V3S Infratech Ltd. Vs DCIT (ITAT Delhi)
The issue under consideration is whether issuance of penalty order in the name of erstwhile dissolved company is justified in law?
ITAT states that, in the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. Accordingly, following the aforesaid ratio and principle laid down by the Hon’ble Supreme Court, we hold that impugned penalty order passed by the AO in the name of erstwhile dissolved company is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B; and hence order passed on amalgamated entity which ceases to exist is a nullity. Such an illegality cannot be cured on the ground that assessee participation in the proceedings as there cannot operate as an estoppel against law. Accordingly, impugned penalty order is quashed.
In the result appeals of the assessee are allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeals have been filed by the assessee against impugned orders dated 19.9.2016 and 12.9.2016, passed by Ld. CIT (Appeals) – 30, New Delhi in relation to the penalty u/s 271(1)(c) for the assessment years 2003-04 and 2004-05 respectively.
2. Since grounds raised in both the appeals are common arising out of identical set of facts, therefore, same were heard together and are being disposed of by way of this consolidated order for the sake of ready reference. Grounds of appeal for the assessment year 2003-04 are reproduced hereunder which is almost similar to ground raised in Asstt. Year 2004-05:-
1. “BECAUSE the Ld. CIT(A) has erred in law and on facts in holding that passing of penalty order in the name of Padampat Gopal Krishna Ramapati Organisation Ltd. cannot be considered as fatal and is curable as per provision of section 292BB of the Act.
2. BECAUSE the Ld. CIT (A) has erred in law and on facts in sustaining the penalty order particularly when the notice issued under section 274 of the Act did not specify the grounds for which penalty was to be imposed.
3. BECAUSE the Ld. CIT(A) has erred in law and on facts in sustaining the imposition of penalty in respect of disallowance of deferred revenue expenditure of Rs. 8,66,280/- as the same are nil in subsequent year i.e. A.Y. 2004-05.
4. BECAUSE the Ld. CIT (A) has erred in confirming the imposition of penalty on erroneous assumption of facts.
5. BECAUSE the order appealed against is contrary to the facts, law and principles of natural justice.”
2. Before us, Ld. Counsel submitted that the AO has passed the penalty order in the case of amalgamated company Padampat Gopal Krishna Ramapati Organisation Ltd. and not in the case of the assessee company; hence the same is not a valid order. He submitted that amalgamation took place on 14.12.2007 which was not only on record but also AO was fully aware of such amalgamation. In support of his contention he has highlighted following dates and events:-
