Aaradhana Exim Private Limited, Aashwini Appartment V. Income Tax Officer, AAYAKAR BHAVAN,SURAT

ITA 81/SRT/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1766 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-05-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 24-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Accommodation entries; Scheme of amalgamation; Set aside
• Section: 147; 148; 144; 69C; 250; 292BB; 143(2); 139(1); 43

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.81/SRT/2024 Assessment Year: (2011-12) (Physical Hearing) Aaradhana Exim Private Limited, Shop No.1, 2 Aashwini Appartment, Opp. Sardar Nagar Society, Sumul Dairy Road, Surat - 395008 Vs. The ITO, Ward -1(1)(1), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: AAICA5597P (Appellant) (Respondent) Appellant by Shri Mehul Shah, CA Respondent by Shri J. K. Chandnani, Sr. DR Date of Hearing 13/05/2024 Date of Pronouncement 06/06/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the appellant emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 21.12.2023 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘Ld. CIT(A)’] for the assessment year (AY) 2011-12. 2. The grounds of appeal raised by the assessee are as under: “1. On the basis of facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the action of assessing officer in re-opening assessment u/s 147 by issuing notice u/s 148 of the I.T. Act, 1961 to a deceased person i.e. non-existing company. 2. On the basis facts and in the circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the action of assessing 2 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. officer in not issuing notice u/s 143(2) and hence assessment is liable to be quashed. 3. On the basis of facts and circumstances of the case as well as law on the subject Ld. CIT(A) has erred in confirming the action of assessing officer by making an addition of Rs.40,00,000/- on account of share application money u/s 68 of the I.T. Act, 1961. 4. On the basis of facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the action of assessing officer by making addition of Rs.60,000/- being commission expense u/s 69C. 5. On the basis of facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the action of assessing officer by making addition of Rs.1,89,078/- on account of undisclosed interest income. 6. It is therefore prayed that the addition made by assessing officer and confirmed by CIT(A) may please be deleted. 7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of appeal.” 3. Ground Nos. 1 pertains to validity of re-opening assessment u/s 147 of the Act by issuing notice u/s 148 of the Act to a deceased person i.e. non- existing company, and issuance of notice u/s 143(2) of the Act. 4. The facts of the case in brief are that the assessee-company filed its return of income for AY.2011-12 on 11.10.2011, declaring total income of Rs.53,850/-. On basis of information and details available on record, Assessing Officer observed that assesse-company had received bogus accommodation entries to the tune of Rs.40,00,000/- in the form of share capital and share premium from different concerns of Shri Pravinkumar Jain group. Thus, the case was reopened u/s 147 of the Act after recording the reasons by issuing notice u/s 148 of the Act on 30.03.2018. In response to the notice u/s 148, the assessee-company filed reply on 16.05.2018 and 3 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. submitted that the assesse-company was converted into LLP on 14.02.2015 and notice u/s 148 was in name of a dead person i.e. non-existing person and requested to drop the proceedings initiated u/s 148 of the Act. The Assessing Officer rejected the assessee’s submission on 04.10.2018 and asked the assessee to file its return of income in response to notice u/s 148 of the Act. The assessee has requested to the Assessing Officer to treat its original return of income filed u/s 139(1) of the Act on 11.10.2011 as the return in the response to the notice u/s 148 of the Act. The Assessing Officer vide his letter dated 10.05.2018 requested to assessee to file from online return of income in prescribed manner in response to the notice u/s 148 of the Act. In reply, assessee submitted that the company has ceased to exist and hence it was not possible to file e-return. In the reasons recorded, it has been mentioned that the case was reopened on the basis of the information received from an Investigation Wing that assessee had received share capital and share premium of Rs.40,00,000/- from an entity namely, M/s Olive Overseas Pvt. Ltd., which was proved to be a shell/paper company, managed and controlled by Mumbai based entry operator, Shri Praveen Kumar Jain. The Assessing Officer, after hearing the assessee, made addition of Rs.40,00,000/- u/s 68 of the Act of Rs.1,20,000/- u/s 69C of the Act and Rs.1,89,078/- towards undisclosed interest income. 5. Aggrieved by the order of Assessing Officer, the assessee went in appeal before Ld. CIT(A). The assessee had raised nine grounds of appeal including validity of re-opening by issuing notice u/s 148 on a dead person 4 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. i.e. non-existing company. It has also raised grounds for non-issuance of notice u/s 143(2) and various additions made in the assessment order. The Ld. CIT(A) has upheld the re-opening of the assessment by stating that the assessee failed to give documents relating to winding up of the company to the Assessing Officer. The company was converted to LLP on 14.02.2015 and up to such date, assessment was to be framed in case of the company and not the LLP. Hence, the objection of the assessee was rejected and the ground was dismissed. The Ld. CIT(A) also sustained the addition of Rs.40,00,000/- u/s 68 which is at page nos. 29 to 30 of the appellate order. Out of two additions u/s 69C of Rs.60,000/- each, he sustained one addition and deleted the other one. The addition for the unexplained interest was also upheld. 6. Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. 7. The Learned Authorized Representative (Ld. AR) has strongly argued against the order of the Ld. CIT(A). The Ld. AR filed two paper books containing 109 and 38 pages. The Ld. AR submitted that notice u/s 148 of the Act was issued on a non-existent company and hence the resultant order u/s 147 is a nullity. The Ld. AR argued that case of the assessee is fully covered by the decision of Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd. (107 taxmann.com 375)(SC). The Ld. AR has given a table comparing the facts of the present case vis-a-vis the facts in case of PCIT vs. Maruti Suzuki India Ltd. (supra) which is reproduced below for ready reference: 5 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. Sr. No. Maruti Suzuki India Ltd. (Supreme Court) Our Case 1 SPIL was a non-existing entity. The notice u/s 148 was issued in the name of SPIL. Aaradhana Exim Pvt. Ltd. was a non-existing entity. The notice u/s 148 was issued in name of Aaradhana Exim Pvt. Ltd. It also bears the PAN of Company 2. SPIL and MNIL got amalgamated through scheme of amalgamation dated 29.01.2013 Aaradhana Exim Pvt. Ltd. got converted in Aaradhana Exim LLP on 14.02.2015. 3. Assessee on 02.04.2013 intimated AO about amalgamation Assessee vie letter filed on 16.05.2018 informed the AO about conversion from Company to LLP. The said details were already present in public domain. 4. The final assessment order was passed in the name of SPIL (amalgamated with MSIL) on 31.010.2016 The final assessment order was passed in the name of Aaradhana Exim Pvt. Ltd. (now known as Aaradhana Exim LLP). The assessment order bears the PAN of non-existing Company AAICA5597P The Ld. AR submitted that notice u/s 148 was issued to assessee-company on 30.03.2018 when the assessee-company was already converted into LLP on 14.02.2015 i.e. nearly 3 years after dissolution of assesse-company and the reassessment order is also passed in the name of the dissolved company. The Ld. AR also submitted that this issue is squarely covered by the decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd, (supra) wherein it was held that “where during pendency of assessment proceedings, assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity would be without jurisdiction and was to be set aside”. The Ld. AR further relied upon the various decisions viz: (i) Adani 6 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. Estate Management (P.) Ltd. vs. ITO, (2023) 151 taxmann.com 387 (Guj – HC), (ii) Adani Wilmar Ltd. vs. ACIT, (2023) 150 taxmann.com 178 (Guj – HC), (iii) Jainam Exports vs CST, ITA No.566/SRT/2023, dated 26.10.2023 (iv) DCIT vs. M/s Ameriprise India Pvt. Ltd., ITA No.2191/Del/2023, dated 22.12.2023, (v) Spice Entertainment vs. CST, (2012) 18 ELT 43 (Delhi), (vi) CIT vs. Micro Steels (P.) Ltd., (2015) 59 taxman.com 470 (Delhi)(Mag.), (vii) CIT vs. Micra India (P.) Ltd., (2015) 57 taxmann.com 163 (Delhi). The Ld. AR also referred to another decision in the case of Sky Light Hospitality LLP vs. ACIT, 90 taxmann.com 413 (Delhi) which is in favour of Revenue. However, the facts in that case were that the Assessing Officer was having knowledge of factum of conversion of company into LLP, so the provision of Section 292BB came to its rescue, being clerical error in typing in the notice whereas in the case of assessee, in the letter dated 04.10.2018, the Assessing Officer himself has stated that “prior to 16.05.2018, this fact was not brought to the knowledge of the undersigned”. Further, various High Courts, including the Delhi High Court have in the following decisions, distinguished the judgment of Skylight Hospitality LLP (supra) and have quashed the notice/assessment framed in the name of a non-existent entity viz: (i) Rajendra Kumar Sehgal vs. ITO, 10 taxmann.com 233 (Delhi), (ii) Chandreshbhai Jayantibhai Patel vs. ITO, 101 taxmann.com 362 (Delhi), and (iii) Alamelu Veerappan vs. ITO, 261 Taxman 137 (Guj.). In the case of Alamelu Veerappan vs. ITO (supra), it was held that “there is no statutory obligation on the part of legal representatives of the deceased assessee to immediately intimate the death of assessee or take 7 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. steps to cancel PAN registration”. The Ld. AR of the assessee relied upon the decision of the ITAT, Surat in the case of Shri Kantibhai Khalasi (L/h of Late Alpeshbhai Khalasi) vs. ITO, in ITA No.1516/SRT/2015, dated 15.01.2021 wherein under similar facts that reopening was held to be invalid. 8. We have heard both the parties and perused the record. We have also deliberated on the decisions relied upon by the Ld. AR. The case was reopened by issue of notice u/s 148 of the Act on 30.03.2018. In response to the said notice, the assessee replied vide letter dated 12.04.2018 that the return originally filed on 11.010.2011 may be treated as the return in response to notice u/s 148 of the Act. Thereafter, Assessing Officer issued notice on 10.05.2018, requesting the assessee to file fresh online return of income for the subject assessment year. The assessee replied that the company was already converted into LLP on 14.02.2015 and the notice u/s 148 of the Act was nearly three years after dissolution of the assessee- company. Therefore, the notice was in the name of a dead person i.e. non- existing entity. The assessee also brought to the notice of the Assessing Officer that it has filed letter on 17.05.2018 to the authority concerned to surrender the PAN of the company due to discontinuity of the business. In response to the letter of the Assessing Office that the factum of conversion of company into LLP was not in his knowledge, the assessee replied that Aaradhana Exim Pvt. Ltd. was converted into Aaradhana Exim LLP on 14.02.2015. Even the Master data of MCA shows the status of the assessee- company as “dissolved”. The Ld. AR has relied on the decision in the case of 8 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. Maruti Suzuki India Ltd. (Supra) wherein it was held that if the assessee- company was amalgamated with another company, it loses its identity and assessment order passed subsequently in the name of the said non-existing entity would be without jurisdiction and was to be set aside. In the case of Maruti Suzuki India Ltd. (supra), assessment was made in the name of Suzuki Powertrain India Limited for (SPIL) which was held to be nullity by the ITAT, since the entity was amalgamated with Maruti Suzuki India Ltd. This view was affirmed by the Hon’ble High Court. The Revenue filed appeal against the said order. The Hon’ble Supreme Court held that the basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. The Hon’ble Supreme Court further stated that the above position holds the field in view of the judgment of a Co-ordinate Bench which dismissed appeal of Revenue, i.e. CIT vs. Spice Enfotainment (Civil Appeal No.285 of 2014, dated 02.11.2017). The facts of the present case are similar to the facts in case of Maruti Suzuki India Ltd. SPIL was a non-existing entity at the time of issue of notice u/s 148; similarly, Aaradhana Exim Pvt. Ltd. was not an entity, when notice u/s 148 was issued in its name. SPIL and MSIL were amalgamated on 29.01.2013; whereas Aaradhana Exim Pvt. Ltd. got converted into Aaradhana Exim LLP on 14.02.2015. The assessee had also informed the Assessing 9 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. Officer about conversion from company to LLP. The assessment order also bears the PAN of the non-existing company (AAICA5597P). 9. In views of the above facts, ratio of the decision in case of Maruti Suzuki India Ltd. (supra) is applicable to the facts of the present case. The other decisions relied on by the Ld. AR also support the case of the assessee. In case of Adani Estate Management (P.) Ltd. (supra), it was held that where a company was amalgamated with assessee-company and the same was intimated to the Assessing Officer, reopening notice issued in the name of the erstwhile company, which was amalgamated, was to be quashed. In case of Adani Wilmar Ltd. (supra), it was held that where a company, was amalgamated and the petitioner sent intimation to the Department about the amalgamation, issuance of show-cause notice in the name of non- existing company, which has lost its existence, was without jurisdiction. The Surat Tribunal in the case of Jainam Exports (supra) has also set aside the assessment order under similar circumstances. In the case of Shri Kantibhai Khalasi (supra), the ITAT, Surat also held that reassessment u/s 147/148 of the Act should not be exercised by the Assessing Officer on a dead person. The notice for reopening of assessment against a dead person is invalid and therefore consequential re-assessment framed by the Assessing Officer u/s 147/148 is also invalid. After the Aaradhan Exim Pvt. Ltd. was converted into Aaradhan Exim LLP, it lost its existence and hence it cannot be treated as a person u/s 2(31) of the Act, against whom assessment or re-assessment proceedings can be initiated. In view of the above facts, following the 10 81/SRT/2024/AY.2011-12 Aaradhana Exim Pvt. Ltd. authorities cited supra, the re-assessment order passed u/s 147 by the Assessing Officer is treated as without jurisdiction and is liable to be set aside. Accordingly, we quash the notice issued u/s 147 of the Act and the resultant order passed u/s 144 r.w.s. 147 of the Act. Since, the assessee has succeeded on the primary issue of assumption of jurisdiction, adjudication of the other submissions on re-assessment on merit have become academic in nature and do not require any adjudication. 10. In the result, appeal of the assessee is allowed. Order is pronounced on 06/06/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 06/06/2024 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat