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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: Shri M.Balaganesh, & Shri S.S.Viswanethra Ravi
This appeal of the assessee arises out of the Order of the Learned CIT, Kolkata-4, Kolkata dated 10-03-2015 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) against the order of assessment framed by the Learned AO u/s 143(3) of the Act.
The first ground raised by the assessee is with regard to the fact that the ld. CIT u/s. 263 of the Act has passed an order in the name of M/s. The Bond Company Ltd, which is not at all in existence on the date of passing the order u/s. 263 of the Act.
2.1 The Ground no.1 raised by the assessee is as below:- “1. a) For that the impugned order of ld. Commissioner of Income tax (CIT) is bad in law in so far as it has been passed in the name of The Bond Company Limited which was no more in existence. b) The order of ld. CIT(A) is otherwise bad in law.
2.2 The brief facts of the issue are that The Bond Company Ltd got merged with M/s. Emerald Company Ltd ( the assessee herein) w.e.f 1-4-2013 vide order of the Hon’ble -C-AM 1 M/s. Emerald Company Ltd Calcutta High Court dated 16-05-2014. The ld.AR also placed on record the paper book wherein at page 53 of the paper book, the fact of this merger has been duly informed to the ld.AO vide letter dated 24-11-2014. Admittedly, show cause notice was issued u/s. 263 of the Act by the ld. CIT on 13-01-2015 and section 263 order was passed on 10-03-2015 in the name of The Bond Company Limited. We also find from pages 3-4 of the paper book that the reply to the show cause notice was filed by M/s. Emerald Company Ltd ( the assessee herein) before the ld.CIT. The ld.AR argued that the order passed by the ld. CIT on the dead person is not valid. Hence, the same requires to be quashed as void ab initio. In response to this the ld. CIT DR argued that the provisions of section 292BB of the Act would have to be applied in the facts of the instant case and the assessee has also co-operated with the proceedings and hence cannot claim this issue before the Tribunal.
2.3 We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee before us. We find that M/s. the Bond Company Limited has been merged with M/s. Emerald Company Ltd ( the assessee herein) vide order of Calcutta High Court on 16-05-2014 and pursuant to the merger, M/s. The Bond Company Ltd had lost its identity and existence. Hence, the arguments of the ld.AR that the revision order u/s. 263 passed on the dead person is to be appreciated. We also find from reply letter dated 27-01-2015 before the ld.CIT in response to show cause notice issued u/s 263 of the Act, the assessee herein had specifically brought to the notice of the ld. CIT that M/s. The Bond Company Ltd was merged with the assessee herein. Hence, we find that the assessee has duly discharged its onus of intimating the revenue officials about the fact of merger of the said company. In these circumstances, the ld. CIT ought to have taken cognizance of the same and should have issued fresh show cause notice in the name of the assessee herein and proceeded to pass the fresh order in the name of the assessee. Pursuant to the merger, the amalgamating ( M/s. The Bond Company Limited) loses its existence in the eyes of law. We find that the section as relied on by the ld.DR on the provisions of section 292BB of the Act cannot be applied in the facts of the instant case for the reason that section 292BB of the Act can be made applicable only for assessment or reassessment proceedings and the same cannot be made applicable for revisional proceedings as contemplated u/s. 263 of the Act. Moreover, the provisions of section 292BB would not come to the rescue of the -C-AM 2 M/s. Emerald Company Ltd revenue when there is a basic fault on the assumption of jurisdiction itself on a non-existent entity by the ld.CIT by issuing show cause and passing the order on the non-existent entity. We hold that when there is a jurisdictional defect, it does not become curable. We also find support for our aforesaid contentions from the following decisions:-
• Hon’ble Delhi High Court in the case of CIT Vs. Dimension Apparels P.Ltd reported in (2014) 52 Taxmann.com 355(Del) dtd July 8,2014, wherein it has been held:
“15. In Spice Entertainment Ltd. (supra), this Court, after discussing the law declared by the Supreme Court in Saraswati Industrial Syndicate Ltd. (supra) stated that:
"9. The Court referred to its earlier judgment in General Radio and Appliances Co. Ltd. v. MA. Khader [1986]60 Comp Case 1013. 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.
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 AIH 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.
After the sanction of the scheme on 11th April, 2004, the Spice ceases to exit w.e.f 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said "dead person". When notice under Section 143 (2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s Spice which was non existing entity on that day. In such proceedings and assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law.
The authority of the above precedent binds us; we see no reason to differ from the logic and reasoning in Spice Entertainment Ltd. (supra).
-C-AM 3 M/s. Emerald Company Ltd
The question of whether an assessment upon an amalgamated company is a mistake within the meaning of Section 2928 was raised and answered by the Delhi High Court in Spice Entertainment Ltd. (supra). In that case, the Tribunal had held that "the assessment in substance and effect has been made against amalgamated company in respect of assessment of income of amalgamating company for the period prior to amalgamation and mere omission to mention the name of amalgamated company alongwith the name of amalgamating company in the body of assessment against the item "name of the assessee" is not fatal to the validity of assessment but is a procedural defect covered by Section 2928 of the Act." (Emphasis Supplied) 20. This Court rejected this argument, holding that "it [becomes] incumbent upon the Income Tax Authorities to substitute the successor in place of the said 'dead person'. Such a defect cannot be treated as procedural defect... 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." (Emphasis Supplied)
In Spice Entertainment Ltd. (supra) the reason for the inapplicability of Section 292-8 was additionally premised on the decision of the Punjab & Haryana High Court in CIT v. Norton Motor, [2005] 275 ITR 595/146 Taxman 701, that while Section 2928 can cure technical defects, it cannot cure a "jurisdictional defect in the assessment notice. "ln Spice Entertainment Ltd. (supra), therefore, this Court expressly classified "the framing of assessment against a non-existing entity/person" as a jurisdictional defect. This has been a consistent position. As early as 1960. In CIT v Express Newspapers Ltd [1960] 40 ITR 38 (Mad.), the Madras High Court held that "there cannot be an assessment of non-existent person. The assessment in the instant case was made long after the Free Press Company was stuck off from the register of the companies, and it could not be valid." (Emphasis Supplied) 22. On the last contention, i.e with respect to participation by the previous assessee, i.e the amalgamating company (which ceases to exist), again Spice Entertainment Ltd. (supra) is categorical; it was ruled on that occasion that such participation by the amalgamated company in proceedings did not cure the defect, because "there can be no estoppel in law. " Vived Marketing Servicing (P.) Ltd. (supra) had also reached the same conclusion.” • Hon’ble Karnataka High Court in the case of CIT Vs. Intel Technology India P.Ltd reported in (2015) 57 Taxmann.com 159(Kar), wherein it has been held:
“ 6. …… ……. …… it is contended that the facts of the present case are similar, if not identical, to the facts in the case of Spice Infotainment Ltd -C-AM 4 M/s. Emerald Company Ltd
(supra) wherein the Delhi High Court has, after considering the various provisions of the Income Tax Act as well as certain decisions of the Apex Court and other High Courts, clearly held that the framing of assessment against the non-existing entity person goes to the root of the matter which is not a procedural irregularity, but, a jurisdictional defect and as there cannot be any assessment against the dead person.
In the present case also, the proceedings had been initiated against a non-existing company/SSS Limited even after the amalgamation of the said company with M/s Intel Technology India Pvt. Ltd . We do not see any good ground to differ with the said judgment of the Delhi High Court.
Accordingly, for the reasons given in the judgment of the Delhi High Court in the case of Spice Infotainment Ltd. (supra), these appeals are dismissed and we decide the substantial questions of law in favour of the assessee and against the revenue. “
• Decision of Co-ordinate Bench of Bangalore Tribunal in the case of ACIT Vs. Arshed properties & Investments P.Ltd reported in 62 Taxmann.com 340, wherein it has been held :-
“17. The next issue is with regard to applicability of provisions of section 292BB of the Act. It is clearly - m the statutory provisions that these provisions only insulate the AO from the proof of service of notice . 143(2) of the Act. It does not in any way insulate the AO from default in issuing notice u/s. 143(2) within the period of limitation contemplated therein. When the records show that there was no issue of notice u/s. 143(2) within the period of limitation prescribed under the said proviso, the Revenue cannot take advantage of the provisions of section 292BB. In other words, "issue of notice" and "service of notice" are two different aspects and what is covered by section 292BB is only "service of notice". on-issue of notice u/s. 143(2) within the period of limitation would not be covered under the ambit of section 292BB of the Act. The decision of the Tribunal in the case of Amithi Software Technologies (P.) Ltd. (supra) referred to in the earlier part of this order clearly supports the plea of the assessee in this regard. We therefore hold that assessment proceedings are invalid for the reason that notice u/s. 143(2) had not been issued and served within the time limit prescribed by those provisions. Accordingly, the order of assessment is annulled. In view of the conclusions on the preliminary issue raised in the Cross Objection, we are of the view that there is necessity to go into the merits on the issues raised by the Revenue in its appeal.
Accordingly, the appeal by the Revenue is dismissed, while the Cross Objection by the assessee is allowed.”
-C-AM 5 M/s. Emerald Company Ltd 2.4. In view of the above, we hold that the order passed in the hands of the non-existent entity is bad in law and deserves to be quashed as void ab initio. Since the order is quashed at threshold, we refrain to go into other grounds of appeal and merits of the issue.
In the result, the appeal of the assessee is allowed.
THIS ORDER IS PRONOUNCED IN OPEN COURT ON 13 -01-2016