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Income Tax Appellate Tribunal, DELHI
Before: SH. BHAVNESH SAINI & SH. ANIL CHATURVEDI
ORDER PER ANIL CHATURVEDI, AM: These two appeals filed by the assessee are directed against the orders dated 21.12.2009 of the Commissioner of Income Tax (A)-XIX, New Delhi relating to Assessment Years 2001-02 & 2002- 03.
Before us, at the outset, Learned AR submitted that though the appeals of the Assessee are for two different years but the issues in both the appeals are identical and the submissions made by him for both the years would be common and therefore, both the appeals can be heard together. The aforesaid submissions of the Learned AR were not controverted by the Learned DR. We therefore, for the sake of convenience proceed to dispose of both the appeals by a consolidated order but however proceed with the facts for A.Y. 2001-02.
The relevant facts as culled from the material on records are as under:
Assessee is a company which was stated to have been engaged in the business of manufacturing and sale of electronic meters. Assessee filed its return of income for A.Y. 2001-02 on 04.10.2001 in the name of Duke Arnics Electronics Ltd. declaring total income of Rs.11,97,000/- before the AO at Hyderabad. The assessment was initially framed u/s 143(3) by the AO at Hyderabad vide order dated 29.09.2003 accepting the return income of the assessee. Thereafter, notice u/s 148 was issued DCIT, Circle-1(2), Hyderabad on 20.02.2007. Thereafter, assessment was framed u/s 147/143(3) by the ACIT, Circle-16(1), Delhi vide order dated 18.12.2007 and total income was determined at Rs.27,98,680/-. Aggrieved by the reassessment order passed by the AO, assessee carried the matter before the CIT(A) who vide order dated 21.12.2009 in Appeal No.337/2007- 08 enhanced the addition made by the AO. Aggrieved by the order of CIT(A) assessee is now before us and has raised the following grounds: “
1. That on the facts and circumstances of the case and in law, the CIT(A) has erred in upholding the validity of order dated 18.12.2007 passed by the assessing officer under section 143(3) read with section 147 of the Income-tax Act, 1961 (‘the Act’), without appreciating that the order of assessing officer was beyond jurisdiction, bad in law and void-ab-inito. 1.1 That the CIT(A) erred on facts and in law in affirming the validity of the impugned assessment order without appreciating that: (a) the assessment had been completed without issuance and service of a valid notice under section 148 of the Act; and (b) the impugned assessment had been completed in the name of a non- existent entity. 1.2 That the CIT(A) failed to appreciate that there is no estoppels in law and legal objections challenging the jurisdiction of the assessing officer/validity of the assessment made could be raised for the first time during the appellate proceedings. 1.3 That on the facts and circumstances of the case, the CIT (A) failed to appreciate that initiation of proceedings was barred by limitation prescribed in the proviso to section 147 of the Act and consequently, the assessment order was illegal and bad in law. 1.4 That on the facts and circumstances of the case, the CIT(A) has erred in not appreciating that the reassessment proceedings were initiated by the assessing officer without forming reasonable belief of escapement of income and consequently, the assessment order was illegal and bad in law.
2. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in disallowing weighted deduction of Rs.16,01,682/-under section 35(2AB) of the Act on research and development expenditure (R&D).
3. That the CIT(A) exceeded his jurisdiction in enhancing the income of the appellant by adjudicating and setting aside the issue of allowability of expenditure on R&D amounting to Rs.32,03,364 (100% portion) to the file of the assessing officer.
4. Without prejudice, that the CIT(A) erred on facts and in law in setting aside issue of allowability of expenditure of Rs.32,03,364 incurred on R&D to the assessing officer for fresh verification.
The appellant craves leave ,0 add, alter, amend or vary from the above grounds of appeal before or at the time of hearing.”
Before us at the outset, the Learned AR submitted that assessee had also filed additional grounds of appeal but he does not wish to press them and he would only like to argue on ground no.1 and its sub grounds wherein the Assessee is challenging the reassessment proceedings.
Before us Learned AR submitted that the reassessment order passed u/s 147 of the Act is without jurisdiction and is bad in law and void ab initio for the reasons that; (1) the notice was issued and assessment was completed on a non-existent company (2) the issuance of notice u/s 148 of the Act was by non-jurisdictional Assessing Officer.
He pointed to the chart of chronology of events filed by him and from there he submitted that assessee had filed the return of income u/s 139(1) in the name of Duke Arnics Electronics Ltd. on 04.10.2001 before the Assessing Officer (AO) at Hyderabad. The AO at Hyderabad vide order dated 29.09.2003 passed the assessment order u/s 143(3) accepting the return of income of the assessee. Assessee decided to shift its Registered Office from the state of Andhra Pradesh to the National Capital Territory of Delhi and accordingly it filed necessary application before the Company Law Board (CLB) at Chennai. He submitted that the CLB vide order passed on 26.05.2004 permitted the transfer of Page | 4 Registered Office of assessee from Hyderabad to Delhi. The change of Registered Office was intimated by the Assessee to the AO at Hyderabad and Delhi. He submitted that the assessee intimated to the AO at Hyderabad vide letter dated 04.11.2004 about the shifting of registered office to Delhi and accordingly requested for transfer of all the assessment records to CIT - Delhi and a similar letter was also addressed to the Assessing Officer Delhi. He submitted that pursuant to the order of the Delhi High Court vide order dated 01.02.2005 passed u/s 394 of the Companies Act, the assessee got amalgamated with TTL Limited with effect from 01.04.2004 and pursuant to the amalgamation of Duke Arnics Electronics Ltd. (the Assessee) with TTL Ltd, Duke Arnics Electronics Ltd. ceased to exist. He, thereafter, pointed out to the reasons recorded for reopening passed by DCIT, Hyderabad dated 20.02.2007 which is placed at Page 155 of the paper book. He also pointed out to the notice u/s 148 dated 20.02.2007 issued by DCIT, Hyderabad. He submitted that since the assessee company i.e Duke Arnics Electronics Ltd. has ceased to exist on 01.04.2004, notice issued u/s 148 dated 20.02.2007 was on a non-existent company and therefore the notice was illegal and bad in law. He submitted that notice issued u/s 148 on non- existing entity is the jurisdictional defect invalidating the whole proceedings and therefore, the re-assessment order passed is bad in law. In support of his contention, he relied on the decision of Hon’ble Apex Court in the case of PCIT vs. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC) and the decision in the case of ACIT vs. Garuda Imaging & Diagnostics Pvt. Ltd. (ITA Page | 5 No.449 of 2016 order dated 05.01.2018) passed by the Delhi Bench of Tribunal. He further submitted that against the order passed by the Delhi Bench of ITAT in the case of Garuda Imaging & Diagnostics Pvt. Ltd. (supra). Revenue had preferred appeal before the Hon’ble Delhi High Court and the Delhi High Court dismissed the appeal of the Revenue (ITA No.1240/2018 order dated 11.10.2019). He placed on record the copy of the aforesaid orders. He further submitted that in the present case, the reassessment order is invalid also for the reason that the notice for reopening u/s 148 was issued by the AO at Hyderabad whereas the reassessment order was passed by the AO at Delhi. He submitted that the AO, Delhi had merely followed the reasons recorded by AO, Hyderabad and thus it was a case of borrowed satisfaction. He submitted that on this count also the initiation of reassessment proceedings u/s 147 was bad in law. He, therefore, submitted that the order passed by the AO was illegal and be set aside. Learned DR on the other hand supported the order of the lower authorities.
We have heard the rival submissions and perused the materials on record. The Assessee in the present case is challenging the assumption of jurisdiction for the reassessment proceedings.
It is an undisputed fact that the return of income for A.Y. 2001-02 was filed in the name of Duke Arnics Electronics Ltd. on 04.10.2001 before the AO at Hyderabad. It is also a fact that Page | 6 pursuant to the order of CLB dated 26.05.2004 the Registered Office of the Assessee was shifted from Hyderabad to Delhi and the Assessing Officers at Hyderabad and Delhi were intimated about the same. It is also a fact that pursuant to the order of Hon’ble Delhi High Court passed u/s 391 to 394 of the Companies Act, 1956, Dukes Arnics Electronics Ltd. stood amalgamated with TTL Ltd. w.e.f. 01.04.2004 meaning thereby that it ceased to exist from that date. It is also a fact that the Assessing Officer of Hyderabad and Delhi were intimated of the amalgamation by the Assessee. The notice u/s 148 for A.Y. 2001- 02 has been issued by the AO at Hyderabad on 20.02.2007 which is after the date of which Dukes Arnics Electronics had ceased to exist.
It is a settled law that upon a scheme of amalgamation being sanctioned, the amalgamating Company ceased to exist in the eyes of law & it cannot be regarded as a “person” in terms of Section 2(31) of the Act and consequently no assessment proceeding can be initiated or an assessment order can be passed. We find that Hon’ble Apex Court in the case of PCIT vs. Maruti Suzuki India Ltd. (2016) 107 Taxmann.com 375 (SC) has held that the issuance of jurisdiction notice and assessment thereafter passed in the name of non-existing company i.e. amalgamating Company having ceased to exist as a result of approved scheme of amalgamation is a substantive illegality and not a procedural violation of nature adverted to in S. 292B and hence being without jurisdiction. Page | 7
We further find that in the present case, the notice u/s 148 was issued by the AO at Hyderabad. The reasons for reopening were also recorded by AO at Hyderabad. The reassessment order was framed by AO at Delhi. The AO at Delhi had followed the reasons recorded by the AO, Hyderabad meaning thereby that he proceeded in framing the assessment on the basis of borrowed satisfaction of the AO, Hyderabad. In such a situation, we are of the view that the AO at Delhi had not validity assumed the jurisdiction to initiate the reassessment proceedings as he had merely followed the reasons recorded by AO, Hyderabad who had no jurisdiction over the Assessee.
In view of the aforesaid facts, we are of the view that the reassessment proceedings initiated against the Assessee needs to be quashed and we accordingly hold so. Thus the Grounds of Assessee are allowed.
Since we have quashed the assessment proceedings hereinabove, the other grounds raised by the Assessee needs no adjudication. Thus, the appeal of the Assessee is allowed.
As far as A.Y. 2002-03 is concerned, both the parties before us have submitted that the facts and issues involved in this year is similar to A.Y. 2001-02. In such a situations, for the reasons given hereinabove while disposing the appeal for A.Y. 2001-02 and for similar reasons, we quash the assessment proceedings for A.Y 2002-03 also. Thus, the grounds of Assessee are allowed.
In the result, both the appeals of the Assessee are allowed. Order pronounced in the open court on 08.07.2020