide order dated 14.12.2007. In our considered opinion, the aforesaid error on the part of the Assessing Officer is liable to be construed as a jurisdictional defect which goes to the root of the matter and such an assessment order is liable to be set-aside. We hold so. At this point, we may take note of the argument set up by the Revenue, which is to say that the amalgamating company, i.e., ITICL was in existence throughout the previous year relevant to assessment year under consideration, and therefore, the order passed in the name of the amalgamating company, i.e., ITICL was a valid assessment. The aforesaid reason has prevailed with the CIT(A) also to reject the plea of the assessee. In our considered opinion, the aforesaid argument of the Revenue deserves to be repelled considering the ratio of the judgement of the Hon 'ble Delhi High Court in the case of Spice Infotainment Ltd. (supra). A reading of the judgement of the Hon'ble Delhi High Court in Spice Infotainment Ltd. (supra) reveals that a similar position was canvassed by the Revenue, but the Hon 'ble High Court held that the assessment order passed in the name of the erstwhile company was void and such a defect cannot be treated as a procedural defect. In our considered opinion, the stand of the Revenue as well as the CIT(A) on this aspect is clearly untenable having regard to the aforesaid discussion.
In the result, we set-aside the action of the Assessing Officer in framing the assessment against IT/CL on 19.12.2008 as the said company was non-existent as it stood amalgamated with IHL w.e.f. 1.4.2007, following the scheme of amalgamation approved by the Hon bie Bombay High Court on 14.12.2007 To the similar effect is the decision of the Mumbai Tribunal in the case of Ambuja Cements Rajasthan (supra). The Hon'ble Bombay High Court in the case of Jitendra Chandralal Navlani & Anr. (surpa) also upholds the proposition that no assessment can be made in respect of non-
existent entity. In fact, the judgment of the Hon'ble Bombay High Court also brings out that framing of assessment in respect of a non-existent entity goes to the root of the jurisdiction of the Assessing Officer to assess the non-existent concern and, thus, said decision also clearly answers the objection of the Revenue in the present case that the plea of the assessee is merely hyper-technical. 8.1 Considering the entirety of facts and circumstances of the case, we set- aside the action of the Assessing Officer in framing the impugned assessment against the Siemens Corporate Finance Pvt. Ltd. on 16/08/2012, because on the said date, it was a non-existing concern on account of its amalgamation with Siemens Technology and Services Pvt. Ltd. w.e.f. 01/10/2011 following the scheme of amalgamation approved by the Hon'ble Bombay High Court on 26/08/2011(supra). As a consequence, the assessment order dated 16/08/2012 is held to be as invalid and void-ab-initio. Since we have upheld the preliminary plea of the assessee, which goes to the root of the jurisdiction and the assessment order has been set-aside as void-a b-initio, the necessity to examine the other Grounds of appeal raised by the assessee on merits of the assessment are obviated Thus, in conclusion, we allow the appeal of the assessee, as above.”
7. The above view of the Coordinate Bench is also affirmed by the Hon’ble Delhi High Court in the case of CIT Vs. Micron Steels (P) Ltd. [372 ITR 386] wherein it was held as under : “The Revenue in these appeals claims to be aggrieved by the order of the Income-tax Appellate Tribunal ("the ITAT"), dated February 19, 2013. The Income-tax Appellate Tribunal had affirmed the order of the Commissioner of Income-tax (Appeals) who had set aside the block assessment of M/s. Micron Steels Pvt. Ltd. (the original assessee which subsequently amalgamated with M/s. Lakhanpal Infrastructure Pvt. Ltd. with effect from February 1, 2008, by virtue of an order dated February 19, 2010). The assessment years in question are 2003-04 to 2008-09. 2. The grounds on which the Commissioner of Income-tax (Appeals) and later the Income-tax Appellate Tribunal set aside the assessment was that the assessee had amalgamated with M/s. Lakhanpal Infrastructure Pvt. Ltd. and neither was it assessed in the relative periods and that the amalgamation of the original assessee corporate had rendered the assessment framed against it as void. 3. The facts relevant for deciding this appeal are that on October 20, 2008, a search and seizure action was conducted in the cases of B.K. Dhingra, Smt. Poonam Dhingra, M/s. Madhusudan Buildcon Pvt. Ltd. and others connected. Based upon the said search, and the materials secured during that proceedings, block assessments were finalised in respect of those assessees. The Assessing Officer ("the AO") was of the opinion that during the course of the search, materials were seized which belonged to the respondents-assessees and, accordingly, issued notice to M/s. Micron Steels Pvt. Ltd. on July 6, 2010. By that time, M/s. Micron Steels Pvt. Ltd. as noticed at the outset in this judgment had been amalgamated with M/s. Lakhanpal Infrastructure Pvt. Ltd. The assessment was finalised on December 31, 2010, by the Assessing Officer. In the course of assessment, various additions were made. This was the subject-matter of appeal to the Commissioner of Income-tax (Appeals). It was urged in the appeal that on account of amalgamation and by operation of section 170 of the Income-tax Act the income-tax authorities were under a duty, upon receipt of information, to initiate complete proceedings against the transferee company which they had not done. This plea was accepted by the Commissioner of Income-tax (Appeals), who, inter alia, noted that on October 19, 2010, since the Assessing Officer changed, on account of an administrative order, an intimation was received by the Assessing Officer on November 18, 2010, stating that M/s. Micron Steels Pvt. Ltd. no longer existed on account of the amalgamation order, dated February 19, 2010. The Commissioner of Income-tax (Appeals) guided by various previous decisions of this court, formed the opinion that the contentions of the respondent-assessee was substantial and that the assessment orders as framed, were unsustainable. He, accordingly, set aside the assessment order.
The Revenue's appeal was rejected. The Income-tax Appellate Tribunal relied upon several judgments including one of the Division Bench of this court in Spice Entertainment Ltd. v. CST [I.T. Appeal No. 475 of 2011, dated August 3, 2011] the Income-tax Appellate Tribunal held as follows : "8. We have carefully considered the submission in this regard and perused the records. We fully concur with the finding of the learned Commissioner of Income-tax (Appeals) that a company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with incorporation and it dies with the dissolution as per the provisions of the Companies Act. On amalgamation, the company ceases to exist in the eye of the law. Thus, assessment upon a dissolved company is impermissible as there is no provision in the Income-tax Act to make an assessment thereupon. The learned Commissioner of Income-tax (Appeals), in our view, has, therefore, rightly held that the assessment on a company which has been dissolved by amalgamation under sections 391 and 394 of the Companies Act, 1956, is invalid. Admittedly, the assessee-company in the present case stood dissolved on September 19, 2010, on amalgamation with M/s. Lakhanpal Infrastructure Pvt. Ltd. and the assessment order in the present case was framed on December 31, 2010. Hence, we uphold the order of the learned Commissioner of Income-tax (Appeals). 9. In view of the above finding on the maintainability of the assessment order itself, which has been held to be a nullity, the issue raised in the other grounds of appeal
s preferred by the Revenue and cross-objections raised by the assessee have become infructuous and they don't need adjudication."
5. It is urged on behalf of the Revenue that the assessment as framed could not have been set aside. To say so, the learned counsel, firstly, contended that the Assessing Officer took note of the fact that the M/s. Micron Steels Pvt. Ltd. had been amalgamated as is evident from the fact that the assessment was framed in respect of "Micron Steels", and, consequently, the assessee effectively participated and made its view on its own and filed its return. Learned counsel contended that the operation of section 292B, therefore, precluded the assessee's contention with regard to nullity of the entire proceedings.
6. This court notices, at the outset, that the issue urged is no longer res integra. As stated earlier, Spice Entertainment Ltd. (supra) is an authority for the proposition that completion of assessment in respect of a non- existent company, due to the amalgamation order, would render assessment in the name and in respect of the original assessee-company, a nullity. In Spice Entertainment Ltd. (supra), after referring to Saraswati Industrial Syndicate Ltd. v. CIT [1990] 186 ITR 278/53 Taxman 92 (SC), this court held as follows : "9. The court referred to its earlier judgment in General Radio and Appliances Co. Ltd. v. M.A. Khader [1986] 60 Comp Cas 1013 (SC). In view of the aforesaid clinching position in law, it is difficult to digest the circuitous route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect.
10. Section 481 of the Companies Act provides for dissolution of the company. The company judge in the High Court can order dissolution of a company on the grounds stated therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. Smith (Plant Hire) Ltd. v. D.L. Mainwaring (T/A Inshore) [1986] BCLC 342 (CA) that 'once a company is dissolved it becomes a non-existent party and, therefore, no action can be brought in its name. Thus, an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter had been dissolved.”
Further in the case of CIT V/s Micra India (P) Ltd (2015) 231 Taxman 809 (Delhi), the Hon’ble Delhi High Court has held as under: “10. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed. Instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; the order also mentioned the transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to the assessment being completed in the name of the transferee company. According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed against a non-existent company. The ITAT's decision is, in the circumstances, justified and warranted. 11. For the above reasons it is held that these appeals do not involve any substantial question of law and of liability. The appeals are accordingly dismissed.”
In the case before us, undoubtedly, the assessments were made in the name of DSP Merrill Lynch Securities Trading Ltd. which is a non-existent entity as this company was amalgamated with DSP Merrill Lynch Ltd. w.e.f. 1.4.2010 and therefore when the assessments were completed on 15.3.2013 and 27.2.2013 on this company for the assessment years 2009-10 and 2010- 11, this company is no more in existence. In these circumstances, we hold that the assessments made on a non-existent company are invalid and void ab initio and therefore the assessments are set aside as void ab initio. Since we have set aside the assessments as void ab initio, we need not go into the other grounds raised on merits. Cross appeal by the Revenue for the assessment year 2009-10 will not survive as the assessment itself has been set aside.
In the result, the appeals of the Assessee are allowed and appeal of the Revenue is dismissed.
Order pronounced in the open court on the 9th day of May 2017.
Sd/- Sd/- (ASHWANI TANEJA) (C.N.PRASAD) लेखा सदस्य / न्याधयक सदस्य / ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई / Mumbai; नििाुंक / Dated 9.5.2017 LR, SPS आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकि आयुक्त(अपील) / The CIT(A), Mumbai. 4. आयकि आयुक्त / CIT 5. नवभागीय प्रनतनिनर्, आयकि अपीलीय अनर्किण, मुंबई / DR, ITAT, Mumbai 6. गार्ा फाईल / Guard file. सत्यानपत प्रनत //True Copy// आदेशान सार/ BY ORDER,