IN THE INCOME TAX APPELLATE TRIBUNAL
`B' : NEW DELHI
DELHI BENCH `B
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
GARG, JUDICIAL MEMBER
SHRI CHANDRA MOHAN GARG,
No.4270/Del/2010
ITA No.
2006-07
Assessment Year : 2006-
Assistant Commissioner of Vs. M/s DLF Cyber City Developers
Income Tax, Limited,
Circle-31(1),
Circle-31(1), (Successors to DLF Cyber City),
C.R. Building, I.P. Estate, DLF Centre,
New Delhi. Sansad Marg,
New Delhi 110 001.
PAN : AAEFD1469L.
(Appellant) (Respondent)
No.4010/Del/2010
ITA No.4010/Del/2010
Year : 2006-
Assessment Year 2006-07
M/s DLF Cyber City Vs. Additional Commissioner of
Developers Limited, Income Tax,
(Successors to DLF Cyber Range-
Range-31,
City), C.R. Building,
DLF Centre, New Delhi 110 002.
Sansad Marg,
New Delhi 110 001.
PAN : AAEFD1469L.
(Appellant) (Respondent)
Revenue by : Smt. Dr. Sudha Kumari, CIT-DR.
Assessee by : Shri Pradeep Dinodia and
Shri R.K. Kapoor, Chartered
Accountants.
ORDER
PER G.D. AGRAWAL, VP :
These appeals by the Revenue and the assessee are directed
against the order of learned CIT(A)-XXVI, New Delhi dated 28th June,
2010 for the AY 2006-07.
2 ITA-4270 & 4010/D/2010
2. At the time of hearing before us, the learned counsel for the
assessee stated that since ground No.3 of the assessee's appeal is
with regard to validity of the issue of notice under Section 148, it
should be decided first and thereafter only, the grounds raised either
by the assessee or by the Revenue with regard to various additions
deleted/sustained by the learned CIT(A) should be considered.
Learned DR has no objection to the above request of the assessee's
counsel. Accordingly, we proceed to decide ground No.3 of the
assessee's appeal which reads as under:-
"Without prejudice to the above grounds of appeal, the
learned Commissioner of Income Tax (Appeals) ought to
have held that the notice issued u/s 148 of the Income-tax
Act, 1961 and the consequent assessment in the name of
the erstwhile firm is bad in law, void ab-initio and non-est."
3. Learned counsel for the assessee stated that the notice under
Section 148 was issued on 18th August, 2008 in the name of DLF Cyber
City (through partner). That DLF Cyber City partnership firm ceased to
exist after its conversion into company with effect from 2nd March,
2006. That the issue of notice in the name of a non-existent person is
void ab-initio and similarly, the completion of assessment in the name
of a non-existent person is also void. He referred to the notes to the
financial statement which read as under:-
"5. The firm has been converted into public company
DLF Cyber City Developers Limited with effect from March
2, 2006, under chapter IX of the Companies Act, 1956.
Hence the firm's accounts are prepared only upto the
period of March 1, 2006."
4. He also referred to the reply furnished by the assessee in
response to notice under Section 148 and pointed out that in the letter
head, it is clearly mentioned `DLF Cyber City Developers Ltd.
(Successor to DLF Cyber City). Again, when the letter was signed, it
3 ITA-4270 & 4010/D/2010
was mentioned as DLF Cyber City Developers Ltd. (Successor to DLF
Cyber City). In support of his contention, he relied upon the decision of
Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. Vs. CIT
[2012] 247 CTR (Del) 500 and the Third Member decision of Agra
Bench in the case of ITO, 4(4), Agra Vs. Sikandar Lal Jain [2011] 45
SOT 113 (Agra)(TM).
5. Learned DR, on the other hand, supported the orders of the
lower authorities. She stated that in the year under consideration, the
assessee filed the return declaring income of `41,31,220/- on 29th
December, 2006. The return was filed in the name of partnership firm
and not in the name of the successor company. That in response to
notice under Section 148 also, the assessee never pointed out that the
firm is not in existence but only stated that the return filed originally
should be treated as return of income in response to the notice under
Section 148. That the assessee never intimated to the Revenue with
regard to dissolution of the firm and its conversion into the company.
Therefore, the assessee misguided the Department. That simply
mentioning in the letter head as successor to DLF Cyber City cannot be
considered to be proper intimation of the dissolution of the firm. She
further submitted that the assessee duly participated in the
assessment proceedings and, therefore, even if there is any
irregularity, that can be rectified by changing the name of the
assessee. In support of this contention, she relied upon the following
decisions:-
(i) CIT Vs. T.V. Sundaram Iyengar and Sons P.Ltd. [1999]
238 ITR 328 (Madras).
(ii) Century Enka Ltd. Vs. DCIT [2008] 303 ITR (A.T.) 0001
(ITAT Mumbai).
4 ITA-4270 & 4010/D/2010
(iii) M Corp Global (P) Ltd. Vs. DCIT ITA No.2024/Del/2008
A.Y. 2002-03, order dated 29.01.2008.
6. She, therefore, submitted that either the order of learned CIT(A)
should be sustained or the matter may be sent to the file of the
Assessing Officer to modify the name of the assessee.
7. In the rejoinder, it is stated by the learned counsel that the
decision of ITAT Delhi Bench relied upon by the learned DR has been
reversed by the Hon'ble Jurisdictional High Court in 247 CTR 500. That
another decision of the ITAT is also prior to the above decision of
Hon'ble Delhi High Court. He further stated that the facts in the other
cases relied upon by the learned DR are altogether different. He,
therefore, submitted that on the facts of the assessee's case, the
decision of Hon'ble Jurisdictional High Court in the case of Spice
Infotainment Ltd. (supra) would be squarely applicable.
8. We have carefully considered the submissions of both the sides
and perused relevant material placed before us. The facts of the case
are that the Assessing Officer issued notice under Section 148 on 18th
August, 2008 in the name of M/s DLF Cyber City (through partner).
Therefore, it is undisputed that the notice was issued to the
partnership firm. It is also undisputed that the partnership firm ceased
to exist from 2nd March, 2006 after its conversion into company under
Chapter IX of the Companies Act. For the AY 2006-07, the firm has
prepared the accounts for the period 1.4.2005 to 1.3.2006 and also
filed the return for the above period. The Revenue has also completed
the assessment on the basis of the said return. We also find that the
assessee has not separately intimated about the conversion of the firm
into company but in the note which was forming part of the annual
5 ITA-4270 & 4010/D/2010
accounts, the fact of conversion of the assessee into public company is
mentioned. The said note reads as under:-
"5. The firm has been converted into public company
DLF Cyber City Developers Limited with effect from March
2, 2006, under chapter IX of the Companies Act, 1956.
Hence the firm's accounts are prepared only upto the
period of March 1, 2006."
9. The letter head on which the reply was furnished to the
Assessing Officer reads as under:-
"DLF Cyber City Developers Ltd.
(Successor to DLF Cyber City)
DLF Centre, 9th Floor, Sansad Marg, New Delhi 110001"
10. From the above, it is clear that though no separate intimation
was given to the Revenue with regard to the conversion of the
partnership firm into company with effect from 2nd March, 2006, but
the fact was available on record. Be that as it may, whether the
Assessing Officer was aware or not about the non-existence of the
partnership firm, the question before us is whether the issue of notice
under Section 148 to a non-existent entity is valid? We find that
somehow similar issue arose before the ITAT in the case of M Corp
Global (P) Ltd. (supra) relied upon by the learned DR. The facts of the
said case were that the above assessee viz., M/s Spice Corporation Ltd.
filed the return of income for AY 2002-03 on 30th October, 2002. The
assessment was completed under Section 143(3) on 28th March, 2005.
Before the CIT(A), the assessee contended that the assessment in the
hands of M/s Spice Corporation Ltd. which is a non-entity is not valid
because the company stood dissolved consequent upon its
amalgamation with M Corp Global (P) Ltd. with effect from 1st July,
2003. The CIT(A) rejected this ground and the assessee was in appeal
6 ITA-4270 & 4010/D/2010
before the ITAT, Delhi Bench. The ITAT, Delhi Bench restored the
matter to the file of the Assessing Officer with the following finding:-
"14. In the light of the discussion s made above, we,
therefore, hold that the assessment made by the AO, in
substance and effect, is not against the non-existent
amalgamating company. However, we do agree with the
proposition or ratio decided in the various cases relied
upon by the learned counsel for the assessee that the
assessment made against non-existent person would be
invalid and liable to be struck down. But, in the present
case, we find that the assessment, in substance and effect.
Has been made against amalgamated company in respect
of assessment of income of amalgamating company for the
period prior to amalgamation and mere omission to
mention the name of amalgamated company alongwith the
name of amalgamating company in the body of
assessment against the item "Name of the assessee" is not
fatal to the validity of assessment but is a procedural
defect covered by Section 292B of the Act. We hold
accordingly.
15. We, therefore, restore the assessment back to the
file of the AO for his fresh assessment after removing the
said defect in the assessment and the AO shall provide
reasonable opportunity of being heard to the assessee.
Therefore, the Cross Objections raised by the assessee are
partly allowed for statistical purposes."
11. The assessee, aggrieved with the decision of the ITAT, filed
appeal before Hon'ble Jurisdictional High Court and Hon'ble
Jurisdictional High Court in the case of Spice Infotainment Ltd. Vs. CIT
[2012] 247 CTR (Del) 500 quashed the assessment by holding as
under:-
"Held : No doubt, S was an assessee and an incorporated
company and was in existence when it filed the returns in
respect of two assessment years in question. However,
before the case could be selected for scrutiny and
assessment proceedings could be initiated, S got
amalgamated with MC Ltd. It was the result of the scheme
of the amalgamation filed before the Company Judge of
7 ITA-4270 & 4010/D/2010
this Court which was duly sanctioned vide orders dt. 11th
Feb., 2004. With this amalgamation made effective from
1st July, 2003, S ceased to exist. That is the plain and
simple effect in law. The scheme of amalgamation itself
provided for this consequence, inasmuch as simultaneous
with the sanctioning of the scheme, S was also stood
dissolved by specific order of this Court. With the
dissolution of this company, its name was struck off from
the rolls of companies maintained by the RoC. A company
incorporated under the Indian Companies Act is a juristic
person. It takes its birth and gets life with the
incorporation. It dies with the dissolution as per the
provisions of the Companies Act. It is trite law that on
amalgamation, the amalgamating company ceases to exist
in the eyes of law. In view of the aforesaid clinching
position in law, it is difficult to digest the circuitous route
adopted by the Tribunal holding that the assessment was
in fact in the name of amalgamated company and there
was only a procedural defect. After the sanction of the
scheme on 11th Feb., 2004, S ceased to exist w.e.f. 1st July,
2003. Even if S had filed the returns, it became incumbent
upon the IT authorities to substitute the successor in place
of the said `dead person'. When notice under s. 143(2)
was sent, the appellant/amalgamated company appeared
and brought this fact to the knowledge of the AO. He,
however, did not substitute the name of the appellant on
record. Instead, the AO made the assessment in the name
of S which was non-existing entity on that day. In such
proceedings an assessment order passed in the name of S
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 estoppel against law."
12. Their Lordships further observed :-
"18. We may, however, point out that the returns were
filed by M/s Spice on the day when it was in existence 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 s. 143(2) of the
Act. In these circumstances, it would be incumbent upon
the AO to first substitute the name of the appellant in place
of M/s Spice and then issue notice to the appellant.
However, such a course of action can be taken by the AO
8 ITA-4270 & 4010/D/2010
only if it is still permissible as per law and has not become
time-barred."
13. In our opinion, the ratio of the above decision of Hon'ble
Jurisdictional High Court would be squarely applicable to the case of
the assessee. It is a settled law that the partnership firm and the
company are separate juridical persons. Under the Income-tax Act
also, they are assessed separately. Chapter IX of the Companies Act
permits the conversion of the partnership firm into company and, on
such conversion, the partnership firm ceases to exist and the company
comes into existence. This incident has taken place on 1st March, 2006
and therefore, from 2nd March, 2006, DLF Cyber City firm is no more in
existence. Notice under Section 148 was issued on 18th August, 2008,
i.e., the date on which the partnership firm was not in existence.
Hon'ble Jurisdictional High Court in the above mentioned case has held
that the assessment in the hands of dead person would be clearly void.
The aforesaid observation would be squarely for the issue of notice
under Section 148 in the name of dead person. Therefore, respectfully
following the above decision, we hold that the issue of notice under
Section 148 in the name of a dead person is void. It is not much
relevant whether the Assessing Officer was aware or not with regard to
dissolution of the firm. However, we may point out that the Revenue is
at liberty to take appropriate action in accordance with law in the
hands of the successor company in the light of the observations of
Hon'ble Jurisdictional High Court at paragraph 18 of the report which is
also reproduced by us at paragraph 12 above.
14. Before we part with the matter, we may mention that the learned
DR also relied upon the decision of Hon'ble Madras High Court in the
case of T.V. Sundaram Iyengar and Sons P.Ltd. (supra) and the decision
of ITAT Mumbai Bench in the case of Century Enka Ltd. (supra).
However, the decision of Hon'ble Jurisdictional High Court would be
9 ITA-4270 & 4010/D/2010
binding upon us and no contrary decision of Hon'ble Jurisdictional High
Court or Hon'ble Apex Court is brought to our knowledge. We,
therefore, respectfully following the decision of Hon'ble Jurisdictional
High Court in the case of Spice Infotainment Ltd. (supra), quash the
notice under Section 148 and also the assessment order passed in
pursuance to notice under Section 148.
15. Since the assessment order has been quashed by us, the various
grounds raised by the Revenue and the assessee in the respective
appeals need no separate adjudication.
16. In the result, the appeal of the assessee is allowed while the
appeal of the Revenue is deemed to be dismissed.
Decision pronounced in the open Court on 22nd August, 2014.
Sd/- Sd/-
GARG)
(CHANDRA MOHAN GARG) AGRAWAL)
(G.D. AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 22.08.2014
VK.
Copy forwarded to: -
1. Appellant : Assistant Commissioner of Income Tax,
Circle-31(1), C.R. Building, I.P. Estate,
Circle-
New Delhi.
2. Respondent : M/s DLF Cyber City Developers Limited,
(Successors to DLF Cyber City),
DLF Centre, Sansad Marg,
New Delhi 110 001.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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