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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
Date of Hearing : 04.02.2021 Date of Order : 17.02.2021
O R D E R PER KULDIP SINGH, JUDICIAL MEMBER :
Since common questions of facts and law have been raised in the inter-connected appeals, the same are being disposed off by way of consolidated order to avoid repetition of discussion.
Appellant, M/s. Sarla Fabrics Pvt. Ltd. (now amalgamated with Shahi Exports Pvt. Ltd.) (hereinafter referred to as ‘the assessee’) by filing the present appeals sought to set aside the impugned orders all dated 23.05.2016 passed by the Commissioner of Income-tax (Appeals)-24, New Delhi qua the Assessment Years 2008-09, 2009-10 & 2010-11 on the identical grounds inter alia that :-
“1. The order of Ld. CIT(A) is not correct in law and facts.
2. On the facts and circumstances of the case, the CIT(A) has erred in quashing the order involving additions (Rs.2,43,91,636/-, Rs.23,29,51,594/- & Rs.8,40,59,413/- for AYs 2008-09, 2009-10 & 2010-11 respectively).
3. On the facts and circumstances of the case, the CIT(A) has erred in quashing the order on the ground that as the company was non-existent on the date of search because of merger with another company, assessment could not have been done in its hands.
4. On the facts and circumstances of the case, the CIT(A) has erred in appreciating the fact that since action u/s 132 was taken in the name of the assessee, assessment for all the years is to be done in the hands of assessee only."
Briefly stated the facts necessary for adjudication of the controversy at hand are : On the basis of search and seizure operation under section 132 of the Income-tax Act, 1961 (for short ‘the Act’) conducted on Shahi Exports Group of assessee on 16.01.2013, some documents were seized from which it was established that the assessee has earned unaccounted interest income from these groups which has not been accounted for in the books of the assessee. This search operation was conducted as a part for larger search coverage in the cases of K.S. Dhingra, G.S.
Dhingra, M/s. U.K. Paints (India) along with group entities of Shahi Exports and Span India group and certain other entities.
Assessing officer (AO) completed assessment u/s 153A read with section 143 (3) of the Act at total income (loss) Rs.(-)5,91,93,421/-, Rs.23,25,98,313/- & Rs.8,40,59,413/- for AYs 2008-09, 2009-10 & 2010-11 respectively.
The assessee carried the matter before the ld. CIT (A) by way of filing the appeals who has partly allowed the same. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeals.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the Revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, M/s. Sarla Fabrics Pvt. Ltd., the assessee got amalgamated with M/s. Shahi Exports Pvt. Ltd. w.e.f. 31.03.2010 vide amalgamation order dated 25.10.2010 passed by Hon’ble High Court of Delhi. It is also not in dispute that on the date of search in the present cases i.e. on 16.01.2013, present assessee has ceased to exist by virtue of the amalgamation order passed by the Hon’ble Delhi High Court dated 25.10.2010 (supra). Keeping in view the aforesaid undisputed facts, ld. CIT (A) quashed the assessment orders in all the aforesaid cases.
Now, the Revenue by way of filing present appeals challenged the quashing orders passed by the ld. CIT (A) on the ground that since action u/s 132 was taken in the name of the assessee, assessment for all the years is to be framed in the hands of the assessee (M/s. Sarla Fabrics Pvt. Ltd.).
Ld. DR for the Revenue challenging the impugned orders passed by the ld. CIT (A) contended that when the assessee has filed original income-tax return in the name of M/s. Sarla Fabrics Pvt. Ltd. and search & seizure action u/s 132 of the Act has been taken in the name of the assessee, the AO has rightly framed the assessment in the name of M/s. Sarla Fabrics Pvt. Ltd.
However, on the other hand, ld. AR for the assessee to repel the arguments addressed by the ld. DR for the Revenue contended that the factum of amalgamation of the assessee company which took place with effect from 31.10.2010 has been duly intimated to the Investigating Wing of the Income-tax Department at the time of search & seizure operation as well as during the framing of assessment by the AO u/s 153 r.w.s. 143 (3) of the Act and that assessment in the name of non-existent entity is illegal, bad in law and non est and relied upon Hon’ble Delhi High Court in case of CIT vs. Spice Enfotainment vs. CIT in ITA 475 & 476 of 2011 dated 03.08.2011, affirmed by the Hon’ble Apex Court in Civil Appeal No.285-286 of 2014 order dated 02.11.2017, PCIT vs. Nokia Solutions & Network India Pvt. Ltd. (formerly known as Nokia Siemens Network Pvt. Ltd. in ITA 135/2018 order dated 06.02.20189, PCTI vs. BMA Capfin Ltd. ITA 1181 of 2017 & CM No.46887 of 2017 order dated 27.12.2017, BDR Builders & Developers Pvt. Ltd. vs. ACIT WP (C) 2712/2016 order dated 26.07.2017 & PCIT vs. Kaizen Products Pvt. Ltd. (presently known as AAS Research & Solutions (P) Ltd. upon amalgamation with Ventura Research & Solutions (P) Ltd.) order dated 25.07.2017, judgments of Hon’ble Apex Court in case of Pr. CIT vs. Maruti Suzuki India Ltd. in C.A. No.5409 of 2019 dated 25.07.2019, M/s. Dalmia Power Ltd. vs. ACIT in CA No.9496-099 of 2019 and decisions of coordinate Bench of the Tribunal in Nirvana Lifestyle Pvt. Ltd. (now merged with TTJ Impex Ltd.) in order dated 09.03.2018, Rudraksha Agencies Company Ltd. vs. DCIT, Circle 21 (2), New Delhi 2018 (5) TMI 740 – ITAT Delhi & DCIT, Circle 18 (1), New Delhi vs. NDC Telecommunications India Pvt. Ltd. 2018 (10) TMI 1119 – ITAT Delhi..
It is also not in dispute that assessment in the case of M/s.
Sarla Fabrics Pvt. Ltd. has been framed by the AO on 27.03.2015, 30.03.2015 & 30.03.2015 for Assessment Years 2008-09, 2009-10 & 2010-11 respectively.
By now, the issue as to framing the assessment on a non- existent company having been merged with some other entity being nullity is settled. Hon’ble Delhi High court in case of Spice Enfotainment Ltd. vs. CIT (supra) quashed the assessment in the identical facts by returning following findings :-
"12. Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act. - provisions of Section 2928 of the Act are not applicable in such a case. - The framing of assessment against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person. ……….
When we apply the ratio of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of Section 292B of the Act are not applicable in such a case. The framing of assessment against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person.”
Aforesaid decision has been confirmed by the Hon’ble Apex 12.
Court vide order dated 02.11.2017 passed in Civil Appeal No.285-286opf -2014.
Similarly, Hon’ble Apex Court in case of Pr.CIT vs. Maruti Suzuki India Ltd. (supra) also quashed the assessment framed on amalgamating company by returning following findings :-
“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 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.
We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable."
Perusal of the record further shows that in the aforesaid cases, AO had resorted to futile exercise of framing assessment in the name of non-existent entity despite the fact that factum of amalgamation has been duly intimated by Shri Hemant Gupta on 16.01.2015 by recording his statement with Investigating Wing, available on pages 1 to 8 of the paper book, during the course of search & seizure operation and AO has also been intimated by the Authorized Representative vide letter dated 07.12.2013 filed on 17.12.2013, available at page 34 of the paper book, duly extracted by the ld. CIT (A) in para 4.1.3 of the impugned order that, “since M/s. Sarla Fabrics (P) Ltd. stood merged and amalgamated with Shahi Exports Pvt. Ltd. vide judgment passed by Hon’ble Delhi High Court, return u/s 153A is not being filed.”
Moreover, the scheme of amalgamation itself takes care of all the consequences of the erstwhile company. Since the assessee company ceased to be in existence and its name got struck off from the rolls of Registrar of Companies, assessments framed against it by the AO vide orders dated 27.03.2015, 30.03.2015 & 30.03.2015 for Assessment Years 2008-09, 2009-10 & 2010-11 respectively are not sustainable in the eyes of law, being a nullity.
16. So, in view of what has been discussed above and by relying upon the judgments rendered by Hon’ble Apex Court and Hon’ble jurisdictional High Courts discussed in the preceding paras, we are of the considered view that when the aforesaid amalgamating company, assessee in this case, has ceased to exist by virtue of the approved scheme of amalgamation w.e.f. 31.03.2010 by the order passed by the Hon’ble Delhi High Court, AO was not within his jurisdiction to frame the assessment in the name of non-existent company, consequently assessment orders dated 27.03.2015, 30.03.2015 & 30.03.2015 for Assessment Years 2008-09, 2009-10 & 2010-11 respectively are liable to be quashed being not sustainable in the eyes of law, hence finding no illegality or perversity in the impugned orders passed by the ld. CIT (A) in the aforesaid appeals quashing the assessment orders passed by the AO, present appeals filed by the Revenue are hereby dismissed. Order pronounced in open court on this 17th day of February, 2021.