Mevron Projects Pvt. Ltd.,, New Delhi vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'E', NEW DELHI Before Sh. N. K. Saini, AM And Sh. A. T Varkey, JM ITA No. 4938/Del/2013 : Asstt. Year : 2003-04 ITA No. 4939/Del/2013 : Asstt. Year : 2004-05 ITA No. 4940/Del/2013 : Asstt. Year : 2005-06 ITA No. 4941/Del/2013 : Asstt. Year : 2006-07 ITA No. 4942/Del/2013 : Asstt. Year : 2007-08 & ITA No. 4943/Del/2013 : Asstt. Year : 2008-09 M/s Mevron Projects Pvt. Ltd., Vs ACIT, Central Circel-21, (Amalgamated with Windchimes New Delhi Constructions Pvt. Ltd.), A-1/8, Vasant Vihar, New Delhi-110057 (APPELLANT) (RESPONDENT) ITA No. 5412/Del/2013 : Asstt. Year : 2003-04 ITA No. 5413/Del/2013 : Asstt. Year : 2004-05 ITA No. 5414/Del/2013 : Asstt. Year : 2005-06 ITA No. 5415/Del/2013 : Asstt. Year : 2006-07 ITA No. 5416/Del/2013 : Asstt. Year : 2007-08 & ITA No. 5417/Del/2013 : Asstt. Year : 2008-09 DCIT, Central Circel-21, Vs M/s Mevron Projects Pvt. Ltd., New Delhi (Amalgamated with Windchimes Constructions Pvt. Ltd.), A-1/8, Vasant Vihar, New Delhi-110057 (APPELLANT) (RESPONDENT) PAN No. AAECM5876F Assessee by : Sh. Kapil Goel, Adv. Revenue by : Sh. Gunjan Prashad, CIT DR

Date of Hearing : 12.02.2015 Date of Pronouncement : 20.02.2015 2 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

ORDER

Per Bench:

These cross appeals by the assessee and the department are directed against the separate orders each dated 26.07.2013 of CIT(A)-II, New Delhi.

2. Since the common issues are involved and the appeals were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity.

3. First we will deal with the appeal in ITA No. 4938/Del/2013 for the assessment year 2003-04.

4. The assessee has raised as many as 13 grounds in this appeal, however, the main grievance of the assessee relates to the initiation of proceedings u/s 153C of the Income Tax Act, 1961 (hereinafter referred to as the Act), for that purpose a specific ground i.e. ground no. 8 has been raised which read as under:

"8. That on the facts and circumstances of the case and the provision of law the Ld. CIT Appeal has failed to appreciate that initiation of proceedings u/s 153C including issue of notice and also completion of assessment on the company which has already become non-existent on account of its merger with other company is illegal and bad in law as such the assessment being bad in law deserves to be quashed."

3 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

At the first instance, the ld. Counsel for the assessee argued the aforesaid ground.

5. Facts of case in brief are that a Search & Seizure operation u/s 132 of the Act was carried out in the case of Sh. B. K. Dhingra, Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. on 20.10.2008, during the course of search certain documents belonging to the assessee were seized. Therefore, the proceedings u/s 153C r.w.s 153A of the Act were initiated and the notice u/s 153C of the Act was issued to the assessee. It was also stated in a letter attached to the above said notice that for the earlier notice u/s 153A of the Act issued on 06.07.2010 to the assessee may be treated as withdrawn as it was inadvertently issued. In response to the aforesaid notice u/s 153C of the Act, the assessee filed the return of income on 18.09.2010 for the assessment year 2003- 04 declaring Nil income. However, the AO framed the assessment at an income of Rs. 32,25,180/-.

6. Being aggrieved the assessee carried the matter to the ld. CIT(A) and challenged the initiation of proceedings u/s 153C of the Act. It was submitted to the ld. CIT(A) that the assessee company was not in existence, following its merger with M/s 4 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

Windchimes Constructions Pvt. Ltd. w.e.f 01.04.2008 as per the order of the Hon'ble Delhi High Court dated 16.08.2010, hence the assessment was required to be made on M/s Windchimes Constructions Pvt. Ltd. Reference was made to several cases including the judgment of the Hon'ble Jurisdictional High Court in the case of M/s Spice Entertainment Ltd. Vs CIT in ITA No. 475/2011 and the decision of the ITAT Delhi Benches 'E', New Delhi in the case of ACIT Vs M/s Micra India Pvt. Ltd. in ITA No. 1060 to 1065/Del/2012. The ld. CIT(A), however, did not find merit in the submissions of the assessee by observing that the assessee filed the return of income in response to the notice u/s 153C of the Act on 18.09.2010 and in response to the notices u/s 143(2) and 142(1) of the Act, the Director wrote a letter dated 10.11.2010 by using the Letter Head of the assessee i.e. M/s Mevron Projects Pvt. Ltd. but remained silent about the amalgamation and informed the AO only in November, 2010 i.e. month before the case was getting barred by limitation. He further observed that the assessment proceedings were attended by M/s Windchimes Constructions Pvt. Ltd. also. Accordingly, the ld. CIT(A) rejected the contention of the assessee.

5 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

7. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee amalgamated w.e.f 01.04.2008 with M/s Windchimes Constructions Pvt. Ltd. vide order dated 06.07.2010 of the Hon'ble Jurisdictional High Court. It was further stated that the assessee intimated the AO vide letters dated 23.08.2010 and 27.08.2010 that the assessee company i.e. M/s Mevron Projects Pvt. Ltd. was merged u/s 391 and 394 of the Companies Act, 1956 with M/s Windchimes Constructions Pvt. Ltd. w.e.f 01.04.2008 (a reference was made to page nos. 3 and 3A of the assessee's paper book). It was submitted that the AO vide letter dated 23.08.2010 asked the assessee for non-filing of the returns in response to the notice issued u/s 153C of the Act (a reference was made to page no. 2 of the assessee's paper book). It was submitted that the defect for not issuing the notice u/s 153C to the amalgamating company i.e. M/s Windchimes Constructions Pvt. Ltd., was not a curable defect, therefore, the assessment framed on the amalgamated company i.e. the assessee which was non-existent was void ab initio.

8. The reliance was placed on the following decisions of the various Benches of the ITAT:

6 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

Ø Impsat (P) Ltd. Vs Income Tax Officer, (2004) 91 ITD 354 (Del) Ø ACIT Vs SPN Milk Products Industries Pvt. Ltd., ITA No. 565 to 578/Del/2012 order dated 22.01.2012 of ITAT Delhi Benche 'G' New Delhi.

Ø ACIT Vs Dimension Apparels Pvt. Ltd., ITA No. 571 to 576/Del/2012, order dated 21.06.2013 of ITAT Delhi Bench 'B' New Delhi.

Ø ACIT Vs Micra India Pvt. Ltd., ITA No. 1060 to 1065/Del/2012 order dated 21.09.2012 of ITAT Delhi Bench 'E' New Delhi.

Ø ACIT Vs Chanakaya Export Pvt. Ltd., ITA No. 539 to 544/Del/2012 order dated 19.07.2013 of ITAT Delhi Bench 'B' New Delhi.

Ø Triveni Entineering & Industries Ltd. Vs DCIT, (2005) 93 ITD 561(Del.) Ø Century Enka Ltd. Vs DCIT (2006) 101 ITD 489 (Mum) (2008) 303 ITR 1 (Mum) Ø Pampasar Distillery Ltd. Vs ACIT, (2007) 15 SOT 331 (Kol)

9. The reliance was also placed on the following judgment of the various Hon'ble High Courts/Hon'ble Supreme Courts:

Ø Spice Entertainment Ltd. Vs CIT, ITA No. 475 of 2011 judgment dated 08.08.2011 of Hon'ble Delhi High Court Ø CIT Vs Express Newspapers Ltd. (1960) 40 ITR 38 (MAD) Ø I. K. Agencies Pvt. Ltd. Vs CWT, Kol-II, of Hon'ble Calcutta High Court (2012) 20 Taxman.com 731 (Cal.) Ø CIT Vs Amarchand N. Shroff (1963) 48 ITR 59 (SC) Ø CIT Vs Kurban Hussain Ibrahimji Mithiborwala, 1973 CTR (SC) 454; (1971) 82 ITR 821 (SC) 7 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

Ø CIT Vs Vived Marketing Servicing Pvt. Ltd., ITA No. 273/2009 order dated 17.09.2009 of Hon'ble Delhi High Court Ø Khurana Engineering Ltd. Vs DCIT, SCA NO. 605 of 2013, (2013) 217 Taxman 75 (Guj.) Ø Torrent Pvt. Ltd. Vs CIT, SCA No. 5857 of 2004, judgment dated 29.04.2013 of Hon'ble Gujarat High Court.

10. In his rival submissions the ld. CIT DR strongly supported the order of the ld. CIT(A) and further submitted that the issuance of notice to the amalgamated company instead of amalgamating company was a procedural defect so it was curable. It was emphasized that the assessee participated in the assessment proceedings and never raised the objection, therefore, the assessment framed by the AO was valid.

11. We have considered the submission of both the parties and carefully gone through the material available on the record. In the present case it is an admitted fact that the assessee company amalgamated with M/s Windchimes Constructions Pvt. Ltd. w.e.f 01.04.2008 vide order dated 16.08.2010 of the Hon'ble Jurisdictional High Court and the assessee informed the AO about this fact vide letter dated 27.08.2010 (copy of which is placed at page no. 3A of the assessee's paper book) and the letter dated 23.08.2010 filed on 27.08.2010 with the Income Tax Department (copy of which is 8 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

placed at page no. 3 of the assessee's paper book). Therefore, this fact was in the knowledge of the AO that the assessee was not inexistence at the time of preparation of the satisfaction note dated 05.07.2010 (copy is placed at page no. 1 of the assessee's paper book) for issuing notice u/s 153C of the Act. From the above facts, it is clear that the notice u/s 153C of the Act by the AO was not issued to M/s Windchimes Constructions Pvt. Ltd. with which the assessee company i.e. M/s Mevron Projects Pvt. Ltd. amalgamated. Therefore, the assessment framed vide order dated 31.12.2010 u/s 153C/143(3) of the Act on the assessee was not valid.

12. Similar issue had been adjudicated in the case of ACIT Vs M/s Micra India Pvt. Ltd. in ITA Nos. 1060 to 1065/Del/2012 order dated 21.09.2012 (supra). In the said case, similar search took place and assessment was framed by the same AO of Central Circle-21, New Delhi and even the first appellate authority i.e. the ld. CIT(A)-II, New Delhi was also the same. The relevant findings have been given in paras 5 & 6 which read as under:

"5. On consideration of the above submissions, we find from the orders of the authorities below that the Assessing Officer in its report to the Ld. CIT(A), as mentioned in para no. 16 of the first appellate order, has admitted the fact that the assessee company was 9 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

amalgamated with M/s Dynamic Buildmart Pvt. Ltd. during the assessment year 2009-10. In the assessment order passed u/s 153C of the Income Tax Act, 1961, name of the transferee company i.e. M/s Dynamic Buildmart Pvt. Ltd. was also mentioned. It also remained admitted fact that no notice u/s 143(2)/142(1) of the Income Tax Act, was issued to M/s Dynamic Buildmart Pvt. Ltd., the transferee company and it (transferee company) did not participate in the assessment proceedings. Under these circumstances, we are of the view that Ld. CIT(A) respectfully following the decisions mentioned below, has rightly held that assessment order passed on the assessee company is a nullity:

a) Impsat (P) Ltd. Vs Income Tax Officer, ITAT, Delhi 'A' Bench ITA No. 1430/Del/2004 dated 28.07.2004; 2005 TTJ (Del) 552; (2004) 91 ITD 354 (Del)

b) CIT Vs Vived Marketing Servicing Pvt. Ltd. ITA No. 273/2009.

c) CIT Vs Express Newspapers Ltd. (1960) 40 ITR 38 (MAD): (1960) Tax 13(3)-282

d) CIT Vs Amarchand N. Shroff (1963) 48 ITR 59 (SC)

e) I. K. Agencies Pvt. Ltd. Vs CWT, Kol-II, Judgment dated 11.03.2011

f) Triveni Entineering & Industries Ltd. Vs DCIT, ITAT Delhi WT Bench, (2005) 93 TTJ (Del) 806:

(2005) 93 ITD 561

g) Century Enka Ltd. Vs DCIT dated 14.02.2006:

2006 101 ITD 489 (Mum), 2008 303 ITR 1 (Mum)

h) Pampasar Distillery Ltd. Vs ACIT, ITAT, Kolkata E Bench, (2007) 15 SOT 331 (Kol) 10 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

i) CIT Vs Kurban Hussain Ibrahimji Mithiborwala, 1973 CTR (SC) 454; (1971) 82 ITR 821 (SC)

j) Spice Entertainment Limited Vs CIT ITA 475 & 476 of 2011

6. We fully concur with the finding of the Ld. CIT(A) that a company incorporated under Indian Companies Act is a juristic person. It takes its birth and gets life with incorporation and it dies with the dissolution as per the provision of the Companies Act. On amalgamation, the company seizes to exist in the eyes of the law. Thus, assessment upon a dissolved company is impermissible as there is no provision of Income Tax Act to make an assessment thereupon. Ld. CIT(A), in our view, has therefore, rightly held that assessment on a company which has been dissolved by amalgamation u/s 391 and 394 of the Companies Act, 1956 is invalid.

Admittedly, the assessee company in the present case stood dissolved on 22.12.2009 on amalgamation with M/s Dynamic Buildmart Pvt. Ltd. and the assessment order in the present case has been framed on 31.12.2010. The first appellate order on the issue is thus upheld. The ground no. 4 is accordingly rejected."

13. So, respectfully following the aforesaid referred to order of the Co-ordinate Bench, we set aside the impugned order passed by the ld. CIT(A) and the assessment framed by the AO on a non-existent company is held to be invalid, for the reason that the initiation of the proceedings for assessment was vitiated for not giving notice to M/s Windchimes Constructions Pvt. Ltd. with which the assessee company amalgamated.

11 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

14. On a similar issue, the Hon'ble Calcutta High Court in the case of I. K. Agencies Pvt. Ltd. Vs CWT (supra) held as under:

"That the initiation of the proceedings for reopening of assessment depends upon the service of a valid notice in terms of section 17 upon the assessee. A notice issued to a person who is not in existence at the time of issuing such notice cannot make it valid and the law permits the Assessing Officer to issue a fresh notice in conformity with the law.

The authorities below totally overlooked the fact that initiation of the proceedings for reassessment was vitiated for not giving notice under section 17 to the assessee and the notice issued upon 'A' which was not in existence at that time was insufficient to initiate proceedings against the assessee who had taken over the liability of 'A' earlier to the issue of such notice and such fact was also made known to the revenue. Thus, the reassessment proceedings were to be set aside on that ground alone."

15. Similarly, the Hon'ble Jurisdictional High Court vide order dated 17.09.2009 in ITA No. 273/2009 in the case of CIT Vs Vived Marketing Servicing Pvt. Ltd. (supra) held as under:

"When the Assessing Officer passed the order of assessment against the respondent company, it had already been dissolved and struck off the register of the Registrar of companies under Section 560 of the Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any assessment order passed against the company which was not in existence as on that date in the eyes of law 12 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

it had already been dissolved. The Tribunal relied upon its earlier decision in Impsat Pvt. Ltd. Vs ITO 276 ITR 136 (AT). We are of the opinion that the view taken by the Tribunal is perfectly valid and in accordance with law. No substantial question of law arises. Dismissed."

16. Same view has been expressed by the Hon'ble Gujarat High Court on a similar issue in the case of Khurana Engineering Ltd. Vs DCIT (OSD) (2013) 217 Taxman 75 wherein it has been held that the assessment proceedings could not be resorted to in case of amalgamated company.

17. In view of the aforesaid discussion and keeping in view the ratio laid down in the above said judicial pronouncements, we are of the view that for making the assessment, it is absolutely essential that the person so to be assessed should be in existence at the time of making the assessment. In the present case the assessment has been framed by the AO on a date when the present assessee was not in existence and M/s Windchimes Constructions Pvt. Ltd. was fastened with the liability of the assessee but no notice was issued to the said amalgamating company i.e. M/s Windchimes Constructions Pvt. Ltd., therefore, the assessment framed by the AO vide assessment order dated 31.12.2010 was not valid.

13 ITA Nos. 4938 to 4943 & 5412 to 5417/Del/2013 Mevron Projects Pvt. Ltd.

18. In the other appeals of the assessee, facts are identical, therefore, our findings given in former part of this order for the assessment year 2003-04 shall apply mutatis mutandis. Since the assessment orders in the case of the assessee are held to be a nullity. The issues raised by the department in its appeals have become infructuous and do not require any adjudication on our part.

19. In the result, appeals of the assessee are allowed and the appeals of the department are dismissed. (Order pronounced in the open Court on 20/02/2015).

Sd/- Sd/- (A. T. Varkey) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 20/02/2015 *Subodh*

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR