SMA CONSTRUCTION PVT. LTD. (Now amalgamated with Buniyad Developers Pvt. Ltd.), NEW DELHI V. PR. CIT- 8, NEW DELHI

ITA 4832/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1201 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 06-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Procedural lapse; Scheme of amalgamation
• Section: 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT AND AND AND AND SHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARY SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA ITAITA ITA NO NONO NO . .. . 4832/DEL/2018 4832/DEL/2018 4832/DEL/2018 4832/DEL/2018 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2010 2010 2010 2010 - -- - 11 1111 11 M/S SMA CONSTRUCTION M/S SMA CONSTRUCTION M/S SMA CONSTRUCTION M/S SMA CONSTRUCTION PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., (NOW AMALGAMATED WIT (NOW AMALGAMATED WIT (NOW AMALGAMATED WIT (NOW AMALGAMATED WITH H H H BUNIYAD DEVELOPERS BUNIYAD DEVELOPERS BUNIYAD DEVELOPERS BUNIYAD DEVELOPERS PVT.LTD.), PVT.LTD.), PVT.LTD.), PVT.LTD.), A AA A- -- -54, NARAINA INDUSTRIAL 54, NARAINA INDUSTRIAL 54, NARAINA INDUSTRIAL 54, NARAINA INDUSTRIAL AREA, PHASE AREA, PHASE AREA, PHASE AREA, PHASE- -- -1, 1,1, 1, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 028. 110 028. 110 028. 110 028. PAN : AAJCS5264N. PAN : AAJCS5264N. PAN : AAJCS5264N. PAN : AAJCS5264N. VS. VS. VS. VS. PRINCIPAL COMMISSIONER OF PRINCIPAL COMMISSIONER OF PRINCIPAL COMMISSIONER OF PRINCIPAL COMMISSIONER OF INCOME TAX INCOME TAX INCOME TAX INCOME TAX- -- -8, 8,8, 8, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEEV SAXENA, AD VOCATE. RESPONDENT BY : SHRI S.S. RANA, CIT - DR. DATE OF HEARING : 07.03.2019 07.03.2019 07.03.2019 07.03.2019 DATE OF PRONOUNCEMENT : 18.03.2019 18.03.2019 18.03.2019 18.03.2019 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT : :: :- -- - THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEA R 2010-11 IS DIRECTED AGAINST THE ORDER OF LEARNED PRINCIPAL CIT -8, NEW DELHI DATED 30 TH MARCH, 2017. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER, THEY ARE ALL AGAINST THE ORDER PASSED UNDE R SECTION 263 OF THE INCOME-TAX ACT, 1961. 3. BY WAY OF GROUND NOS.1 & 2, THE ASSESSEE HAS CLA IMED THAT THE ORDER PASSED UNDER SECTION 263 IN THE NAME OF NON-E XISTENT ENTITY IS VOID AB-INITIO. ITA-4832/DEL/2018 2 4. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE PRINCIPAL COMMISSIONER OF INCOME-T AX-8, NEW DELHI HAS PASSED THE ORDER UNDER SECTION 263 ON 30 TH MARCH, 2017 IN THE NAME OF M/S SMA CONSTRUCTION PVT.LTD. HE STATED TH AT THE ABOVE MENTIONED COMPANY IS NON-EXISTENT ON THE ABOVE DATE BECAUSE OF ITS AMALGAMATION WITH M/S BUNIYAD DEVELOPERS PVT.LTD. THAT THE SCHEME OF AMALGAMATION HAS BEEN APPROVED BY THE HON'BLE JU RISDICTIONAL HIGH COURT VIDE ORDER DATED 27 TH SEPTEMBER, 2011 AND, BY WHICH, THE AMALGAMATION IS APPROVED WITH EFFECT FROM THE APPOI NTED DATE I.E., 1 ST APRIL, 2009. THUS, AFTER THE APPROVAL OF AMALGAMAT ION, M/S SMA CONSTRUCTION PVT.LTD. IS NO MORE IN EXISTENCE AND I T IS ONLY M/S BUNIYAD DEVELOPERS PVT.LTD., WHICH IS THE TRANSFEREE COMPAN Y AS PER THE SCHEME OF AMALGAMATION, IS IN EXISTENCE. HE STATED THAT THE ORDER UNDER SECTION 263 PASSED ON A NON-EXISTENT ENTITY I S VOID AB-INITIO AND NULLITY. IN THIS REGARD, HE RELIED UPON THE DECISI ON OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SPICE ENTE RTAINMENT LTD. 247 CTR 500. 5. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE D ECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SK Y LIGHT HOSPITALITY LLP VS. ACIT [2018] 405 ITR 296 (DELHI). HE FURTHER POINTED OUT THAT HON'BLE SUPREME COURT HAS DISMISSED THE SLP AGAINST THE ABOVE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF SKY LIGHT HOSPITALITY LLP. HE, HOWEVER, HAS NOT DISPUTED THE FACTUAL SUBMISSION MADE BY THE LEARNED COUNSEL THAT THE SCHEME OF AMAL GAMATION IS APPROVED BY HON'BLE DELHI HIGH COURT AND, AFTER THE APPROVAL OF THE SCHEME, THE ASSESSEE COMPANY STOOD AMALGAMATED AND TRANSFERRED TO M/S BUNIYAD DEVELOPERS PVT.LTD. 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT IN THE CASE OF ITA-4832/DEL/2018 3 SKY LIGHT HOSPITALITY LLP (SUPRA) RELIED UPON BY TH E LEARNED DR, THE NOTICE UNDER SECTION 148 WAS ISSUED IN THE NAME OF M/S SKY LIGHT HOSPITALITY PRIVATE LIMITED. THE LEGAL POSITION IS THAT ON THE DATE OF ISSUE OF NOTICE, THIS COMPANY HAD CEASED TO EXIST A ND WAS DISSOLVED UPON CONVERSION INTO LIMITED LIABILITY PARTNERSHIP. THE QUESTION BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT WAS WITH REGA RD TO VALIDITY OF ISSUE OF NOTICE UNDER SECTION 148 ON THE NON-EXISTENT PER SON. THE HONBLE HIGH COURT UPHELD THE VALIDITY OF THE ISSUE OF NOTI CE WITH THE FOLLOWING FINDING IN PARAGRAPH 17 OF THEIR ORDER :- 17. IN THE CONTEXT OF THE PRESENT WRIT PETITION, T HE AFORESAID RATIO IS A COMPLETE ANSWER TO THE CONTENT ION RAISED ON VALIDITY OF THE NOTICE UNDER SECTION 147/ 148 OF THE ACT AS IT WAS ADDRESSED TO THE ERSTWHILE COMPAN Y AND NOT TO THE LIMITED LIABILITY PARTNERSHIP. THERE WAS NO DOUBT AND DEBATE THAT THE NOTICE WAS MEANT FOR THE PETITI ONER AND NO ONE ELSE. LEGAL ERROR AND MISTAKE WAS MADE IN ADDRESSING THE NOTICE. NOTICEABLY, THE APPELLANT HA VING RECEIVED THE SAID NOTICE, HAD FILED WITHOUT PREJUDI CE REPLY/LETTER DATED 11.04.2017. THEY HAD OBJECTED TO THE NOTICE BEING ISSUED IN THE NAME OF THE COMPANY, WHI CH HAD CEASED TO EXIST. HOWEVER, THE READING OF THE SA ID LETTER INDICATES THAT THEY HAD UNDERSTOOD AND WERE AWARE, THAT THE NOTICE WAS FOR THEM. IT WAS REPLIED AND DEALT W ITH BY THEM. THE FACT THAT NOTICE WAS ADDRESSED TO M/S SKY LIGHT HOSPITALITY PVT. LTD., A COMPANY WHICH HAD BEEN DIS SOLVED, WAS AN ERROR AND TECHNICAL LAPSE ON THE PART OF THE RESPONDENT. NO PREJUDICE WAS CAUSED. HON'BLE JURISDICTIONAL HIGH COURT HAS ALSO REFERRED TO SECTION 292B. 7. ON THE OTHER HAND, IN THE DECISION RELIED UPON B Y THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF SPICE ENTER TAINMENT LTD. (SUPRA), HON'BLE DELHI HIGH COURT HELD AS UNDER :- 15. LIKEWISE, IN THE CASE OF SRI NATH SURESH CHAN D RAM NARESH VS. CIT (2006) 280 ITR 396, THE ALLAHABAD HI GH COURT HELD THAT THE ISSUE OF NOTICE UNDER SECTION 1 48 OF THE INCOME TAX ACT IS A CONDITION PRECEDENT TO THE VALI DITY OF ITA-4832/DEL/2018 4 ANY ASSESSMENT ORDER TO BE PASSED UNDER SECTION 147 OF THE ACT AND WHEN SUCH A NOTICE IS NOT ISSUED AND ASSESSMENT MADE, SUCH A DEFECT CANNOT BE TREATED AS CURED UNDER SECTION 292B OF THE ACT. THE COURT OBSE RVED THAT THIS PROVISIONS CONDONES THE INVALIDITY WHICH ARISES MERELY BY MISTAKE, DEFECT OR OMISSION IN A NOTICE, IF IN SUBSTANCE AND EFFECT IT IS IN CONFORMITY WITH OR AC CORDING TO THE INTENT AND PURPOSE OF THIS ACT. SINCE NO VALID NOTICE WAS SERVED ON THE ASSESSEE TO REASSESS THE INCOME, ALL THE CONSEQUENT PROCEEDINGS WERE NULL AND VOID AND IT WA S NOT A CASE OF IRREGULARITY. THEREFORE, SECTION 292B OF THE ACT HAD NO APPLICATION. 16. WHEN WE APPLY THE RATIO OF AFORESAID CASES TO THE FACTS OF THIS CASE, THE IRRESISTIBLE CONCLUSION WOU LD BE PROVISIONS OF SECTION 292B OF THE ACT ARE NOT APPLI CABLE IN SUCH A CASE. THE FRAMING OF ASSESSMENT AGAINST A NO N- EXISTING ENTITY/PERSON GOES TO THE ROOT OF THE MATT ER WHICH IS NOT A PROCEDURAL IRREGULARITY BUT A JURISDICTION AL DEFECT AS THERE CANNOT BE ANY ASSESSMENT AGAINST A DEAD PERS ON . 17. THE ORDER OF THE TRIBUNAL IS, THEREFORE, CLEAR LY UNSUSTAINABLE. WE, THUS, DECIDE THE QUESTIONS OF LA W IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND ALLOW THESE APPEALS. 18. WE MAY, HOWEVER, POINT OUT THAT THE RETURNS WE RE FILED BY M/S SPICE ON THE DAY WHEN IT WAS IN EXISTE NCE IT WOULD BE PERMISSIBLE TO CARRY OUT THE ASSESSMENT ON THE BASIS OF THOSE RETURNS AFTER TAKING THE PROCEEDINGS AFRESH FROM THE STAGE OF ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT. IN THESE CIRCUMSTANCES, IT WOULD BE INC UMBENT UPON THE AO TO FIRST SUBSTITUTE THE NAME OF THE APP ELLANT IN PLACE OF M/S SPICE AND THEN ISSUE NOTICE TO THE APP ELLANT. HOWEVER, SUCH A COURSE OF ACTION CAN BE TAKEN BY TH E AO ONLY IF IT IS STILL PERMISSIBLE AS PER LAW AND HAS NOT BECOME TIME BARRED. 8. AFTER CONSIDERING BOTH THE ABOVE DECISIONS OF HO N'BLE DELHI HIGH COURT, WE FIND THAT THE DECISION OF SKY LIGHT HOSPI TALITY LLP (SUPRA) WOULD BE APPLICABLE WHILE CONSIDERING THE APPLICABI LITY OF VALIDITY OF NOTICE, WHILE, FOR CONSIDERING THE VALIDITY OF A FI NAL ORDER, THE DECISION OF SPICE ENTERTAINMENT LTD. (SUPRA) WOULD BE APPLIC ABLE. THEIR LORDSHIPS HAVE CLEARLY HELD THAT WHILE CONSIDERING THE VALIDITY OF AN ORDER, SECTION 292B WOULD NOT BE APPLICABLE BECAUSE THE FRAMING OF AN ITA-4832/DEL/2018 5 ASSESSMENT AGAINST A NON-EXISTENT ENTITY GOES TO TH E ROOT OF THE MATTER WHICH IS NOT A PROCEDURAL IRREGULARITY BUT A JURISD ICTIONAL DEFECT AS THERE CANNOT BE ANY ASSESSMENT AGAINST A DEAD PERSO N. THE ABOVE OBSERVATION WOULD BE SQUARELY APPLICATION WITH REGA RD TO ORDER UNDER SECTION 263. WHEN ON THE DATE OF ORDER UNDER SECTI ON 263 ADMITTEDLY THE COMPANY M/S SMA CONSTRUCTION PVT.LTD. IS NOT IN EXISTENCE, ANY ORDER PASSED ON A NON-EXISTENT ENTITY WOULD BE NULL ITY. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF SPICE ENTERTAINMENT LTD. (SUPRA), HO LD THAT THE ORDER PASSED UNDER SECTION 263 IN THE CASE OF M/S SMA CON STRUCTION PVT.LTD. WAS VOID AB-INITIO AND NULLITY. THE SAME IS QUASHE D. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 18.03.2019 . SD/- SD/- (K. NARASIMHA CHARY (K. NARASIMHA CHARY (K. NARASIMHA CHARY (K. NARASIMHA CHARY ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : M/S SMA CONSTRUCTION PVT.LTD., M/S SMA CONSTRUCTION PVT.LTD., M/S SMA CONSTRUCTION PVT.LTD., M/S SMA CONSTRUCTION PVT.LTD., (NOW AMALGAMATED WITH BUNIYAD DEVELOPERS (NOW AMALGAMATED WITH BUNIYAD DEVELOPERS (NOW AMALGAMATED WITH BUNIYAD DEVELOPERS (NOW AMALGAMATED WITH BUNIYAD DEVELOPERS PVT.LTD.), A PVT.LTD.), A PVT.LTD.), A PVT.LTD.), A- -- -54, NARAINA INDUSTRIAL AREA, PHASE 54, NARAINA INDUSTRIAL AREA, PHASE 54, NARAINA INDUSTRIAL AREA, PHASE 54, NARAINA INDUSTRIAL AREA, PHASE- -- -1, 1,1, 1, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 028. 110 028. 110 028. 110 028. 2. RESPONDENT : PRINCIPAL COMMISSIONER OF INCOME TA X PRINCIPAL COMMISSIONER OF INCOME TAX PRINCIPAL COMMISSIONER OF INCOME TAX PRINCIPAL COMMISSIONER OF INCOME TAX- -- -8, 8,8, 8, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 002. 110 002. 110 002. 110 002. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR