ACIT, New Delhi V. M/s Sarla Fabrics Pvt. Ltd., New Delhi

ITA 4313/DEL/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2459 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M P RASTOGI SHRI DEEPAK MALIK
• Keywords: Procedural lapse; Scheme of amalgamation; Set aside
• Section: 153A; 201; 153; 132; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.4311/DEL./2016 (ASSESSMENT YEAR : 2008-09) ITA NO.4312/DEL./2016 (ASSESSMENT YEAR : 2009-10) ITA NO.4312/DEL./2016 (ASSESSMENT YEAR : 2010-11) ACIT, CENTRAL CIRCLE 8, VS. M/S. SARLA FABRICS PVT . LTD., NEW DELHI. (NOW AMALGAMATED WITH SHAHI EXPORTS PVT. LTD.) F 88, OKHLA INDUSTRIAL AREA, PHASE 1, NEW DELHI. (PAN : AAHCS3856Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. RASTOGI, ADVOCATE SHRI DEEPAK MALIK, ADVOCATE REVENUE BY : SHRI H.K. CHOUDHARY, CIT DR DATE OF HEARING : 04.02.2021 DATE OF ORDER : 17.02.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : ITA NOS.4311, 4312 & 4313/DEL./2016 2 SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN THE INTER-CONNECTED APPEALS, THE SAME ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DI SCUSSION. 2. APPELLANT, M/S. SARLA FABRICS PVT. LTD. (NOW AMA LGAMATED WITH SHAHI EXPORTS PVT. LTD.) (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEALS SOUGHT TO SET ASIDE THE IMPUGNED ORDERS ALL DATED 23.05.2016 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-24, NEW DELHI QUA THE ASSES SMENT YEARS 2008-09, 2009-10 & 2010-11 ON THE IDENTICAL GROUNDS INTER ALIA THAT :- 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN QUASHING THE ORDER INVOLVING ADDITIONS (RS.2,43,91,636/-, RS.23,29,51,594/- & RS.8,40,59,4 13/- FOR AYS 2008-09, 2009-10 & 2010-11 RESPECTIVELY). 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN QUASHING THE ORDER ON THE GROUND THAT AS THE COMPANY WAS NON-EXISTENT ON THE DATE OF SEARCH BECA USE OF MERGER WITH ANOTHER COMPANY, ASSESSMENT COULD NOT H AVE BEEN DONE IN ITS HANDS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN APPRECIATING THE FACT THAT SINCE ACTIO N U/S 132 WAS TAKEN IN THE NAME OF THE ASSESSEE, ASSESSMENT FOR A LL THE YEARS IS TO BE DONE IN THE HANDS OF ASSESSEE ONLY.' 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ON THE BASIS OF SEARCH AN D SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) CONDUCTED ON SHAHI EXPORTS GROUP OF ASS ESSEE ON ITA NOS.4311, 4312 & 4313/DEL./2016 3 16.01.2013, SOME DOCUMENTS WERE SEIZED FROM WHICH I T WAS ESTABLISHED THAT THE ASSESSEE HAS EARNED UNACCOUNTE D INTEREST INCOME FROM THESE GROUPS WHICH HAS NOT BEEN ACCOUNT ED FOR IN THE BOOKS OF THE ASSESSEE. THIS SEARCH OPERATION WAS C ONDUCTED AS A PART FOR LARGER SEARCH COVERAGE IN THE CASES OF K.S . DHINGRA, G.S. DHINGRA, M/S. U.K. PAINTS (INDIA) ALONG WITH GROUP ENTITIES OF SHAHI EXPORTS AND SPAN INDIA GROUP AND CERTAIN OTHE R ENTITIES. ASSESSING OFFICER (AO) COMPLETED ASSESSMENT U/S 153 A READ WITH SECTION 143 (3) OF THE ACT AT TOTAL INCOME (LOSS) R S.(-)5,91,93,421/-, RS.23,25,98,313/- & RS.8,40,59,413/- FOR AYS 2008-0 9, 2009-10 & 2010-11 RESPECTIVELY. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT (A) BY WAY OF FILING THE APPEALS WHO HAS PARTLY ALLOWED TH E SAME. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEALS. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. UNDISPUTEDLY, M/S. SARLA FABRICS PVT. LTD., THE ASSESSEE GOT AMALGAMATED WITH M/S. SHAHI EXPORTS PVT. LTD. W.E.F . 31.03.2010 VIDE AMALGAMATION ORDER DATED 25.10.2010 PASSED BY HONBLE ITA NOS.4311, 4312 & 4313/DEL./2016 4 HIGH COURT OF DELHI. IT IS ALSO NOT IN DISPUTE THA T ON THE DATE OF SEARCH IN THE PRESENT CASES I.E. ON 16.01.2013, PRE SENT ASSESSEE HAS CEASED TO EXIST BY VIRTUE OF THE AMALGAMATION ORDER PASSED BY THE HONBLE DELHI HIGH COURT DATED 25.10.2010 (SUPRA). KEEPING IN VIEW THE AFORESAID UNDISPUTED FACTS, LD. CIT (A) QU ASHED THE ASSESSMENT ORDERS IN ALL THE AFORESAID CASES. 7. NOW, THE REVENUE BY WAY OF FILING PRESENT APPEAL S CHALLENGED THE QUASHING ORDERS PASSED BY THE LD. CI T (A) ON THE GROUND THAT SINCE ACTION U/S 132 WAS TAKEN IN THE N AME OF THE ASSESSEE, ASSESSMENT FOR ALL THE YEARS IS TO BE FR AMED IN THE HANDS OF THE ASSESSEE (M/S. SARLA FABRICS PVT. LTD.). 8. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDERS PASSED BY THE LD. CIT (A) CONTENDED THAT WHEN THE A SSESSEE HAS FILED ORIGINAL INCOME-TAX RETURN IN THE NAME OF M/S . SARLA FABRICS PVT. LTD. AND SEARCH & SEIZURE ACTION U/S 132 OF TH E ACT HAS BEEN TAKEN IN THE NAME OF THE ASSESSEE, THE AO HAS RIGHT LY FRAMED THE ASSESSMENT IN THE NAME OF M/S. SARLA FABRICS PVT. L TD. 9. HOWEVER, ON THE OTHER HAND, LD. AR FOR THE ASSES SEE TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. DR FOR THE REVEN UE CONTENDED THAT THE FACTUM OF AMALGAMATION OF THE ASSESSEE COM PANY WHICH TOOK PLACE WITH EFFECT FROM 31.10.2010 HAS B EEN DULY INTIMATED TO THE INVESTIGATING WING OF THE INCOME -TAX DEPARTMENT ITA NOS.4311, 4312 & 4313/DEL./2016 5 AT THE TIME OF SEARCH & SEIZURE OPERATION AS WELL A S DURING THE FRAMING OF ASSESSMENT BY THE AO U/S 153 R.W.S. 143 (3) OF THE ACT AND THAT ASSESSMENT IN THE NAME OF NON-EXISTENT ENT ITY IS ILLEGAL, BAD IN LAW AND NON EST AND RELIED UPON HONBLE DELHI HIGH COURT IN CASE OF CIT VS. SPICE ENFOTAINMENT VS. CIT IN IT A 475 & 476 OF 2011 DATED 03.08.2011, AFFIRMED BY THE HONB LE APEX COURT IN CIVIL APPEAL NO.285-286 OF 2014 ORDER DATE D 02.11.2017, PCIT VS. NOKIA SOLUTIONS & NETWORK INDI A PVT. LTD. (FORMERLY KNOWN AS NOKIA SIEMENS NETWORK PVT. LTD. IN ITA 135/2018 ORDER DATED 06.02.20189, PCTI VS. BMA CAPFIN LTD. ITA 1181 OF 2017 & CM NO.46887 OF 2017 ORDER D ATED 27.12.2017, BDR BUILDERS & DEVELOPERS PVT. LTD. VS. ACIT WP (C) 2712/2016 ORDER DATED 26.07.2017 & PCIT VS. KAI ZEN PRODUCTS PVT. LTD. (PRESENTLY KNOWN AS AAS RESEARCH & SOLUTIONS (P) LTD. UPON AMALGAMATION WITH VENTURA R ESEARCH & SOLUTIONS (P) LTD.) ORDER DATED 25.07.2017, JUDGM ENTS OF HONBLE APEX COURT IN CASE OF PR. CIT VS. MARUTI SU ZUKI INDIA LTD. IN C.A. NO.5409 OF 2019 DATED 25.07.2019, M/S. DALMIA POWER LTD. VS. ACIT IN CA NO.9496-099 OF 2019 AND D ECISIONS OF COORDINATE BENCH OF THE TRIBUNAL IN NIRVANA LIFE STYLE PVT. LTD. (NOW MERGED WITH TTJ IMPEX LTD.) IN ITA NO.4793/DEL/2017 ORDER DATED 09.03.2018, RUDRAKSHA AGENCIES ITA NOS.4311, 4312 & 4313/DEL./2016 6 COMPANY LTD. VS. DCIT, CIRCLE 21 (2), NEW DELHI 201 8 (5) TMI 740 ITAT DELHI & DCIT, CIRCLE 18 (1), NEW DELHI V S. NDC TELECOMMUNICATIONS INDIA PVT. LTD. 2018 (10) TMI 11 19 ITAT DELHI.. 10. IT IS ALSO NOT IN DISPUTE THAT ASSESSMENT IN TH E CASE OF M/S. SARLA FABRICS PVT. LTD. HAS BEEN FRAMED BY THE AO O N 27.03.2015, 30.03.2015 & 30.03.2015 FOR ASSESSMENT YEARS 2008-0 9, 2009-10 & 2010-11 RESPECTIVELY. 11. BY NOW, THE ISSUE AS TO FRAMING THE ASSESSMENT ON A NON- EXISTENT COMPANY HAVING BEEN MERGED WITH SOME OTHER ENTITY BEING NULLITY IS SETTLED. HONBLE DELHI HIGH COURT IN CASE OF SPICE ENFOTAINMENT LTD. VS. CIT (SUPRA) QUASHED THE ASSESSMENT IN THE IDENTICAL FACTS BY RETURNING FOLLOWING FINDINGS :- '12. ONCE IT IS FOUND THAT ASSESSMENT IS FRAMED IN THE NAME OF NON-EXISTING ENTITY, IT DOES NOT REMAIN A PROCEDURA L IRREGULARITY OF THE NATURE WHICH COULD BE CURED BY INVOKING THE PROVISIONS OF SECTION 292B OF THE ACT. - PROVISIONS OF SECTION 29 28 OF THE ACT ARE NOT APPLICABLE IN SUCH A CASE. - THE FRAMING OF ASSESSMENT AGAINST A NON-EXISTING ENTITY/PERSON GOES TO THE RO OT OF THE MATTER WHICH IS NOT A PROCEDURAL IRREGULARITY BUT A JURISD ICTIONAL DEFECT AS THERE CANNOT BE ANY ASSESSMENT AGAINST A DEAD PE RSON. . 16. WHEN WE APPLY THE RATIO OF AFORESAID CASES TO THE FACTS OF THIS CASE, THE IRRESISTIBLE CONCLUSION WOULD BE PRO VISIONS OF SECTION 292B OF THE ACT ARE NOT APPLICABLE IN SUCH A CASE. THE FRAMING OF ASSESSMENT AGAINST A NON-EXISTING ENTITY /PERSON GOES TO THE ROOT OF THE MATTER WHICH IS NOT A PROCEDURAL IRREGULARITY BUT A JURISDICTIONAL DEFECT AS THERE CANNOT BE ANY ASSESSMENT AGAINST A DEAD PERSON. ITA NOS.4311, 4312 & 4313/DEL./2016 7 12. AFORESAID DECISION HAS BEEN CONFIRMED BY THE HONBLE APEX COURT VIDE ORDER DATED 02.11.2017 PASSED IN CIVIL APPEAL NO.285-286OPF -2014 . 13. SIMILARLY, HONBLE APEX COURT IN CASE OF PR.CIT VS. MARUTI SUZUKI INDIA LTD. (SUPRA) ALSO QUASHED THE ASSESSMENT FRAMED ON AMALGAMATING COMPANY BY RETURNING FOLLOWING FINDING S :- 33 IN THE PRESENT CASE, DESPITE THE FACT THAT THE ASSESSING OFFICER WAS INFORMED OF THE AMALGAMATING COMPANY HA VING CEASED TO EXIST AS A RESULT OF THE APPROVED SCHEME OF AMALGAMATION, THE JURISDICTIONAL NOTICE WAS ISSUED ONLY IN ITS NAME. THE BASIS ON WHICH JURISDICTION WAS INVOKED W AS FUNDAMENTALLY AT ODDS WITH THE LEGAL PRINCIPLE THAT THE AMALGAMATING ENTITY CEASES TO EXIST UPON THE APPROV ED SCHEME OF AMALGAMATION. PARTICIPATION IN THE PROCEEDINGS BY THE APPELLANT IN THE CIRCUMSTANCES CANNOT OPERATE AS AN ESTOPPEL AGAINST LAW. THIS POSITION NOW HOLDS THE FIELD IN VIEW OF THE JU DGMENT OF A CO- ORDINATE BENCH OF TWO LEARNED JUDGES WHICH DISMISSE D THE APPEAL OF THE REVENUE IN SPICE ENFOTAINMENT ON 2 NOVEMBER 2017. THE DECISION IN SPICE ENFOTAINMENT HAS BEEN FOLLOWED IN THE CASE OF THE RESPONDENT WHILE DISMISSING THE SPECIAL LEAVE P ETITION FOR AY 2011-2012. IN DOING SO, THIS COURT HAS RELIED ON THE DECISION IN SPICE ENFOTAINMENT. 34. WE FIND NO REASON TO TAKE A DIFFERENT VIEW. TH ERE IS A VALUE WHICH THE COURT MUST ABIDE BY IN PROMOTING TH E INTEREST OF CERTAINTY IN TAX LITIGATION. THE VIEW WHICH HAS BEE N TAKEN BY THIS COURT IN RELATION TO THE RESPONDENT 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 UNCERT AINTY AND DISPLACEMENT OF SETTLED EXPECTATIONS. THERE IS A SI GNIFICANT VALUE WHICH MUST ATTACH TO OBSERVING THE REQUIREMENT OF C ONSISTENCY AND CERTAINTY. INDIVIDUAL AFFAIRS ARE CONDUCTED AND BUSINESS DECISIONS ARE MADE IN THE EXPECTATION OF CONSISTENC Y, UNIFORMITY AND CERTAINTY. TO DETRACT FROM THOSE PRINCIPLES IS NEITHER EXPEDIENT NOR DESIRABLE.' 14. PERUSAL OF THE RECORD FURTHER SHOWS THAT IN THE AFORESAID CASES, AO HAD RESORTED TO FUTILE EXERCISE OF FRAMIN G ASSESSMENT IN THE NAME OF NON-EXISTENT ENTITY DESPITE THE FACT TH AT FACTUM OF ITA NOS.4311, 4312 & 4313/DEL./2016 8 AMALGAMATION HAS BEEN DULY INTIMATED BY SHRI HEMANT GUPTA ON 16.01.2015 BY RECORDING HIS STATEMENT WITH INVESTIG ATING WING, AVAILABLE ON PAGES 1 TO 8 OF THE PAPER BOOK, DURING THE COURSE OF SEARCH & SEIZURE OPERATION AND AO HAS ALSO BEEN INT IMATED BY THE AUTHORIZED REPRESENTATIVE VIDE LETTER DATED 07.12.2 013 FILED ON 17.12.2013, AVAILABLE AT PAGE 34 OF THE PAPER BOOK, DULY EXTRACTED BY THE LD. CIT (A) IN PARA 4.1.3 OF THE IMPUGNED OR DER THAT, SINCE M/S. SARLA FABRICS (P) LTD. STOOD MERGED AND AMALGA MATED WITH SHAHI EXPORTS PVT. LTD. VIDE JUDGMENT PASSED BY HON BLE DELHI HIGH COURT, RETURN U/S 153A IS NOT BEING FILED. 15. MOREOVER, THE SCHEME OF AMALGAMATION ITSELF TAK ES CARE OF ALL THE CONSEQUENCES OF THE ERSTWHILE COMPANY. SIN CE THE ASSESSEE COMPANY CEASED TO BE IN EXISTENCE AND ITS NAME GOT STRUCK OFF FROM THE ROLLS OF REGISTRAR OF COMPANIES, ASSESSMENTS FR AMED AGAINST IT BY THE AO VIDE ORDERS DATED 27.03.2015, 30.03.2015 & 30.03.2015 FOR ASSESSMENT YEARS 2008-09, 2009-10 & 2010-11 RES PECTIVELY ARE NOT SUSTAINABLE IN THE EYES OF LAW, BEING A NUL LITY. 16. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AN D BY RELYING UPON THE JUDGMENTS RENDERED BY HONBLE APEX COURT A ND HONBLE JURISDICTIONAL HIGH COURTS DISCUSSED IN THE PRECEDI NG PARAS, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE AFORESAID AMAL GAMATING COMPANY, ASSESSEE IN THIS CASE, HAS CEASED TO EXIST BY VIRTUE OF THE ITA NOS.4311, 4312 & 4313/DEL./2016 9 APPROVED SCHEME OF AMALGAMATION W.E.F. 31.03.2010 B Y THE ORDER PASSED BY THE HONBLE DELHI HIGH COURT, AO WAS NOT WITHIN HIS JURISDICTION TO FRAME THE ASSESSMENT IN THE NAME OF NON-EXISTENT COMPANY, CONSEQUENTLY ASSESSMENT ORDERS DATED 27.03 .2015, 30.03.2015 & 30.03.2015 FOR ASSESSMENT YEARS 2008-0 9, 2009-10 & 2010-11 RESPECTIVELY ARE LIABLE TO BE QUASHED BEI NG NOT SUSTAINABLE IN THE EYES OF LAW, HENCE FINDING NO IL LEGALITY OR PERVERSITY IN THE IMPUGNED ORDERS PASSED BY THE LD. CIT (A) IN THE AFORESAID APPEALS QUASHING THE ASSESSMENT ORDERS PA SSED BY THE AO, PRESENT APPEALS FILED BY THE REVENUE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 17 TH DAY OF FEBRUARY , 2021. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 17 TH DAY OF FEBRUARY, 2021 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-24, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.