Edelweiss Broking Ltd. ( on behalf of Amalgamating Company Edelweiss Financial Advisors Ltd.), Ahmedabad V. ACIT, Circle-1(3), , Ahmedabad

ITA 2226/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1803 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 02-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R R MAKWANA
• Keywords: Procedural lapse; Scheme of amalgamation
• Section: 271(1)(c); 143(3); 92CA; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO. 2226/AHD/2018 (ASSESSMENT YEAR: 2011-12) EDELWEISS BROKING LTD. [(ON BEHALF OF AMALGAMATING COMPANY EDEL WEISS FINANCIAL ADVISORS LTD.)] AHMEDABAD VS. ACIT CIRCLE-1(3), AHMEDABAD PAN NO. AABCE9421H/AABCA2916K ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI VARTIK CHOKSHI, AR RESPONDENT BY : SHRI R. R. MAKWANA , SR. DR DATE OF HEARING 08.01.2021 DATE OF PRONOUNCEMENT 02.03.2021 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER DATED 27.08.2018 PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS)-10, AHMEDABAD ARISING OUT OF THE PENALTY ORDER DATED 27.03.2017 PASSED BY THE ACIT, RANGE-1(3), AHMEDABA D UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) FOR ASSESSMENT YEAR 2011-12. 2. THE MATTER RELATES TO THE PENALTY ORDER DATED 27 .08.2018 PASSED BY THE LD. CIT(A) CONFIRMING THE ORDER PASSED BY THE L D. ACIT, RANGE- ITA NO.2226/AHD/2018 EDELWEISS BROKING LTD. VS. ACIT ASST.YEAR 2011-12 - 2 - 1(3), AHMEDABAD DATED 27.03.2017 UNDER SECTION 271( 1)(C) OF THE ACT, LEVYING PENALTY OF RS. 17,86,440/-. 3. THE BRIEF FACTS LEADING TO THE CASE IS THIS THE M/S. EDELWEISS FINANCIAL ADVISORS LTD. HAVING PAN NO. AABCA2916K I N SHORT EFAL HAS BEEN AMALGAMATED WITH EDELWEISS BROKING LIMITED HAVING PAN NO. AABCE9421H IN SHORT EBL BY AND UNDER THE ORDER PASSED BY THE HONBLE HIGH COURT AT GUJARAT DATED 17.10.20 14 WITH EFFECT FROM 01.10.2013. THE SAID FACT OF AMALGAMATION WAS BROU GHT TO THE NOTICE OF THE REVENUE ON 16.03.2015 BY THE APPELLANT WITHOUT CONSIDERATION OF WHICH THE LD. AO PASSED THE ORDER OF PENALTY UNDER SECTION 271(1)(C) 27.03.2017 IMPOSING PENALTY OF RS. 17,86,440/- WHIC H WAS, IN TURN, CONFIRMED BY THE LD. CIT(A). 4. THE CRUX OF THE CASE MADE OUT BY THE APPELLANT A ND THE SUBMISSION MADE BY THE LD. AR ON THE PRELIMINARY ISSUE OF MAIN TAINABILITY IS THIS THAT ONE THE COMPANY IS AMALGAMATED WITH ANOTHER IT LOSES ITS ORIGINAL IDENTITY AND PROCEEDING CANNOT BE CONTINUED IN THE EARLIER NAME RATHER IT IS THE SETTLED PRINCIPLE OF LAW THAT THE PROCEEDING HAS TO CONTINUE IN THE NAME OF THE AMALGAMATED COMPANY AND ORDER CAN ONLY BE PASSED IN THE NEW NAME AS EDELWEISS BROKING LIMITED, THE APPELLAN T COMPANY BEFORE US. IN SUPPORT OF THE CONTENTION MADE BY THE LD. A R, HE HAS RELIED UPON THE JUDGMENT PASSED BY THE COORDINATE BENCH IN THE MATTER OF INTAS LIFESCIENCES VS. ACIT IN ITA NOS. 677 & 678/AHD/201 9 FOR A.YS. 2013- 14 & 2014-15. HE HAS FURTHER RELIED UPON THE JUDGM ENT PASSED BY THE ITA NO.2226/AHD/2018 EDELWEISS BROKING LTD. VS. ACIT ASST.YEAR 2011-12 - 3 - HONBLE SUPREME COURT IN THE CASE OF PCIT VS. MARUT I SUZUKI INDIA LIMITED REPORTED IN 416 ITR 613. 5. WE HAVE HEARD THE RESPECTIVE PARTIES AND WE HAVE ALSO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. 6. IT APPEARS THAT THE FACT OF AMALGAMATION OF THE EARLIER COMPANY NAMELY EDELWEISS FINANCIAL ADVISORS LIMITED (EFAL) WITH THE NEW COMPANY NAMELY EDELWEISS BROKING LIMITED (EBL) BY A ND UNDER THE ORDER DATED 17.10.2014 PASSED BY THE HONBLE GUJARA T HIGH COURT WITH EFFECT FROM 01.10.2013, THE AMALGAMATING COMPANY I. E. EFAL STOOD DISSOLVED FROM THE DATE ON WHICH THAT AMALGAMATION/ TRANSFER TOOK EFFECT AND, THUS, CEASED TO EXIST IN THE EYES OF LAW, FACT OF WHICH HAS BEEN MADE KNOWN TO THE REVENUE AS THE SAID FACT IS REFLECTING AT PARAGRAPH 2.2 AT PAGE OF THE APPELLATE ORDER IMPUGNED BEFORE US. TH E APPELLANT, AS IT FURTHER APPEARS FROM THE ORDER IMPUGNED, VEHEMENTLY MADE OBJECTION IN REGARD TO THE PENALTY PROCEEDING INITIATED AND CONT INUED BY THE REVENUE IN THE NAME OF THE ERSTWHILE COMPANY. THE AO HAS NO J URISDICTION TO LEVY PENALTY AND/OR TO PASS ORDER IN THE HANDS OF EFAL A S IT HAS BECOME A NON-EXISTENT ENTITY. AS SUBMITTED BY THE LD. AR TH AT THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT ADMITTEDLY ISSU ED UPON THE DISSOLVED COMPANY WHICH IS NEITHER PERMISSIBLE IN THE EYES OF LAW. 7. IN FACT, THE LD. DR HAS FAILED TO DRAW OUR ATTEN TION TO ANY PROVISION UNDER THE INCOME TAX ACT, SUPPORTING SUCH ISSUANCE OR ORDERS ON THE NON-EXISTENT ENTITY. IN FACT, THE ASSESSMEN T PROCEEDINGS FOR THE ITA NO.2226/AHD/2018 EDELWEISS BROKING LTD. VS. ACIT ASST.YEAR 2011-12 - 4 - ASSESSMENT YEAR 2010-11 TO 2013-14 HAVE ALSO BEEN C ONDUCTED BY THE CONCERNED AO IN THE HANDS OF THE THEN AMALGAMATED C OMPANY I.E. EFAL AFTER CONSIDERING INCOME AND EXPENSES OF AMALGAMATI NG COMPANY EDELWEISS STOCK BROKING LTD. (ESBL) IN VIEW OF MERG ER OF EDELWEISS STOCK BROKING LTD. (ESBL) INTO EDELWEISS FINANCIAL ADVISORS LTD. (EFAL). SIMILARLY IN VIEW OF MERGER EFAL INTO EBL WITH EFFECT FROM 01.10.2013 I.E. THE POINTED DATE OF EFFECT OF MERGE R, THE PENALTY PROCEEDING UNDER SECTION 271(1)(C) MUST HAVE BEEN C ONTINUED ONLY IN THE HANDS OF THE AMALGAMATED COMPANY I.E. EDELWEISS BRO KING LIMITED AS EDELWEISS FINANCIAL ADVISORS LIMITED BECAME A NON-E XISTENT COMPANY FROM THE DATE AS ENVISAGED UNDER THE SCHEME OF AMA LGAMATION APPROVED BY THE HONBLE HIGH COURT OF GUJARAT ON 01.10.2013. 8. IN THIS REGARD, WE HAVE ALSO CONSIDERED THE JUDG MENT PASSED BY THE COORDINATE BENCH IN THE MATTER OF INTAS LIFESCIENCE S VS. ACIT BEING ITA NO. 677&678/AHD/2019 FOR A.Y. 2013-14 & 2014-15. I T FURTHER APPEARS THAT THE JUDICIAL PRONOUNCEMENT RELIED UPON BY THE LD. AR PASSED BY THE HONBLE APEX COURT IN THE CASE OF PCIT VS. MARUTI S UZUKI INDIA LIMITED HAS ALSO BEEN TAKEN INTO CONSIDERATION WHILE DECIDI NG THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE SAID CASE OF MARUTI SUZUKI INDIA LIMITED, ON 29.01.2013 A SCHEME FOR AMALGAMATION OF SPIL AND MS IL WAS APPROVED BY THE HONBLE HIGH COURT WITH EFFECT FROM 01.04.20 12 IN TERMS OF WHICH ALL LIABILITIES AND DUTIES OF THE TRANSFEROR COMPANY STOOD TRANSFERRED TO THE TRANSFEREE COMPANY AND THE TRANS FEROR COMPANY STOOD DISSOLVED WITHOUT WINDING UP. THE SCHEME STIPULATE D THAT THE ORDER OF AMALGAMATION WOULD NOT BE CONSTRUED AS AN ORDER GRA NTED EXEMPTION ITA NO.2226/AHD/2018 EDELWEISS BROKING LTD. VS. ACIT ASST.YEAR 2011-12 - 5 - FROM THE PAYMENT OF STAMP DUTY OR TAXES OR ANY OTHE R CHARGES, IF ANY, PAYABLE IN ACCORDANCE WITH LAW. THE MSIL PARTICIPA TED IN THE ASSESSMENT PROCEEDING OF ERSTWHILE AMALGAMATING ENT ITY I.E. SPIL THROUGH ITS AUTHORIZED REPRESENTATIVE. BUT THE FIN AL ASSESSMENT ORDER PASSED ON 31.10.2016 WAS IN THE NAME OF THE ERSTWHI LE ENTITY I.E. SPIL WHICH ALREADY AMALGAMATED WITH MSIL. THE OBJECTION OF THE ASSESSEE THAT ASSESSMENT ORDER PASSED IN THE NAME OF THE NON -EXISTENT COMPANY IS VOID AB INITIO HAS BEEN ACCEPTED BY THE LD. TRIBUNA L WHICH WAS UPHELD BY THE HONBLE HIGH COURT AND FINALLY BY THE HONBL E APEX COURT. WHILE HOLDING THE SAID ASSESSMENT ORDER A NULLITY A S THE SAME WAS IN THE NAME OF NON-EXISTENT COMPANY PER SE THE HONBLE APE X COURT HAS BEEN PLEASED TO OBSERVE AS FOLLOWS:- '33. IN THE PRESENT CASE, DESPITE THE FACT THAT TH E 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 ISSU ED 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 T HE APPROVED SCHEME OF AMALGAMATION. PARTICIPATION IN THE PROCEEDINGS BY T HE 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 ENFOTA INMENT (SUPRA) ON 2 NOVEMBER 2017. THE DECISION IN SPICE ENFOTAINMENT HAS BEEN F OLLOWED IN THE CASE OF THE RESPONDENT WHILE DISMISSING THE SPECIAL LEAVE PETIT ION FOR AY 2011-2012. IN DOING SO, THIS COURT HAS RELIED ON THE DECISION IN SPICE ENFOTAINMENT (SUPRA). 34. WE FIND NO REASON TO TAKE A DIFFERENT VIEW. THE RE 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 RESPOND ENT FOR AY 2011- 12 MUST, IN OUR VIEW BE ADOPTED IN RESPECT OF THE PRESENT APPEAL WH ICH RELATES TO AY 2012-13. NOT DOING SO WILL ONLY RESULT IN UNCERTAINTY AND DISPLA CEMENT OF SETTLED EXPECTATIONS. THERE IS A SIGNIFICANT VALUE WHICH MUST ATTACH TO O BSERVING THE REQUIREMENT OF CONSISTENCY AND CERTAINTY. INDIVIDUAL AFFAIRS ARE C ONDUCTED AND BUSINESS DECISIONS ARE MADE IN THE EXPECTATION OF CONSISTENCY, UNIFORM ITY AND CERTAINTY. TO DETRACT FROM THOSE PRINCIPLES IS NEITHER EXPEDIENT NOR DESIRABLE .' ITA NO.2226/AHD/2018 EDELWEISS BROKING LTD. VS. ACIT ASST.YEAR 2011-12 - 6 - WE HAVE FURTHER CAREFULLY CONSIDERED THE JUDGMENT PASSED BY THE COORDINATE BENCH WHEREIN IT APPEARS THAT THE JUDGME NT PASSED BY THE HONBLE APEX COURT IN THE CASE OF PCIT VS. MARUTI S UZUKI INDIA LIMITED AND THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. DIMENSION APPARELS P. LTD. ON THE IDENTICAL ISSUE WERE TAKEN INTO CONSIDERATION. THE RELEVANT PORTION WHEREOF IS AS FOLLOWS:- IN THE CASE OF EMERALD COMPANY LTD., ITAT KOLKATT A BENCH HAS ALSO DEALT WITH SIMILAR SITUATION AFTER MAKING REFERENCE TO JUDGMEN T OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIMENSION APPARELS P.LTD., 3 70 ITR 288 (DEL) AS WELL AS DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF SPICE ENTERTAINMENT LTD. THE ITAT HAS ALSO MADE REFERENCE TO THE DECISION OF HON 'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. INTEL TECHNOLOGY LTD. P. LTD., 380 ITR 272 (KAR.). THE TRIBUNAL HAS HELD THAT ACTION UNDER SECTION 263 IS A JURISDI CTIONAL ACTION AGAINST AN ASSESSEE. IN THE CASE OF A COMPANY, THE LD. COMMISSIONER WAS REQUIRED TO ISSUE A SHOW CAUSE NOTICE AGAINST A JURIDICAL PERSON CONTEMPLATED IN S ECTION 2(31) OF THE INCOME TAX ACT AND IF A JURIDICAL PERSON CEASES TO EXIST THEN IT W OULD NOT BE CONSTRUED AS A PERSON WITHIN THE MEANING OF SECTION 2(31) AGAINST WHOM AN Y ACTION CAN BE TAKEN. THE COMMISSIONER WOULD NOT ASSUME PROPER JURISDICTION A ND SUCH TYPE OF DEFECT WOULD NOT BE CURED WITH HELP OF SECTION 292B OF THE ACT, BECAUSE IT IS NOT A PROCEDURAL IRREGULARITY WHICH COULD BE CURED. WE ALSO NOTE THA T THIS TRIBUNAL IN THE CASE OF SNOWHILL AGENCIES PVT. LTD. VS. PR. CIT BEARING ITA NO. 1775/AHD/2019 VIDE ORDER DATED 21-1-2020 INVOLVING IDENTICAL FACTS AND CIRCU MSTANCES HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN VIEW OF ABOVE, WE NOTE T HAT THE ASSESSMENT FRAMED UNDER SECTION 143(3) R.W.S. 92CA OF THE ACT IS NOT SUSTAI NABLE. HENCE THE ADDITIONAL GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. HENCE, RESPECTFULLY RELYING UPON THE RATIO LAID DO WN BY THE HONBLE APEX COURT AS DISCUSSED ABOVE AND THE JUDGM ENT PASSED BY THE COORDINATE BENCH FOLLOWING SUCH RATIO WE FIND THAT THE ORDER OF PENALTY PASSED BY THE REVENUE ON A NON-EXISTING COMPANY IS NOT SUSTAINABLE IN THE EYES OF LAW. THE SAME IS VOID AB INITIO AND LI ABLE TO BE QUASHED. HENCE, WE QUASH THE ENTIRE PROCEEDING. THE PENALTY IS, THEREFORE, IS HEREBY DELETED. SINCE LEGAL ISSUE ON THE POINT OF MAINTAINABILITY OF THE PENALTY PROCEEDING HAS BEEN DECIDING IN FAVOUR OF T HE ASSESSEE WE REFRAIN ITA NO.2226/AHD/2018 EDELWEISS BROKING LTD. VS. ACIT ASST.YEAR 2011-12 - 7 - FROM DECIDING THE MATTER ON MERIT. THE OTHER GROUN DS ARE THEREFORE DISMISSED AS INFRUCTUOUS. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 02 / 0 3 /20 2 1 SD/- SD/- (WASEEM AHMED) (MS. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 02/03/2021 TANMAY, SR. PS TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)- 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 15.01.2021 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.01.2021 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 02.03.2021 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .03.2021 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S .03.2021 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 03.03.2021 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER