M/s Images Credit and Portfolio (P) Ltd. (Amalgamated with Sainath Associates Pvt.Ltd.) B 19, Pamposh Enclave, G.K. I New Delhi Vs. ACIT, Central Circle 21 New Delhi
December, 22nd 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `C' : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No. 5301 to 5305/Del/13
AY: 2004-05 to 2008-09
ITA No. 5306/Del/13
M/s Images Credit and Portfolio (P) Ltd. vs. ACIT, Central Circle 21
(Amalgamated with New Delhi
Sainath Associates Pvt.Ltd.)
B 19, Pamposh Enclave, G.K. I
PAN: AADCS 6195 C
ITA No. 5418 to 5423/Del/13
AY: 2003-04 to 2008-09
DCIT, Central Circle 21 vs. M/s Image Credit and Portfolio Ltd.
New Delhi (Amalgamated with Sainath Associates
Appellant by : Shri Kapil Goel, Adv.
Shri BK Dhingra, C.A.
Respondent by : Shri R.I.S.Gill, CIT, D.R.
PER BENCH :
These are Cross Appeals directed against a common order passed
by the Ld.CIT(Appeals)-II, New Delhi dated 16th July, 2013 pertaining to
the Assessment Years 2003-04 to 2008-09.
2. Since the facts and grounds of the appeals in all the Assessment
Years are more or less common, we shall consider the facts and grounds
of appeal for the Assessment Year 2003-04, and the decision arrived at
for the Assessment Year 2003-04 would be equally applicable to other
Assessment Years from 2004-05 to 2008-09.
3. Ground no.5 of the assessee's appeal which is against the validity
of the issue of notice under Section 153C of the Act and consequently the
completion of assessment in pursuance thereto, reads as under.
"5. That on the facts and circumstances of the case and the provision of
law, the Ld.CIT(Appeals) has failed to appreciate that initiation of
proceedings under Section 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."
4. The facts of the case are that there was a search and seizure action
under Section 132 of the Income Tax Act (the Act) in the cases of Shri BK
Dhingra, Smt.Poonam Dhingra and M/s Madhusudan Buildcon Pvt.Ltd.,
New Delhi on 20th October,2008. On the basis of documents found from
the residential premises of Shri BK Dhingra, which were belonging to the
assessee company, proceedings under Section 153C read with S.153A
were initiated in the case of the assessee vide notice dated 10th
September,2010. The Assessing Officer completed the assessment vide
order dated 31st December,2010 at the total income of Rs.32,91,002/- in
which the following additions were made:
Unexplained purchases under Section 68 Rs.28,80,575/-
Expenses disallowed Rs. 4,01,338/-
Both the above additions were deleted by the Ld.CIT(A). Therefore, the
Revenue is in appeal against the deletion of the addition by the Ld.CIT(A).
The assessee is in appeal wherein the validity of the initiation of
proceedings under Section 153C on various grounds have been
challenged. However, at the time of hearing before us, the Ld.Counsel for
the assessee first referred and argued ground no.5 of the assessee's
appeal. Therefore, we have taken up ground no.5 of the assessee's
appeal first for hearing and adjudication. It was stated by the
Ld.Counsel for the assessee that there was amalgamation of the assessee
company with M/s Sainath Associates Pvt.Ltd., the Hon'ble
Jurisdictional High Court sanctioned the amalgamation vide order dt.
25.5.2010. That after the order of the amalgamation by the Hon'ble
Jurisdictional High Court the assessee company namely M/s Image
Credit and Portfolio Pvt.Ltd. (supra) ceased to exist. That the Assessing
Officer issued notice under Section 153 C on 14.9.2010 which was after
the order of Hon'ble Jurisdictional High Court sanctioning the scheme of
amalgamation. Thus the notice issued under Section 153C in the name
of non existing company is a nullity and consequently the assessment
framed on the basis of notice issued under Section 153C is also a
nullity. In support of this contention he relied upon the decision of the
Delhi "F" Bench of the ITAT in the case of PD Associates Pvt.Ltd. in ITA
nos. 5811/Del/2013 to 5816/Del/2013, and the decision of Hon'ble
Jurisdictional High Court in the case of Spice Entertainment Ltd. in ITA
nos. 475 and 476 of 2011.
5. The Ld.D.R. on the other hand relied upon the order of the
authorities below and stated that in the assessment order the Assessing
Officer has duly mentioned that M/s Image Credit and Portfolio Pvt.Ltd.
has amalgamated with M/s Sainath Associates Pvt.Ltd. Therefore in
affect the assessment order is not passed on a non-existent entity but on
M/s Sainath Associates P.Ltd. which is very much in existence. He also
pointed out that the assessee intimated the Assessing Officer about the
amalgamation of the assessee company vide letter dt. 19th
November,2010. Notice under Section 153C was already issued before
that date i.e. on 14th September,2010. He, therefore, submitted that the
assessment order is validly passed and the same should be upheld.
6. We have carefully considered the arguments of both sides, perused
the material placed before us. Admittedly the assessment for the year
under consideration has been completed on the basis of notice under
Section 153C dt. 14.9.2010 which reads as under.
To: M/s Image Credit & Portfolio Pvt.Ltd.
In pursuance of the provisions of section 153C of the Income TaxAct, 1961,
inserted by the Finance Act,2003 with effect from 1st June,2003, you are
required to furnish return of income in respect of AY 2003-04 in respect of
which you are assessable as company.
The return shall be in `Form' as prescribed in sub-rule(1) 12 of Income Tax
Rules, 1962 and shall be delivered in this office within 15 days of service
of this notice. The prescribed form should be duly verified and signed in
accordance with the provisions of s.140 of the Income Tax Act,1961.
Sd/- (Gautam Deb)
ACIT, CC 17, N.Delhi"
6.1. From the above it is evident that the notice has been issued in the
name of M/s Image Credit & Portfolio Ltd. That the Hon'ble Delhi High
Court, which is the Jurisdictional High Court, has passed the order dt.
25th day of May,2010 under Section 394 of the Companies Act, 1956
approving the amalgamation of the assessee company with M/s Sainath
Associates Pvt.Ltd. The relevant finding of their Lordships held as under.
"THIS COURT DOTH HEREBY SANCTION THE SCHME OF
AMALGAMATION set forth in Schedule I annexed hereto and Doth hereby
declare the same to be binding on all the shareholders & creditors of the
Transferor and Transferee Companies and all concerned and doth approve
the said Scheme of Amalgamation with effect from the appointed date i.e.
Thus their Lordships have approved the amalgamation w.e.f. appointed
date i.e. 1st April,2008. The order approving amalgamation was passed
on 25th day of May,2010 by which M/s Image Credit and Portfolio P.Ltd.
which is a transferor company merged and amalgamated with M/s
Sainath Associates Pvt.Ltd. which is a transferee company. Thus M/s
Image Credit and Portfolio Pvt.Ltd. i.e. the assessee ceased to exist after
25th day of May,2010. The notice under Section 153C in the name of
M/s Image Credit and Portfolio Pvt.Ltd. was issued on 10th
September,2010 i.e. after the date when M/s Image Credit and Portfolio
Pvt.Ltd. ceased to exist. The Hon'ble Jursidictional High Court has
considered the validity of notice issued under Section 143(2) of the Act
after amalgamation in the case of M/s Spice Entertainment Ltd. vide ITA;
nos. 475 and 576/2000. Their Lordships held as under.
" 11. After the sanction of the scheme on 11th April,2004, the Spice ceases
to exist w.e.f. 1st July,2003. Even if Spice had filed the returns, it became
incumbent upon the Income tax authorities to substitute the successor in
place of the said `dead person'. When notice under Section 143(2) was
sent, the appellant/amalgamated company appeared and brought this fact
to the knowledge of the Assessing Officer. He, however, did not substitute
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 date. In such proceedings and assessment order passed in the name
of M/s Spice would clearly be void. Such a defect cannot be treated as
procedural defect. Mere participation by the appellant would be of no
effect as there is no estoppels against law."
6.2. The ratio of the above decision would be squarely applicable to the
case of the assessee because the facts are identical. In the above
mentioned case notice under Section 143(2) of the Act was sent to the
company which was not in existence on the date of the issue of notice.
Similarly in the case of the assessee notice under Section 153C was
issued in the name of M/s Image Credit and Portfolio Pvt.Ltd. on 10th
September,2010 when this company was not in existence. Therefore, the
ratio of the decision of Hon'ble Jurisdictional High Court in the case of
M/s Spice Entertainment Ltd. (supra) would be squarely applicable to
the issue of notice under Section 153C in the case of the assessee.
Whether the assessee intimated about the amalgamation before the issue
of notice under Section 153C or not would not be relevant for deciding
the issue of validity of the notice under Section 153C of the Act. Whether
the assessee intimated or not the fact remains that M/s Images Credit
and Portfolio (P) Ltd. ceased to exist after the approval of amalgamation
by the Hon'ble Jurisdictional High Court i.e. 25th day of May,2010.
Whether it is in the knowledge of the Revenue or not any notice issued in
the name of a non existent person is a nullity. Therefore, we hold that
the issue of notice under Section 153C of the Act on 10th
September,2010 was void. It may be pointed out that on 19th
November,2010 the assessee intimated to the Assessing Officer with
regard to amalgamation of the assessee company with M/s Sainath
Associates Pvt.Ltd. and also furnished a copy of the order of the Hon'ble
Jurisdictional High Court. At that time the Assessing Officer could have
issued the notice under Section 153C in the name of the transferor
company i.e. M/s Sainath Associates Pvt.Ltd. However, the Assessing
Officer instead of issuing notice in the name of transferor company chose
to complete the assessment in the name of the assessee by simply
mentioning in the Cause Title of the assessment order the fact of
amalgamation. Considering the totality of the above facts and
respectfully following the decision of Hon'ble Jurisdictional High Court
in the case of M/s Spice Entertainment Ltd. we hold that the issue of
notice under Section 153C in the name of M/s Image Credit and Portfolio
Pvt.Ltd. on 10th September,2010 is void. Accordingly the same is
quashed. Once the notice issued under Section 153C has been quashed
the assessment completed in pursuance to such notice also cannot
survive and the same is also quashed.
6.3. The facts in the AY 2004-05 to 2008-09 are identical. Therefore,
the issue of notice under Section 153C for the AY 2004-05 to 2008-09
and the consequential assessment orders which were passed in
pursuance to such notice are also cancelled.
6.4. Since we have already quashed the assessment order, the grounds
of appeal raised by the Revenue in its appeals against the deletion of
addition by the Ld.CIT(A) do not survive.
7. In the result, assessee's appeals are allowed and Revenue's appeals
Decision pronounced in the open Court on 19th December, 2014.
(H.S. SIDHU) (G.D. AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 19.12.2014
Copy forwarded to: -
1. Appellant :
2. Respondent :
5. DR, ITAT