Case Law Details
CIT Vs Tarachanthini Services Pvt. Ltd. (Madras High Court)
The issue under consideration is whether the Tribunal was right in remanding back to the file of AO for investigation as to whether the company was in existence at the relevant time by holding that the assessment order passed was nullity?
dmittedly the assessment year is 2000-01, when the assessee Company was carrying on business. It is not in dispute that the assessee Company filed its Return of Income for the said assessment year. This was processed and an intimation was issued under Section 143(1) of the Act on 15.01.2002. When the assessment was reopened under Section 147 of the Act by issuing notice dated 20.03.2007 under Section 148 of the Act, the assessee Company was carrying on business. The assessee fully cooperated in the reassessment proceedings and we have mentioned about the various hearing dates on which the Assessing Officer heard the assessee. At no point of time, the assessee informed the Assessing Officer that the Company has been struck off from the Register of Companies on 25.05.2007. Thus there was no occasion for the Assessing Officer to know about the said fact as the assessee failed to bring it to the notice of the Assessing Officer. That apart, the assessee continued to remain as an assessee on the file of the Income Tax Department and the PAN number was valid and not cancelled.
High Court states that, the assessee took no steps to inform the Department about the striking off the name of the Company from the Register of Companies. The assessee did not file any documents before the Assessing Officer stating that their PAN number has to be revoked and their Income Tax account has to be closed. Therefore the court held that the relevant time would be when the Company was in existence during the assessment year 2000-01, that alone would be the relevant time and the relevant year for the assessee’s case. The Tribunal erred in not considering the provisions of Section 176 of the Act and without deciding the said issue, the question of remanding the matter to the Assessing Officer does not arise and consequently the Tribunal committed an error of law on that aspect. For all the above reasons, these Tax Case Appeals are allowed and the Substantial Questions of Law is answered in favour of the Revenue.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
These appeals filed by the Revenue under Section 260 A of the Income Tax Act 1961 (‘the Act’ for brevity) are directed against the common order passed by the Income Tax Appellate Tribunal, Madras ‘C’ Bench in I.T.A. Nos. 473/Mds/2010 and I.T.A. No. 549/Mds/2010 for the assessment year 2000-01 and the following substantial question of law raised for consideration in these appeals:
(i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in remanding back to the file of AO for investigation as to whether the company was in existence at the relevant time by holding that the assessment order passed was nullity?
(ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in remanding the issue back to AO without considering the provisions of Section 176(1) to 176(7) of the I.T.Act which provides for assessment of income in the year of discontinuance or even after discontinuance the income arising in the year of dissolution or after dissolution also assessable to tax?
2. The facts which are necessary for disposal of these appeals are stated as hereunder.
3. The assessee is engaged in investment business and dealing in shares. For the Assessment Year under consideration, they filed their Return of Income declaring a loss of Rs.78,42,605/-. The return was assessed under Section 143(1) of the Act on 15.01.2002. The assessment was reopened under Section 147 of the Act and Notice under Section 148 of the Act was issued on 20.03.2007 and served on the assessee on 22.07.2007. Subsequently, a notice under Section 142(1) of the Act along with questionnaire was issued to the assessee on 19.09.2007. After issuing summons to certain persons, the assessment was completed on 31.12.2007. The assessee being aggrieved by such order, filed appeal before the Commissioner of Income Tax (Appeals)-III, Chennai. The appeal was dismissed and aggrieved by such order, the assessee preferred appeal to the Tribunal as well as the Revenue. The appeals were heard together and disposed of by order dated 18.04.2011, by remanding the matter to the Assessing Officer to investigate as to whether the Assessee Company was in existence at the relevant time. As the Tribunal was of the view that if the Company was not in existence, the Assessing Officer cannot stand, the correctness of the order passed by the Tribunal was called in question by the Revenue. In this question, we have elaborately heard Mr.M.Swaminathan, learned Senior Standing Counsel and Ms.S.Premalatha, learned junior standing counsel for the appellant / Revenue and Mr.G.Baskar, learned counsel appearing for the respondent/assessee. The assessee for the very first time raised a new ground before the Tribunal stating that the assessment itself was bad in law and nullity, since the name of the assessee Company was struck off from the Register of Companies, even before the Assessment Order was passed. The Tribunal permitted the assessee to raise the ground as a additional ground stating that it goes to the very root of the matter.
4. After considering the submissions made by the assessee, the Tribunal thought fit to remand the matter to the Assessing Officer to investigate as to whether the assessee Company was in existence at the relevant time. The Tribunal has not specifically mentioned as to what it mean by the relevant time to take a decision in the instant case. We are not here to find answer as to what would be the relevant time in the instant case.
5. The undisputed facts are that the assessment is of the year 2000-01, the intimation was received by the assessee under Section 143(1) of the Act on 15.01.2002, subsequently, the assessment was reopened by issuing a notice under Section 148 of the Act on 20.03.2007. Elaborate exercise was done by the Assessing Officer and the matter was heard by the Assessing Officer on 16.08.2007, 14.11.2007, 19.11.2007, 24.12.2007 and ultimately, the assessment was completed on 31.12.2007 under Section 143(3) read with Section 147 of the Act.
6. Reading of the Assessment Order would show that the assessee had extended full cooperation to the reassessment proceedings, pursuant to the notice under Section 148 of the Act. In fact, the assessee appeared before the Assessing Officer on 15.11.2007 and gave break up details of the shareholding pattern of the Company. The assessee contended before the Tribunal for the first time stating that the name of the assessee Company has been struck off from the Register of Companies and the same has been published in the Gazette on 25.05.2007 and the Assessment Order having been passed on 31.12.2007, is a nullity because the Company became non existent on and after 25.05.2007.
7. In support of his contention, Mr.G.Baskar, learned counsel for the respondent / assessee referred to the decision of the Hon’ble Supreme Court of India in the case of the Principal Commissioner of Income Tax Vs. Maruti Suzuki India Limited (2019 (416) ITR 0613 [SC]). The said decision was relied on to support the contention that framing of an assessment against the non existing entities / persons is a jurisdictional defect and the Assessment Order is liable to be quashed.
8. Admittedly the assessment year is 2000-01, when the assessee Company was carrying on business. It is not in dispute that the assessee Company filed its Return of Income for the said assessment year. This was processed and an intimation was issued under Section 143(1) of the Act on 15.01.2002. When the assessment was reopened under Section 147 of the Act by issuing notice dated 20.03.2007 under Section 148 of the Act, the assessee Company was carrying on business. The assessee fully cooperated in the reassessment proceedings and we have mentioned about the various hearing dates on which the Assessing Officer heard the assessee. At no point of time, the assessee informed the Assessing Officer that the Company has been struck off from the Register of Companies on 25.05.2007. Thus there was no occasion for the Assessing Officer to know about the said fact as the assessee failed to bring it to the notice of the Assessing Officer. That apart, the assessee continued to remain as an assessee on the file of the Income Tax Department and the PAN number was valid and not cancelled. The assessee took no steps to inform the Department about the striking off the name of the Company from the Register of Companies. The assessee did not file any documents before the Assessing Officer stating that their PAN number has to be revoked and their Income Tax account has to be closed.
9. The decision in the case of Maruthi Suzuki would not render assistance to the case of the assessee because in the said case, the amalgamation was intimated to the Assessing Officer and despite the fact that the amalgamating Company ceased to exist as a result of an approved scheme of amalgamation, making an assessment in the name of non existing Company would render assessment invalid. While the facts of the present case as mentioned above are totally different, it cannot be applied to the case on hand. As mentioned earlier, the assessment is for the year 2000-01 which was reopened and striking off the name of the assessee Company from the Register of Companies occurred only on 21.05.2007, can in no manner impact the assessment for the year 2000-01.
10. The decision of the Delhi Bench of the Tribunal in the case of Impsat Private Limited Vs. ITO, which has been referred to by the Tribunal in the Impugned Order pertains to a case where the Assessment Order was passed after the Company was struck off from the Register of Companies. However in the instant case, the assessee filed their Return of Income for the assessment year 2000-01 which assessment was reopened and the assessee fully participated in the reassessment proceedings and thereafter the Assessment Order has been passed. Therefore the reassessment order would take effect and to be effective for the assessment year 2000-01 and the striking off the name of the assessee Company from the Register of Companies on 25.05.2007, can in no manner impact the said assessment. Further more the question would be whether the Tribunal committed an error in permitting the assessee to raise such a ground for the first time before the Tribunal, especially when it is a factual issue which the assessee never raised before the Assessing Officer in the reassessment proceedings or before the Commissioner of Income Tax (Appeals) and sought to raise it before the Tribunal for the first time stating that it goes to the root of the matter. We do not agree with the reasoning of the Tribunal in this regard. If the assessee had failed to raise the factual issue before the Assessing Officer at the first instance and consciously participated in the proceedings, could not have been permitted to canvass such factual issue for the first time before the Tribunal.
11. That apart, the Tribunal committed an error in not specifying as to what would be the relevant time in the case on hand. Our answer would be, the relevant time would be when the Company was in existence during the assessment year 2000-01, that alone would be the relevant time and the relevant year for the assessee’s case. For the sake of arguments, if we are to accept the stand taken by the Tribunal to be correct, that this issue goes to the root of the matter, the Tribunal erred in not considering the provisions of Section 176 of the Act and without deciding the said issue, the question of remanding the matter to the Assessing Officer does not arise and consequently the Tribunal committed an error of law on that aspect.
12. For all the above reasons, these Tax Case Appeals are allowed and the Substantial Questions of Law is answered in favour of the Revenue.
T.S.SIVAGNANAM, J.
AND
V.BHAVANI SUBBAROYAN, J.
After we pronounced the Common Judgment in the above appeals, it is pointed out by the learned counsel for the respondent / assessee that the Tribunal did not adjudicate the correctness of the quantum assessment as it proceeded on the basis that assessment against the defunct company is invalid. Therefore, it is the submission of Mr. G. Baskar, learned counsel for the respondent / assessee that this Court having answered the substantial questions of law in favour of the Revenue, the matter may be remanded to the Tribunal to decide the merits of the assessment.
2. We have heard Ms. Premalatha, learned standing counsel for the Appellant / Revenue on the above submission.
3. As it could be seen from the impugned order of the Tribunal that the merits of the matter having not been gone into, necessarily the matter has to be remanded to the Tribunal to take a decision on merits, as we have held that the assessment cannot be stated to be invalid in the eye of law. Accordingly, the matter is remanded to the Tribunal to take a decision on merits.
