Commissioner of Income-tax (C)-II v. Micra India Pvt. Ltd
[Citation -2015-LL-0122-12]

Citation 2015-LL-0122-12
Appellant Name Commissioner of Income-tax (C)-II
Respondent Name Micra India Pvt. Ltd.
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 22/01/2015
Judgment View Judgment
Keyword Tags income tax authorities • amalgamating company • amalgamation scheme • condition precedent • transferee-company • insurance company • issue of notice • valid notice • substantial question law
Bot Summary: The assessee s contention that the order was invalid ultimately prevailed with the ITAT, which held that since the assessee had amalgamated with the transferee company, notice ought to have been sent to the latter, and since such notice had not been issued to the transferee company, the entire proceedings were a nullity. Section 481 of the Companies Act provides for dissolution of the company. The Company Judge in the High Court can order dissolution of a company on the grounds stated therein. The revenue urges that the assessment is justified because the liabilities of the amalgamating company accrue to the amalgamated company. In Saraswati Industrial Syndicate it was held that: ITA 441/2013 connected matters Page 5 after the amalgamation of the two companies the transferor company ceased to have any entity and the amalgamated company acquired a new status and it was not possible to treat the two companies as partners or jointly liable in respect of their liabilities and assets. In Vivid Marketing, this court held: 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 u/s 560 of the Companies Act. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed.


IN HIGH COURT OF DELHI AT NEW DELHI Decided on: 22nd January, 2015 ITA 441/2013 ITA 444/2013 ITA 445/2013 ITA 446/2013 ITA 452/2013 ITA 461/2013 COMMISSIONER OF INCOME TAX (C)-II .Appellant Through Mr. N P Sahni, Sr. Standing Counsel with Mr. Nitin Gulati and Mr. Judy James, Jr. Standing Counsel versus MICRA INDIA PVT LTD Respondent Through Mr. Salil Kapoor and Mr. Vikas Jain, Advs. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K.GAUBA MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) % 1. present appeals of revenue are directed against common order of Income Tax Appellate Tribunal (hereinafter, ITAT) dated 21.9.2012 passed in ITA Nos. 1060-1065/Del./2012. question of law sought to be urged by revenue is whether in facts and circumstances of case, notice issued under Section 153C/143(3) of Income Tax Act, 1961 ITA 441/2013 & connected matters Page 1 (hereinafter, Act) to M/s Micra India Pvt. Ltd. was binding and could have been proceeded with further. 2. facts necessary to decide case are that original assessee, M/s Micra India Pvt. Ltd., was assessed in regular course of its business for assessment years 2003-04 through 2008-09. Proceedings under Section 391 of Companies Act were initiated to amalgamate said assessee (M/s Micra India Pvt. Ltd.) with M/s Dynamic Buildmart (P) Ltd. (hereinafter referred to as transferee ). order sanctioning amalgamation scheme was made by this Court on 22.12.2009; in its terms appointed date was 01.04.2008. In other words, amalgamation was w.e.f. 01.04.2008. In terms of sanctioned scheme, liabilities of transferor company, i.e. original assessee M/s Micra India Pvt. Ltd., were to be taken over and discharged by transferee. For subsequent period, i.e. 2009-10 and 2010-11, comprehensive returns were filed by transferee-company at relevant time. Accordingly, fact of amalgamation was communicated to revenue on 06.05.2010. While so, on 08.09.2010, revenue issued notice under Section 153C to M/s Micra India Pvt. Ltd. (which had ceased to exist by then) on basis of search conducted in premises of some other parties (including M/s Madhusudan Buildcon Pvt. Ltd. and M/s Mayank Traders Pvt. Ltd.) on 20.10.2008. In response to notice under Section 153C, assessee in its return filed on 02.11.2010 contended that proceedings were illegal, bad in law and without jurisdiction. Subsequently, assessee in its response dated 22.11.2010 to AO s questionnaire stated that, inter alia, assessee had ceased to exist on account of dissolution consequent upon amalgamation ITA 441/2013 & connected matters Page 2 sanctioned by this Court on 22.12.2009 w.e.f 1.4.2008. AO, however, completed assessment in respect of transferor company. assessee s contention that order was invalid ultimately prevailed with ITAT, which held that since assessee had amalgamated with transferee company, notice ought to have been sent to latter, and since such notice had not been issued to transferee company, entire proceedings were nullity. 3. It is urged on behalf of revenue that ITAT fell into error in not noticing that assessee, at initial stages of proceedings before assessing officer, did not object to proceedings and did not rely upon amalgamation. It was contended that in these circumstances, ITAT should not have interfered with and quashed assessment. Counsel for revenue argued that after receiving notice under Section 153C, assessee participated in proceedings. AO, in fact took note of change resultant from amalgamation and reflected that in assessment order. revenue further argues that having participated in assessment proceedings, it is not open to assessee to contest their validity; it relies upon Section 292B of Act in support of this contention. 4. Learned counsel for assessee argued that proceedings against M/s Micra India Pvt. Ltd. abated with its dissolution, consequent upon its amalgamation with transferee company. This event was notified well in advance by transferee company, which had even reflected income and other related matters of transferor company for relevant period. Even after receipt of notice under Section 153C, transferee company intimated about amalgamation. Yet final assessment order of AO was ITA 441/2013 & connected matters Page 3 in respect of company which did not exist on date of assessment. It was, therefore, urged that impugned order of ITAT should be left undisturbed. 5. Counsel for assessee relies upon decision of Supreme Court in Saraswati Industrial Syndicate v. CIT, 1990 Supp. 1 SCR 332 and two rulings of this Court : Spice Entertainment Ltd v. CIT (ITA 475/2011; reported in 2012 (280) ELT 43) and CIT v. Vivid Marketing Servicing Pvt. Ltd. (ITA 273/2009). In Spice Entertainment (supra) this Court held as follows: 9. Court referred to its earlier judgment in General Radio and Appliances Co. Ltd. Vs. M.A. Khader (1986) 60 Comp Case 1013. In view of aforesaid clinching position in law, it is difficult to digest circuitous route adopted by Tribunal holding that assessment was in fact in name of amalgamated company and there was only procedural defect. 10. Section 481 of Companies Act provides for dissolution of company. Company Judge in High Court can order dissolution of company on grounds stated therein. effect of dissolution is that company no more survives. dissolution puts end to existence of company. It is held in M.H. Smith (Plant Hire) Ltd. Vs. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342 (CA) that once company is dissolved it becomes non-existent party and therefore no action can be brought in its name. Thus insurance company which was subrogated to rights of another insured company was held not to be entitled to maintain action in name of company after latter had been dissolved XXX XXX XXX 15. Likewise, in case of Sri Nath Suresh Chand Ram Naresh Vs. CIT (2006) 280 ITR 396, Allahabad High Court held ITA 441/2013 & connected matters Page 4 that issue of notice under Section 148 of Income Tax Act is condition precedent to validity of any assessment order to be passed under section 147 of Act and when such notice is not issued and assessment made, such defect cannot be treated as cured under Section 292B of Act. Court observed that this provision condones invalidity which arises merely by mistake, defect or omission in notice, if in substance and effect it is in conformity with or according to intent and purpose of this Act. Since no valid notice was served on assessee to reassess income, all consequent proceedings were null and void and it was not case of irregularity. Therefore, Section 292B of Act had no application. 6. In case of amalgamation, predecessor of assessee (being dissolved company) cannot be found . Consequently, Section 170(2) of Act applies. This provision clarifies that where predecessor cannot be found, assessment of income of previous year in which succession took place up to date of succession and of previous year preceding that year shall be made on successor in like manner and to same extent as it would have been made on predecessor. (Emphasis Supplied) 7. revenue, however, urges that assessment is justified because liabilities of amalgamating company accrue to amalgamated (transferee) company. While that is true, question here is which entity must assessment be made on. text of Section 170(2) makes it clear that assessment must be made on successor (i.e., amalgamated company). 8. In Saraswati Industrial Syndicate (supra) it was held that: ITA 441/2013 & connected matters Page 5 after amalgamation of two companies transferor company ceased to have any entity and amalgamated company acquired new status and it was not possible to treat two companies as partners or jointly liable in respect of their liabilities and assets. In Vivid Marketing (supra), this court held: When Assessing Officer passed order of assessment against respondent company, it had already been dissolved and struck off register of Registrar of companies u/s 560 of Companies Act. In these circumstances, Tribunal rightly held that there could not have been any assessment order passed against company which was not in existence as on that date in eyes of law it had already been dissolved. It was further held that Section 176 of Act, which enacts provisions relating to discontinuation of business, does not apply to case of amalgamation/dissolution. It was further held that Section 159 of Act, which provides for tax liability to be attached to legal representatives of deceased person, is also inapplicable. language of Section 159 ex-facie applies to natural persons, and cannot be extended, through legal fiction, to dissolution of companies. 9. There is another aspect in these appeals, which is applicability of Section 292B of Act. Section 292B, inter alia, prescribes that proceedings etc. initiated cannot be deemed invalid merely by reason of mistake, defect or omission in any return of income, assessment or notice. revenue had argued that this provision neutralizes procedural defects in jurisdiction. In these circumstances, it was submitted, having regard to assessee s omission to urge so-called illegality at threshold, Court ITA 441/2013 & connected matters Page 6 ought to interfere with order of ITAT. This question, too, has been dealt with - in CIT v. Dimension Apparels Pvt. Ltd. reported in (2015) 370 ITR 288. In that case, after noticing Section 292B, Court discussed ruling in Spice Entertainment (supra), wherein it had been held that since assessment made in such cases is against amalgamated company in respect of income of amalgamating company for period prior to amalgamation, income tax authorities are nevertheless under obligation to substitute successor in place of amalgamated company. Thus, such defect cannot be treated as procedural defect . In any event, it is to be noted that fact of amalgamation of assessee with transferee company had been intimated and disclosed in response to notice under Section 153C on 22.11.2010. Accordingly, this ground, too, has no merit and is rejected. 10. In present case, no doubt there was participation during course of assessment; however, AO, despite being told that original company was no longer in existence, did not take remedial measures and did not transpose transferee as company which had to be assessed. Instead, he resorted to peculiar procedure of describing original assessee as one in existence; order also mentioned transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to assessment being completed in name of transferee company. According to AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was case where assessment was contrary to law, as having being completed against non-existent company. ITAT's decision is, in circumstances, justified and warranted. ITA 441/2013 & connected matters Page 7 11. For above reasons it is held that these appeals do not involve any substantial question of law and of liability. appeals are accordingly dismissed. S. RAVINDRA BHAT (JUDGE) R.K.GAUBA (JUDGE) JANUARY 22, 2015 vld ITA 441/2013 & connected matters Page 8 Commissioner of Income-tax (C)-II v. Micra India Pvt. Ltd
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