M/s. Focus Portfolio (P) Ltd., Delhi V. ITO, New Delhi

ITA 1794/DEL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7166 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 28-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Validity of assessment; Accommodation entries; Reason to believe
• Section: 142(1); 147; 148; 144; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE : JUDICIAL MEMBER ITA NO. 1794/DEL/2013 U/S 2002-03 FOCUS PORTFOLIO (P) LTD., VS. INCOME-TAX OFFICE R, C/O SH. SUSHIL VERMA, DIRECTOR WARD 11(3), NEW DE LHI. 2386/179, TRI NAGAR, DELHI. PAN: AAACF 0978 K (APPELLANT) ( RESPONDENT) APPELLANT BY : SHRI VED PRAKASH BANSAL CA RESPONDENT : SHRI ANIL KUMAR SAROHA SR. DR DATE OF HEARING : 14/09/2016. DATE OF ORDER : 19/09/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 22.01.2013 PASSED BY THE LD. CIT(APPEALS)-XIII, NEW DELHI IN APPEAL N O. 31/10-11 RELATING TO AY 2002-03. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURN DECLARING INCOME OF RS. 41,020/-. PROCESSING U/S 143(1) WAS COMPLETE D. LATER ON, AO RECEIVED INFORMATION FROM DIT(INV.) THAT THE ASSESSEE COMPAN Y AS INVOLVED IN BOGUS ACCOMMODATION ENTRIES AND DURING THE ASSESSMENT EYA R 2002-03 THE ASSESSEE HAD TAKEN ENTRIES AMOUNTING TO RS. 5,55,120/- FROM M/S TRANSPAN FINANCIAL SERVICES LTD. AFTER OBTAINING APPROVAL FROM COMPETE NT AUTHORITY, NOTICE U/S 2 148 WAS ISSUED ON 30.3.2009. THE AO HAS MENTIONED I N THE ASSESSMENT ORDER THAT VARIOUS NOTICES U/S 142(1) WERE ISSUED BUT TH ERE WAS NO COMPLIANCE AND FINALLY ASSESSMENT WAS COMPLETED ON AS TOTAL INCOME OF RS. 5,96,140/-. 3. LD. CIT(A) CONFIRMED THE ACTION OF THE AO. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN UPHOLDING THE VALIDITY OF ORDE R DATED 17.12.2009 PASSED U/S 144 READ WITH SECTION 147 OF 1. T. ACT, 1961, WITHOUT APPRECIATING THAT THE ORDER OF ASSESSING OFFICER WA S BEYOND JURISDICTION, BAD IN LAW AND VOID-AB-INITIO, 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN AFFIRMING THE VALIDITY OF THE ASSESSMENT ORDER WITHOUT APPRECIATING: A) THAT THE ASSESSMENT HAS BEEN COMPLETED WITHOUT I SSUANCE AND SERVICE OF VALID NOTICE U/S 148 OF THE IT ACT, 1961. B) THAT THE ASSESSMENT HAS BEEN COMPLETED IN THE NA ME OF NON-EXISTENT COMPANY. 3. THAT THE LEARNED CIT (A) HAS ERRED IN AFFIRMING THE VALIDITY OF ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT THE NOTICE ISSUED U/S 148 IS INVALID, ILLEGAL, VOID-AB-INITIO, SINCE CONDITIONS PRECEDENT FOR ASSWNING JURISDICTION U/S 147 HAS NOT BEEN SATI SFIED ON THE GROUND THAT: A) THE PROCEEDINGS HAVE BEEN INITIATED AFTER LAPSE OF FOUR YEARS AND THERE IS NOT EVEN AN ALLEGATION THAT THE APPELLANT COMPANY HAS NOT DISCLOSED FULL AND TRUE ALL MATERIA L FACTS NECESSARY FOR ASSESSMENT. B) THE AO HAS FAILED IN ITS DUTIES, HAVING RECORDED THE SATISFACTION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND SUCH ESCAPEMENT HAS OCCURRED BY REAS ON OF FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FU LLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. 3 C) THE REOPENING OF ASSESSMENT BY THE AO IS BASED O N IRRELEVANT MATERIAL/EVIDENCE. D) THERE WAS NO REASON TO BELIEVE FOR ANY ESCAPEMEN T OF INCOME OF RS.5,55,1201- 4. THAT THE LEARNED CIT (A) HAS ERRED IN AFFIRMING THE ADDITION OF RS.5,55 .120/- MADE BY THE AO ON ACCOUNT OF ALLEGED ACCOMMODATION ENTRY RECEIVED FROM M/S TRANSPAN FINANCIAL SERVICES LIMITED U/S '68 OF THE I. T. ACT, 1961. 5. THAT THE LEARNED CIT (A) HAS ERRED IN AFFIRMING THAT THE SUFFICIENT OPPORTUNITIES WERE GIVEN TO THE APPELLAN T BEFORE PASSING THE REASSESSMENT ORDER BY THE AO. 6. THAT THE APPELLANT, CRAVES, LEAVE TO ADD/ALTER/D ELETE/AMEND ANY GROUND(S) OF APPEAL BEFORE OR AT THE TIME OF HEARIN G. 4. AT THE OUTSET LD. COUNSEL SUBMITTED THAT THE ORD ER PASSED BY THE AO IS WITHOUT JURISDICTION. IN THIS REGARD HE REFERRED TO PAGE 32 OF THE PB WHEREIN NOTIFICATION NO. SES/560(5)/55/TS060/291/2155 DATED 5.10.04 OF REGISTRAR OF COMPANIES IS CONTAINED, WHERE IT IS NOTIFIED THA T PURSUANT TO SUB-SECTION (5) OF SECTION 560 OF THE COMPANIES ACT, 1956, THE NAME OF COMPANY FOCUS PORTFOLIO PRIVATE LIMITED HAS BEEN STRUCK OFF FROM THE REGISTER AND THE SAID COMPANY WAS DISSOLVED. LD. COUNSEL REFERRED TO PAGE 23 OF THAT PB, WHEREIN THE NOTICE ISSUED BY AO U/S 148 DATED 30.3.2009 IS CONTAINED AND POINTED OUT THAT THIS NOTICE HAS BEEN ISSUED ON DEFUNCT COMPANY AND, THEREFORE, THE ASSESSMENT ORDER IS VOID AB INITIO. IN SUPPORT OF H IS CONTENTION, LD. COUNSEL RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SPICE INFOTAINMENT LTD. VS. CIT (ITA NOS. 475 & 476 OF 20 11 ORDER DATED 3.8.2011). 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS ARE NOT DISPUTED. ADMITTEDLY THE 4 NOTICE U/S 148 HAS BEEN ISSUED AFTER THE NAME OF TH E COMPANY WAS STRUCK OFF FROM THE REGISTER OF REGISTRAR OF COMPANIES. WE FIN D THAT HONBLE DELHI HIGH COURT IN THE CASE OF SPICE INFOTAINMENT LTD. ( SUPRA) IN PARA 3 & 4 OF ITS ORDER HAS OBSERVED AS UNDER: 3. IN THIS BACKDROP, THE QUESTION THAT ARISES FOR CONSIDERATION IS AS TO WHETHER THE ASSESSMENT IN TH E NAME OF A COMPANY WHICH HAD BEEN AMALGAMATED AND HAD BEEN DIS SOLVED WITH THE SAID AMALGAMATING COMPANY WILL BE NULL AND VOID OR WHETHER FRAMING OF ASSESSMENT IN THE NAME OF SUCH A COMPANY IS A MERE PROCEDURAL DEFECT WHICH CAN BE CURED. THE APPEALS WERE, THUS, FINALLY ADMITTED AND HEARD ON THE FOLLO WING QUESTIONS OF LAW: '(I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL ERRED IN LA W IN HOLDING THAT THE ACTION OF THE AO IN FRAMING ASSESSMENT IN THE NAME OF 'SPICE CORP. LTD.', AFTER THE SAID ENTITY STOOD DIS SOLVED CONSEQUENT UPON ITS AMALGAMATION WITH MCORP (P) LTD . W.E.F 1ST JULY, 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 S. 292B OF THE ACT THE ASSESSMENT, HA VING IN SUBSTANCE AND EFFECT, BEEN FRAMED ON THE AMALGAMATE D COMPANY WHICH COULD NOT BE REGARDED AS NULL AND VOI D ?' 4. THE RATIONALE GIVEN BY THE TRIBUNAL, GIVING IT TO BE A MERE PROCEDURAL DEFECT IS SUMMED UP AS UNDER: (I) SPICE CORPORATION LTD. (THE AMALGAMATING COMPANY) WAS AN INCOME-TAX A SSESSEE IN THE STATUS OF A COMPANY INCORPORATED UNDER THE P ROVISIONS OF COMPANIES ACT, 1956. (II) THE AMALGAMATING COMPANY WAS IN EXISTENCE DURING THE RELEVANT ASST. YRS. 2002-03 AN D 200304. (III) THE-RETURNS OF INCOME FOR THESE ASSESSMENT YE ARS WERE FILED ON 30TH NOV., 2002 AND ON 30TH OCT., 2003 RESPECTIV ELY BY M/S SPICE. (IV) THE SCHEME OF AMALGAMATING WAS SANCTION ED MUCH SUBSEQUENTLY ON 11TH FEB., 2004 BY THE HIGH COURT. (V) THE RETURN FILED BY M/S SPICE WAS SELECTED FOR SCRUTINY AND NOTICES WERE ISSUED. PURSUANT THERETO, THE AMALGAMATED COMP ANY I.E. THE APPELLANT APPEARED AND PARTICIPATED IN THE PROC EEDINGS. EVEN THE ASSESSMENT ORDER WERE CHALLENGED BY THE APPELLANT/AMALGAMATED COMPANY. THUS, THE APPELLANT ACCEPTED 5 THAT THE ASSESSMENT PROCEEDINGS IN RESPECT OF THE A SSESSMENT OF SPICE FOR THE PERIOD PRIOR TO ITS AMALGAMATION ARE BEING TAKEN UP AGAINST THE APPELLANT AND IT IS THE APPELLANT WH ICH FELT AGGRIEVED OF THE ASSESSMENT ORDER AND PREFERRED APP EAL. THE ORDER WAS THUS IN SUBSTANCE AND IN EFFECT, AGAINST THE APPELLANT/AMALGAMATED COM ANY'- THE MERE OMISSION O N THE PART OF THE AO TO MENTION THE NAME OF THE APPELLANT/AMALGAMATED COMPANY' IN PLACE OF M/S SPI CE WAS, THEREFORE A PROCEDURAL DEFECT COVERED BY THE PROVIS IONS OF S. 292B OF THE ACT. 6. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF SPICE INFOTAINMENT LTD. (SUPRA), THE ASSESS MENT ORDER IS HELD TO BE BAD IN LAW AND, ACCORDINGLY, QUASHED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCEMENT IN OPEN COURT ON 19/09/2016. SD/- SD/- (SUCHITRA KAMBLE) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19/09/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.