Emerald Company Ltd, Kolkata V. The ITO, Wd-11(1), Kolkata, Kolkata

ITA 428/KOL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5148 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-04-2015
• Court: TRIBUNAL
• Department Lawyers: S SRIV ASTAVA LD
• Assessee Lawyers: P R KOTHARI FCA LD
• Keywords: Period of limitation; Validity of assessment; Procedural lapse; Reassessment proceedings
• Section: 143(3); 263; 63

Judgement Text

ITA NO. 428/KOL/2015-C-AM M/S. EMERALD COMPANY LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI M.BALAGANESH, ACCOUNTANT MEMBER, AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 428/KOL/2015 A.Y: 2010-11 M/S. EMERALD COMPANY LTD VS. I.T.O WARD 11(1 ), KOLKATA PAN: AADCE 2623D (APPELLANT) (RES PONDENT) FOR THE APPELLANT: SHRI P.R KOTHARI, FCA, L D.AR FOR THE RESPONDENT: SHRI S. SRIV ASTAVA, LD.CIT/DR DATE OF HEARING: 08-01-2016 DATE OF PRONOUNCEMENT: 13 -01 -2016 ORDER SHRI M.BALAGANESH, AM 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 I NCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AGAINST THE ORDER OF ASSESSMENT FR AMED BY THE LEARNED AO U/S 143(3) OF THE ACT. 2. 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 ORD ER U/S. 263 OF THE ACT. 2.1 THE GROUND NO.1 RAISED BY THE ASSESSEE IS AS BE LOW:- 1. A) FOR THAT THE IMPUGNED ORDER OF LD. COMMISSIONE R 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 L AW. 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 HONBLE ITA NO. 428/KOL/2015-C-AM M/S. EMERALD COMPANY LTD 2 CALCUTTA HIGH COURT DATED 16-05-2014. THE LD.AR AL SO PLACED ON RECORD THE PAPER BOOK WHEREIN AT PAGE 53 OF THE PAPER BOOK, THE FACT OF T HIS MERGER HAS BEEN DULY INFORMED TO THE LD.AO VIDE LETTER DATED 24-11-2014. ADMITTEDLY, SH OW CAUSE NOTICE WAS ISSUED U/S. 263 OF THE ACT BY THE LD. CIT ON 13-01-2015 AND SECTION 2 63 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 T HE 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 AS SESSEE HAS ALSO CO-OPERATED WITH THE PROCEEDINGS AND HENCE CANNOT CLAIM THIS ISSUE BEFOR E 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 BEFO RE US. WE FIND THAT M/S. THE BOND COMPANY LIMITED HAS BEEN MERGED WITH M/S. EMERALD C OMPANY LTD ( THE ASSESSEE HEREIN) VIDE ORDER OF CALCUTTA HIGH COURT ON 16-05-2014 AN D PURSUANT TO THE MERGER, M/S. THE BOND COMPANY LTD HAD LOST ITS IDENTITY AND EXISTENCE. HE NCE, 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 SPECIFICALL Y BROUGHT TO THE NOTICE OF THE LD. CIT THAT M/S. THE BOND COMPANY LTD WAS MERGED WITH THE ASSES SEE 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 FRES H SHOW CAUSE NOTICE IN THE NAME OF THE ASSESSEE HEREIN AND PROCEEDED TO PASS THE FRESH O RDER IN THE NAME OF THE ASSESSEE. PURSUANT TO THE MERGER, THE AMALGAMATING ( M/S. THE BOND COMPA NY LIMITED) LOSES ITS EXISTENCE IN THE EYES OF LAW. WE FIND THAT THE SECTION AS RELIED O N 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 A SSESSMENT OR REASSESSMENT PROCEEDINGS AND THE SAME CANNOT BE MADE APPLICABLE FOR REVISION AL PROCEEDINGS AS CONTEMPLATED U/S. 263 OF THE ACT. MOREOVER, THE PROVISIONS OF SECTION 292 BB WOULD NOT COME TO THE RESCUE OF THE ITA NO. 428/KOL/2015-C-AM M/S. EMERALD COMPANY LTD 3 REVENUE WHEN THERE IS A BASIC FAULT ON THE ASSUMPT ION OF JURISDICTION ITSELF ON A NON-EXISTENT ENTITY BY THE LD.CIT BY ISSUING SHOW CAUSE AND PASS ING 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 FOL LOWING DECISIONS:- HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DI MENSION 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 COUR T, AFTER DISCUSSING THE LAW DECLARED BY THE SUPREME COURT IN SARASWATI INDUSTRI AL SYNDICATE LTD. (SUPRA) STATED THAT: '9. THE COURT REFERRED TO ITS EARLIER JUDGMENT IN G ENERAL RADIO AND APPLIANCES CO. LTD. V. MA. KHADER [1986]60 COMP CAS E 1013. IN VIEW OF THE AFORESAID CLINCHING POSITION IN LAW, IT IS DIFFICUL T 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. 10. SECTION 481 OF THE COMPANIES ACT PROVIDES FOR D ISSOLUTION OF THE COMPANY. THE COMPANY JUDGE IN THE HIGH COURT CAN ORDER DISSO LUTION OF A COMPANY ON THE GROUNDS STATED THEREIN. THE EFFECT OF THE DISSO LUTION IS THAT THE COMPANY NO MORE SURVIVES. THE DISSOLUTION PUTS AN END TO THE E XISTENCE OF THE COMPANY. IT IS HELD IN AIH SMITH (PLANT HIRE) LTD. V. D.L. MAIN WARING (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 ANOTH ER INSURED COMPANY WAS HELD NOT TO BE ENTITLED TO MAINTAIN AN ACTION IN TH E NAME OF THE COMPANY AFTER THE LATTER HAD BEEN DISSOLVED. 11. AFTER THE SANCTION OF THE SCHEME ON 11 TH APRIL, 2004, THE SPICE CEASES TO EXIT W.E.F 1 ST JULY, 2003. EVEN IF SPICE HAD FILED THE RETURNS, IT BECAME INCUMBENT UPON THE INCOME TAX AUTHORITIES TO SUBSTI TUTE THE SUCCESSOR IN PLACE OF THE SAID 'DEAD PERSON'. WHEN NOTICE UNDER SECTIO N 143 (2) WAS SENT, THE APPELLANT/AMALGAMATED COMPANY APPEARED AND BROUGHT THIS FACT TO THE KNOWLEDGE OF THE AO. HE, HOWEVER, DID NOT SUBSTITUT E 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 A S PROCEDURAL DEFECT. MERE PARTICIPATION BY THE APPELLANT WOULD BE OF NO EFFEC T AS THERE IS NO ESTOPPEL AGAINST LAW. 16. THE AUTHORITY OF THE ABOVE PRECEDENT BINDS US; WE SEE NO REASON TO DIFFER FROM THE LOGIC AND REASONING IN SPICE ENTERTAINMENT LTD. (SUPRA). ITA NO. 428/KOL/2015-C-AM M/S. EMERALD COMPANY LTD 4 19. THE QUESTION OF WHETHER AN ASSESSMENT UPON AN AMALGAMATED COMPANY IS A MISTAKE WITHIN THE MEANING OF SECTION 2928 WAS RA ISED 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 MA DE AGAINST AMALGAMATED COMPANY IN RESPECT OF ASSESSMENT OF INCOME OF AMALG AMATING COMPANY FOR THE PERIOD PRIOR TO AMALGAMATION AND MERE OMISSION TO M ENTION THE NAME OF AMALGAMATED COMPANY ALONGWITH THE NAME OF AMALGAMAT ING COMPANY IN THE BODY OF ASSESSMENT AGAINST THE ITEM 'NAME OF THE AS SESSEE' IS NOT FATAL TO THE VALIDITY OF ASSESSMENT BUT IS A PROCEDURAL DEFECT C OVERED BY SECTION 2928 OF THE ACT.' (EMPHASIS SUPPLIED) 20. THIS COURT REJECTED THIS ARGUMENT, HOLDING THAT 'IT [BECOMES] INCUMBENT UPON THE INCOME TAX AUTHORI TIES TO SUBSTITUTE THE SUCCESSOR IN PLACE OF THE SAID 'DEAD PERSON'. S UCH A DEFECT CANNOT BE TREATED AS PROCEDURAL DEFECT... ONCE IT IS FOUND TH AT ASSESSMENT IS FRAMED IN THE NAME OF NON-EXISTING ENTITY IT DOES N OT REMAIN A PROCEDURAL IRREGULARITY OF THE NATURE WHICH COULD B E CURED BY INVOKING THE PROVISIONS OF SECTION 292B OF THE ACT.' (EMPHAS IS SUPPLIED) 21. IN SPICE ENTERTAINMENT LTD. (SUPRA) THE REASON FOR THE INAPPLICABILITY OF SECTION 292-8 WAS ADDITIONALLY PREMISED ON THE DECI SION OF THE PUNJAB & HARYANA HIGH COURT IN CIT V. NORTON MOTOR, [2005] 2 75 ITR 595/146 TAXMAN 701, THAT WHILE SECTION 2928 CAN CURE TECHNI CAL DEFECTS, IT CANNOT CURE A 'JURISDICTIONAL DEFECT IN THE ASSESSMENT NOT ICE. 'LN SPICE ENTERTAINMENT LTD. (SUPRA), THEREFORE, THIS COURT E XPRESSLY CLASSIFIED 'THE FRAMING OF ASSESSMENT AGAINST A NON-EXISTING ENTITY /PERSON' AS A JURISDICTIONAL DEFECT. THIS HAS BEEN A CONSISTENT P OSITION. 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 PERS ON. 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 COUL D NOT BE VALID.' (EMPHASIS SUPPLIED) 22. ON THE LAST CONTENTION, I.E WITH RESPECT TO P ARTICIPATION BY THE PREVIOUS ASSESSEE, I.E THE AMALGAMATING COMPANY (WHICH CEASE S TO EXIST), AGAIN SPICE ENTERTAINMENT LTD. (SUPRA) IS CATEGORICAL; IT WAS R ULED ON THAT OCCASION THAT SUCH PARTICIPATION BY THE AMALGAMATED COMPANY IN PR OCEEDINGS DID NOT CURE THE DEFECT, BECAUSE 'THERE CAN BE NO ESTOPPEL IN L AW. ' VIVED MARKETING SERVICING (P.) LTD. (SUPRA) HAD ALSO REACHED THE SA ME CONCLUSION. HONBLE 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 ITA NO. 428/KOL/2015-C-AM M/S. EMERALD COMPANY LTD 5 (SUPRA) WHEREIN THE DELHI HIGH COURT HAS, AFTER CON SIDERING 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 JURISDICTI ONAL DEFECT AND AS THERE CANNOT BE ANY ASSESSMENT AGAINST THE DEAD PERSON. 7. IN THE PRESENT CASE ALSO, THE PROCEEDINGS HAD BEEN INITIATED AGAINST A NON-EXISTING COMPANY/SSS LIMITED EVEN AFTER THE AMA LGAMATION 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 DELH I HIGH COURT. 8. ACCORDINGLY, FOR THE REASONS GIVEN IN THE JUDGM ENT OF THE DELHI HIGH COURT IN THE CASE OF SPICE INFOTAINMENT LTD. (SUPRA ), THESE APPEALS ARE DISMISSED AND WE DECIDE THE SUBSTANTIAL QUESTIONS O F 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 6 2 TAXMANN.COM 340, WHEREIN IT HAS BEEN HELD :- 17. THE NEXT ISSUE IS WITH REGARD TO APPLICABILIT Y OF PROVISIONS OF SECTION 292BB OF THE ACT. IT IS CLEARLY - M THE STATUTORY P ROVISIONS THAT THESE PROVISIONS ONLY INSULATE THE AO FROM THE PROOF OF S ERVICE 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 NO TICE 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 D IFFERENT ASPECTS AND WHAT IS COVERED BY SECTION 292BB IS ONLY 'SERVICE OF NOT ICE'. ON-ISSUE OF NOTICE U/S. 143(2) WITHIN THE PERIOD OF LIMITATION WOULD N OT 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) R EFERRED 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 INVA LID FOR THE REASON THAT NOTICE U/S. 143(2) HAD NOT BEEN ISSUED AND SERVED W ITHIN THE TIME LIMIT PRESCRIBED BY THOSE PROVISIONS. ACCORDINGLY, THE OR DER OF ASSESSMENT IS ANNULLED. IN VIEW OF THE CONCLUSIONS ON THE PRELIMI NARY ISSUE RAISED IN THE CROSS OBJECTION, WE ARE OF THE VIEW THAT THERE IS N ECESSITY TO GO INTO THE MERITS ON THE ISSUES RAISED BY THE REVENUE IN ITS A PPEAL. 18. ACCORDINGLY, THE APPEAL BY THE REVENUE IS DIS MISSED, WHILE THE CROSS OBJECTION BY THE ASSESSEE IS ALLOWED. ITA NO. 428/KOL/2015-C-AM M/S. EMERALD COMPANY LTD 6 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. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 1.. THE APPELLANT: M/S. EMERALD COMPANY LTD 31 CHO WRINGHEE ROAD, KOL-16. 2 THE RESPONDENT: INCOME TAX OFFICER W 11(1), KOL AAYKAR BHAWAN P-7 CHOWRINGHEE SQ. KOL-69. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS THIS ORDER IS PRONOUNCED IN OPEN COURT ON 13 -01-2016 SD/- ( S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 13-01/2016 COPY OF THE ORDER FORWARDED TO:- COPY OF THE ORDER FORWARDED TO:-