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Income Tax Appellate Tribunal, DELHI BENCH, ‘H’: NEW DELHI
Before: SHRI SHAMIM YAHYA & Ms. ASTHA CHANDRA
Date of Hearing 12.09.2023 Date of Pronouncement 14.09.2023 ORDER PER SHAMIM YAHYA, AM,
This appeal by the assessee is against the order of the Ld. Pr.
CIT(Central), KNP at Meerut, passed u/s 263 of the Act dated 29.03.2023 and pertains to Assessment Year 2018-19.
The grounds of appeal reads as under:-
“1. That the PCIT erred in issuing notice u/s 263 of the Act dated 21.03.2023 and also passing the order us 263 of the Act dated 29.03.2023 in the name of "Sundaram IT. Parks Pvt. Ltd." whereas the aforesaid company had already been amalgamated with the Appellant Company w.e.f. 01.04.2018 vide order of NCLT dated 19.09.2019 and information regarding amalgamation was duly submitted during the course of assessment proceedings alongwith copy of order of NCLT and therefore, notice and the order issued / passed in the name of non-existent company are invalid and therefore, deserve to be quashed.
2. That the PCIT also erred in passing the order u/s 263 dated 29.03.2023 without appreciating that the order of assessment dated 10.06.2020 was invalid in law being in the name of non-existent company and therefore, he had no jurisdiction / authority to pass the order us 263 of the Act setting aside aforesaid order and therefore, his action is not sustainable under law.
3. That the PCIT also erred in sending the notice dated 21.03.2023 u/s 263 of the Act at the wrong address and also not sending the same through e-mail as per information available on website whereas in the order he has mentioned that notice was sent by email / post and, accordingly no opportunity of hearing was given, warranting the order to be quashed. 4. That the PCIT also erred in passing the order u/s 263 of the Act in the case of the company without appreciating that after the amalgamation of Sundaram IT. Parks Pvt. Ltd. assessment order could be passed only by the AO having jurisdiction over the case of the Appellant Company i.e.WTC Noida Development Company Pvt. Ltd. which was with Assessing Officer, Circle 25(1), New Delhi, accordingly, concerned PCIT of Delhi charge had the jurisdiction to pass the order us 263 of the Act. 5. That the PCIT erred in passing the order u/s 263 of the Act on the basis of proposal received by him from the Assessing Officer for taking action u/s 263 of the Act whereas in terms of section 263 of the Act action could be taken on the basis of his own examination of record and not on the basis of proposal received from the Assessing Officer or from any other authority. 6. Without prejudice to Ground No.3 hereinabove, the PCIT also erred in passing the order us 263 of the Act dated 29.03.2023 without giving proper opportunity of being heard to the Appellant since issuing notice on 21.03.2023 and requiring the Appellant to submit details alongwith documentary evidence by 28.03.2023 could not be said to be a proper opportunity and therefore, order deserves to be quashed on the basis of principle of natural justice. 7. That PCIT also erred in not specifying what further enquiry had to be made by AO in respect of each of the issues and how claims made by the company were not sustainable under law. 8. That the PCIT failed to appreciate that the company had made full disclosure in respect of each of the issues, reference to which had also been made by him in his notice dated 21.03.2023 and the A© had completed the assessment after fully examining the disclosure made in the accounts and replies submitted by the company during the course of assessment proceedings and therefore, order under reference has been passed beyond the powers u/s 263 of the Act in the facts and circumstances of the case.
That PCIT also erred in referring to certain judgments and also the provisions of Explanation 2 to section 263 of the Act without appreciating that same were not applicable in the facts of the case of the Appellant as the AO had fully examined the issues under reference and the assessment order was passed after fully considering the facts and the legal position.
That the order passed by PCIT making general and vague observations is not sustainable under law and therefore, same deserves to be quashed, particularly, for the reason that powers under section 263 cannot be invoked for purpose of making fresh and detailed investigation and pass the order of assessment afresh.
That the PCIT erred in observing that an amount of income of Rs.62.99 crores was required to be offered by the company as per Section 43CA of the Act in the assessment year under reference in respect of transfer of development rights on the portion of land of 29,807.84 sq. mtr. to M/s Spire Techpark Pvt. Ltd. without appreciating that in the facts of the case provisions of section 43CA were not applicable and in any case circle rate of F.Y.2010-11 was applicable since the development rights were transferred as per agreement dated 25.07.2010 read with amendment dated 27.12.2017 12. That the PCIT also erred in observing that adjustment of Rs.55.26 crores made by the company pursuant to change in accounting policy as regard revenue recognition was wrongly allowed in the assessment order without appreciating that the company had bonafide reasons for changing the accounting policy and it was duly entitled to change the same under law and make the necessary adjustment in its books of account and change was not made for any malafide reason or for taking any tax advantage.
That the PCIT also erred in observing that charging of amount of Rs. 14.7 crores as assured payments to customers and payment of Rs.2.09 crores as interest on loan was not called for and was unreasonable without appreciating that the aforesaid payments were in the nature of interest on funds / loans taken by the company which were used for business purpose.
That the PCIT also erred in observing that during the year advances from customer had increased from Rs.62.45 crores to Rs. 138.07 crores and no enquiry in that regard was made by the AO without even mentioning the same in notice issued us 263 of the Act 15. That PCIT also erred in making certain wrong and irrelevant observations in the order and taking a view that in the facts and circumstances of the case the assessment order is erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the Act and setting aside the same with the direction to pass fresh order after conducting proper enquiries and investigations etc. into the claims made by the company.”
The ld. Counsel for the assessee submitted that though the assessee has taken multiple grounds, adjudication of ground no.1 can lead to the disposal of the appeal. He submitted that Pr. CIT has issued notice against non-existent company in as much the assessee company amalgamated with WTC Noida Development Company Pvt. Ltd. based on balance sheet as on 01.04.2018. Hence the ld. Counsel for the assessee submitted that the issue of notice in the name of non-existent company is void ab initio. For this proposition, the ld. Counsel for the assessee relied upon the various case laws, which reads as under:-
i. CIT vs Kaizen Products Pvt. Ltd. (2018) 406 ITR 311 (Del.) ii. Varnika RPG Trust and Ors. Vs CIT (2021) 91 ITR (Trib.) 135 (ITAT Del.) iii. CIT vs Aarcee Holding Pvt. Ltd. G.A. No.1921 of 2014(Calcutta HC) iv. Bbigplas Poly Pvt. Ltd. vs CIT (ITAT Kolkata) v. Tanuj Properties Pvt. Ltd. vs Pr. CIT (ITA No.371/2020 (ITAT Kolkata) vi. Snowhill Agencies Pvt. Ltd. vs CIT (2020) 79 ITR (Trib.) 176 (ITAT [Ahm]) vii. Hiraben Babubhai Patel vs Pr. CIT (ITA No.700/2019) (ITAT Ahmedabad) viii. Tech Mahindra Ltd. vs Pr. CIT (ITA No.7249/2017 (ITAT Mumbai)
We have heard both the parties and perused the records. The Ld. DR could not dispute the proposition that in show cause notice, the Pr.
CIT was aware that the company amalgamated with WTC Noida Development Company Pvt. Ltd based on balance sheet as on 01.042018.
The Revenue has served notice to non-existent Company which is void ab initio and order passed under such name is liable to be quashed. The case laws relied upon by the ld. Counsel for the assessee are germane and support the case of the assessee. We may gainfully refer to the decision of the Hon’ble Delhi High Court in the case of Pr. CIT (Central) vs Kaizen Products (P.) Ltd. in 2017 (8) TMI 36 (Del.) as under:-
“14. In the present case, it is not in dispute that KPPL ceased to exist as a result of the order dated 8th October, 2010 passed by this Court whereby its merger with Ventura Stood approved. Ventura was later renamed as ARSPL. These facts were known to the Assessing Officer in the course of the assessment proceedings. The statement of the Director of KPPL formed part of the assessment record. Consequently, the issuance of the notice dated 23rd March, 2016 by the PCIT under section 263 of the Act and consequential order dated 31st March, 2016 were in respect of a non-existence entity and were clearly void ab initio, as correctly held by the ITAT. This, by itself, was sufficient for the ITAT to set aside the impugned order dated 31st March, 2016.
No. Substantial question of law arises from the impugned order of the ITAT.”
Examining the present case and touchstone of the aforesaid case laws it is amply clear that subsequent to the amalgamation Sundaram I.T. Parks Pvt. Ltd. ceased to exist. Hence, any notice/order passed in its name is liable to be quashed as such. Hence, we quash the order passed u/s 263 on the ground that notice u/s 263 has been issued in the name of non-existent entity.
In the result, the appeal of the assessee stands allowed.
Order pronounced in the open court on 14th September, 2023.