Ii) Spice Entertainment Ltd v. Commissioner Of Servicetax ((2012) 280 Elt 43

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.1.2020 CORAM : THE HONOURABLE DR.JUSTICE ANITA SUMANTH W.P.Nos.21858 and 1759 of 2018and WMP Nos.25634, 2180, 16198 and 18734 of 2018 M/s.Oasys Green Tech Private LimitedRepresented by its authorised signatoryMr.E.Venkatakrishnaiah... Petitioner in both W.PsVs. Income Tax Officer, Corporate Ward – 5(1)RoomNo.412,4[th] Floor, Aayakar Bhawan, 121, Mahatma Gandhi Road,Nungambakkam, Chennai – 600 034.... Respondent in both W.Ps Prayer in W.P.No.21858 of 2018: Writ Petition filed underArticle 226 of the Constitution of India, for the issuance ofWrit of Certiorari, calling for the records of the respondentcomprised in its order dated 28.06.2018, passed under Section274 read with Section 271(1)(c) of the Income Tax Act, 1961,in PAN /CW 5(1), and to quash the same as arbitrary,unjust and illegal. Prayer in W.P.No.1759 of 2018: Writ Petitions filed underArticle 226 of the Constitution of India, for the issuance ofWrit of Certiorari, calling for the records of the respondentcomprised in its assessment order dated 30.12.2017, passedunder Section 144 read with Section 147 of the Income Tax Act,1961, in PAN , and to quash the same as arbitrary,unjust and illegal. For Petitioner in both W.Ps: Mr.Suhrith ParthasarathyFor Respondents in both W.Ps: Mrs.Hema MuralikrishnanSenior Standing Counsel Heard Mr.Suhrith Parthasarathy, learned counsel for thepetitioner and Mrs.Hema Muralikrishnan, learned SeniorStanding Counsel for the respondent. 2. An order of re-assessment dated 28.06.2018 forAssessment Year (AY) 2010-11 passed in terms of the provisionsof the Income Tax Act, 1961 (in short ‘Act’) has beenhttps://hcservices.ecourts.gov.in/hcservices/challenged. The main ground on which the impugned order is assailed is that the entity known as M/s.OAS DigitalInfrastructures Private Limited to whom notice under Section148 of the Act was issued and based upon which the impugnedorder has been passed, did not exist at the time of issuanceof notice and passing of the impugned order. 3. The sequence of relevant dates and events are asfollows: i) OAS Digital Infrastructures Private Limited (in short‘OAS’/transferor) did not file a return of income for AY 2010-11. ii) OAS stood amalgamated with the petitioner, OasysGreen Tech Private Limited (in short ‘OGT’/transferee), witheffect from 01.02.2015 per order of the Madras High Courtdated 20.08.2015 in Company Petition Nos.203 and 204 of 2015. iii) Notice under Section 148 of the Act dated 31.03.2017addressed to OAS was issued, since, admittedly, the Departmentwas unaware of the factum of amalgamation. iv) On 14.09.2017 OGT wrote to the Department bringing toits notice the merger and also requesting that the notice behanded over to the bearer of the letter. v) On 09.10.2017, OGT took the view that the proceedingsfor re-asessment were non est, since notice under Section 148had been issued upon a non-existing entity. vi) The Assessing Authority however, on the basis of thenotices already issued proceeded to complete the re-assessmentexparte passing the present impugned order under Section 144of the Act, to the best of his judgment. vii) On merits, cash deposits in the bank account of theassessee have been treated as unexplained cash credits underSection 68 of the Act along with equal penalty. viii) It is as against the aforesaid order that thepetitioner has filed Writ Petition in W.P.No.1759 of 2018. ix) An order of stay of impugned proceedings granted bythis Court on 29.01.2018 was duly brought to the notice of therespondent Officer, despite which, the Officer, being of theview that proceedings for re-assessment were different anddistinguishable from proceedings for the levy of penalty, hasproceeded to finalise and levy penalty in terms of Section 271(1)(c) of the Act by order dated 28.06.2018. vii) On merits, cash deposits in the bank account of theassessee have been treated as unexplained cash credits underSection 68 of the Act along with equal penalty. viii) It is as against the aforesaid order that thepetitioner has filed Writ Petition in W.P.No.1759 of 2018. ix) An order of stay of impugned proceedings granted bythis Court on 29.01.2018 was duly brought to the notice of therespondent Officer, despite which, the Officer, being of theview that proceedings for re-assessment were different anddistinguishable from proceedings for the levy of penalty, hasproceeded to finalise and levy penalty in terms of Section 271(1)(c) of the Act by order dated 28.06.2018. xi) As against the above order, the petitioner has filedW.P.No.21858 of 2018. Both the impugned orders of assessmentand penalty have been framed on ‘OGT (formally known as OAS)’. 4. The crux of the submissions of the petitioner are tothe effect that the impugned order is based on a notice dated31.03.2017 issued to OAS, that was non-existent on that dateand hence the aforesaid notice and all subsequent proceedingsincluding the impugned order of assessment and penalty areliable to be set aside. https://hcservices.ecourts.gov.in/hcservices/ 5. The petitioner places reliance on the followingdecisions: i) Principal Commissioner of Income Tax, New Delhi V.Maruti Suzuki India Limited (Civil Appeal No.5409 of 2019dated 25.07.2019) ii) Spice Entertainment Ltd. V. Commissioner of ServiceTax ((2012) 280 ElT 43) iii) M/s.Rustagi Engineering Udyog Pvt. Ltd. V. AssistantCommissioner of Income Tax, (W.P.(C) No.1289 of 1999 dated24.02.2016) iv) BDR Builders & Developers Pvt. Ltd. V. AssistantCommissioner of Income Tax (W.P.(C) No.2712 of 2016 dated26.07.2017) v) Alamelu Veerappan V. The Income Tax Officer, NonCorporate Ward 2(2) (304 CTR 512) 6. Learned Senior Standing Counsel for the revenuesubmits that the Department was wholly unaware of theproceedings for amalgamation of OAS with OGT. Moreover, thereturn of income for AY 2014-15 had been filed by 07.03.2016in the name of OAS by OGT, further confirming the positionthat OAS was a functioning entity. Income tax refunds issuedby the Department in favour of OAS had been duly received andencashed by OGT. Thus it did not lie in the mouth of OGT tocanvass the view now that OAS was non-existent and thatproceedings initiated in its name would be bad in law. 7. She distinguishes all the decisions cited by thepetitioner pointing out that the transferee entities in thosecases had duly brought to the notice of the revenue the factumof amalgamation, inspite of which the revenue had initiatedproceedings only as against the transferor/amalgamatingentity. This was the reason why the Courts (in those cases)had interfered in the proceedings, holding that once theDepartment had been put to notice about the amalgamation,proceedings ought to have been initiated only in the hands ofthe transferee entities. 8. The case of Alamelu Veerappan (supra) isdistinguished stating that it relates to individuals and not acorporate merger. The provisions of Section 159 that areapplicable to the case of individuals are not applicable inthe case of companies. The decision has not been accepted bythe Department and is pending in Writ Appeal. 9. Heard learned counsel. A relevant factor to determinethe assessable entity in cases such as the present, is theconduct of the transferee entity. OGT has not only omitted tobring to the notice of the revenue the factum of amalgamation,but, has by its conduct of filing a return of income postamalgamation in the name of OAS furthered the illusion thatOAS continues to exist even after amalgamation. The fact thatit has benefitted from the refunds issued in favour of OAS ishttps://hcservices.ecourts.gov.in/hcservices/ also not denied. Thus, by its very conduct, OGT has led theDepartment to believe that OAS, as an entity, existed. 9. Heard learned counsel. A relevant factor to determinethe assessable entity in cases such as the present, is theconduct of the transferee entity. OGT has not only omitted tobring to the notice of the revenue the factum of amalgamation,but, has by its conduct of filing a return of income postamalgamation in the name of OAS furthered the illusion thatOAS continues to exist even after amalgamation. The fact thatit has benefitted from the refunds issued in favour of OAS ishttps://hcservices.ecourts.gov.in/hcservices/ also not denied. Thus, by its very conduct, OGT has led theDepartment to believe that OAS, as an entity, existed. 10. In the case of Maruti Suzuki (supra), the relevantfacts are: i)The transferor entity was Suzuki Powertrain IndiaLimited (SPIL) and the transferee entity was MarutiSuzuki India Limited (MSIL).Limited (SPIL) and the transferee entity was MarutiSuzuki India Limited (MSIL). ii)Return of income had been filed by SPIL, noamalgamation having taken place on that date, i.e.,28.11.2012. On 29.01.2013, the Scheme of amalgamationof SPIL and MSIL was approved with effect from01.04.2012. On 02.04.2013, MSIL intimated theAssessing Officer of the factum of amalgamation. amalgamation having taken place on that date, i.e.,28.11.2012. On 29.01.2013, the Scheme of amalgamationof SPIL and MSIL was approved with effect from01.04.2012. On 02.04.2013, MSIL intimated theAssessing Officer of the factum of amalgamation. iii) Notice under Section 143(2) and a questionnaire underSection 142(1) were issued to SPIL, despite theDepartment having been aware that SPIL had ceased toexist upon an amalgamation.Section 142(1) were issued to SPIL, despite theDepartment having been aware that SPIL had ceased toexist upon an amalgamation. iv)The transfer pricing order and draft assessment orderwere also passed in the name of SPIL.were also passed in the name of SPIL. v)MSIL participated in the assessment proceedings of SPILand various communications issued by the Departmentrevealed the fact that the Assessing Officer was awareof the amalgamation of SPIL and MSIL. and various communications issued by the Departmentrevealed the fact that the Assessing Officer was awareof the amalgamation of SPIL and MSIL. vi)The assessment order was challenged by MSIL before theDispute Resolution Panel (DRP) as a successor-in-interest of SPIL. No objection had been taken by MSILto the fact that the draft assessment order andtransfer pricing order had been passed in the name ofSPIL to contend that such a defect would vitiate theproceedings for assessment.Dispute Resolution Panel (DRP) as a successor-in-interest of SPIL. No objection had been taken by MSILto the fact that the draft assessment order andtransfer pricing order had been passed in the name ofSPIL to contend that such a defect would vitiate theproceedings for assessment. vii) The order of the DRP was issued in the name of MSIL assuccessor of SPIL.successor of SPIL. viii)The final assessment order was passed however in thename of SPIL (amalgamated with MSIL) and whilechallenging the same before the Income Tax AppellateTribunal (Tribunal) an objection was raised to theeffect that the assessment proceedings had beencontinued in the name of a non-existing entity whichvitiated the order.name of SPIL (amalgamated with MSIL) and whilechallenging the same before the Income Tax AppellateTribunal (Tribunal) an objection was raised to theeffect that the assessment proceedings had beencontinued in the name of a non-existing entity whichvitiated the order. ix)The Tribunal as well as the High Court accepted thestand of the assessee giving rise to the appeal beforethe Supreme Court. stand of the assessee giving rise to the appeal beforethe Supreme Court. ix)The Tribunal as well as the High Court accepted thestand of the assessee giving rise to the appeal beforethe Supreme Court. stand of the assessee giving rise to the appeal beforethe Supreme Court. x)After noticing the sequence of facts as above andseveral decisions on the point, the Bench distinguishedreliance placed by the revenue on the decision of theDelhi High Court in the case of Skylight HospitalityLLP V. Assistant Commissioner of Income Tax, Circle -28(1), New Delhi ((2018) 405 ITR 296), wherein the Delhiseveral decisions on the point, the Bench distinguishedreliance placed by the revenue on the decision of theDelhi High Court in the case of Skylight HospitalityLLP V. Assistant Commissioner of Income Tax, Circle -28(1), New Delhi ((2018) 405 ITR 296), wherein the Delhihttps://hcservices.ecourts.gov.in/hcservices/High Court had taken the view that reference to the wrong assessee in the notice was only a clerical errorwhich could be corrected under Section 292B of the Act. xi)The case of Skylight (supra) was by the Supreme Courtthat held that it was only in the peculiar facts ofthat case that the Court had condoned the error innaming the assessee and the escapement of income inthat case had been established conclusively otherwise.xii) The Supreme Court also took note of the position thatthat the decision in Skylight (supra) had beendistinguished by the Delhi, Gujarat and Madras HighCourts in the cases of Rajender Kumar Sehgal V. ITO((2019) 260 Taxman 412), Chandreshbhai JayantibhaiPatel V. ITO ((2019) 261 Taxman 137) and AlameluVeerappan (supra). xiii)Noting specifically that the Assessing Officer (in thecase of Maruti Suzuki) had been informed of the factthat the amalgamating company had ceased to exist as aresult of the Scheme of Amalgamation, despite which thejurisdictional notice had been issued only in its name,the appeal of the revenue was dismissed. xiv) At paragraph Nos.33 and 34, the Bench states asfollows: 33 In the present case, despite the fact that theassessing officer was informed of the amalgamatingcompany having ceased to exist as a result of theapproved scheme of amalgamation, the jurisdictionalnotice was issued only in its name. The basis onwhich jurisdiction was invoked was fundamentally atodds with the legal principle that the amalgamatingentity ceases to exist upon the approved scheme ofamalgamation. Participation in the proceedings bythe appellant in the circumstances cannot operateas an estoppel against law. This position now holdsthe field in view of the judgment of a co-ordinateBench of two learned judges which dismissed theappeal of the Revenue in Spice Enfotainment on 2November 2017. The decision in Spice Enfotainmenthas been followed in the case of the respondentwhile dismissing the Special Leave Petition for AY2011-2012. In doing so, this Court has relied onthe decision in Spice Enfotainment. 34 We find no reason to take a different view.There is a value which the court must abide by inpromoting the interest of certainty in taxlitigation. The view which has been taken by thisCourt in relation to the respondent for AY 2011-12must, in our view be adopted in respect of thepresent appeal which relates to AY 2012-13. Notdoing so will only result in uncertainty anddisplacement of settled expectations. There is a https://hcservices.ecourts.gov.in/hcservices/ significant value which must attach to observingthe requirement of consistency and certainty.Individual affairs are conducted and businessdecisions are made in the expectation ofconsistency, uniformity and certainty. To detractfrom those principles is neither expedient nordesirable. 11. In the case of Spice Entertainment Ltd. (supra), therelevant facts are: i)Spice Entertainment Ltd. (SCL/transferor) had filed areturn of income for A.Y.2002-03. https://hcservices.ecourts.gov.in/hcservices/ significant value which must attach to observingthe requirement of consistency and certainty.Individual affairs are conducted and businessdecisions are made in the expectation ofconsistency, uniformity and certainty. To detractfrom those principles is neither expedient nordesirable. 11. In the case of Spice Entertainment Ltd. (supra), therelevant facts are: i)Spice Entertainment Ltd. (SCL/transferor) had filed areturn of income for A.Y.2002-03. ii)On 11.02.2004 SCL stood amalgamated with M/s.MCorpPrivate Limited (MPL). Upon receipt of notice ofscrutiny, MPL duly brought to the notice of theAssessing Officer the fact that SCL had been dissolvedas a result of amalgamation.Private Limited (MPL). Upon receipt of notice ofscrutiny, MPL duly brought to the notice of theAssessing Officer the fact that SCL had been dissolvedas a result of amalgamation. iii) Despite being informed of the fact of amalgamation, the Assessing Officer passed an order of assessment on SCLon 28.03.2005. In second appeal, the Tribunal heldthat mere failure of the Assessing Officer to mentionthe correct name of the assessee did not vitiate theassessment, since, in substance and fact, theassessment related only to MCL. on 28.03.2005. In second appeal, the Tribunal heldthat mere failure of the Assessing Officer to mentionthe correct name of the assessee did not vitiate theassessment, since, in substance and fact, theassessment related only to MCL. iv)The reasoning of the Tribunal to the effect that theerror in the order of assessment was only proceduralwas held to be ‘blemished with legal loopholes andcontrary to law’ by the Supreme Court. error in the order of assessment was only proceduralwas held to be ‘blemished with legal loopholes andcontrary to law’ by the Supreme Court. v)The Court noted that from 01.07.2003, SCL ceased toexist, plain and simple.exist, plain and simple.vi)Taking note of the position that an Indian Company wasa juristic person taking birth with incorporation anddying with dissolution, the Court reiterated that onamalgamation, the amalgamating company that standssubsumed with amalgamated entity and ceased to exist inthe eyes of law as a separate company. a juristic person taking birth with incorporation anddying with dissolution, the Court reiterated that onamalgamation, the amalgamating company that standssubsumed with amalgamated entity and ceased to exist inthe eyes of law as a separate company. vii) Thus, the framing of an order of assessment in the nameof the erstwhile entity, where (a) returns had beenfiled earlier by the dead entity, (b) the Departmentwas put to notice of such amalgamation, and (c) theamalgamated entity had participated in the assessment,was held to be bad in law as it did not constitute amere procedural irregularity that could be cured byrecourse to Section 292 of the Act.of the erstwhile entity, where (a) returns had beenfiled earlier by the dead entity, (b) the Departmentwas put to notice of such amalgamation, and (c) theamalgamated entity had participated in the assessment,was held to be bad in law as it did not constitute amere procedural irregularity that could be cured byrecourse to Section 292 of the Act. 12. As far as the case of Alamelu Veerappan (supra) isconcerned, the decision is wholly distinguishable, since itrelates to the provisions of Section 159(2) dealing with adeceased assessee and his legal representatives, whereas thepresent assessment is made in terms of Section 170 dealinghttps://hcservices.ecourts.gov.in/hcservices/ with succession to business or profession otherwise than ondeath. 13. In the light of the decisions discussed, let us seethe facts in the present case. 12. As far as the case of Alamelu Veerappan (supra) isconcerned, the decision is wholly distinguishable, since itrelates to the provisions of Section 159(2) dealing with adeceased assessee and his legal representatives, whereas thepresent assessment is made in terms of Section 170 dealinghttps://hcservices.ecourts.gov.in/hcservices/ with succession to business or profession otherwise than ondeath. 13. In the light of the decisions discussed, let us seethe facts in the present case. i)No return of income has been filed by OAS for therelevant assessment year. However, there are credits inthe bank account that are liable to be explained by theentity for the purposes of determination of taxability.relevant assessment year. However, there are credits inthe bank account that are liable to be explained by theentity for the purposes of determination of taxability. ii)The factum of amalgamation was not known to the IncomeTax Department. The jurisdictional notice, i.e., noticeunder Section 148 thus came to be issued to OAS.Tax Department. The jurisdictional notice, i.e., noticeunder Section 148 thus came to be issued to OAS. iii) Receipt of notices by OGT is not denied, since it hasappeared before the Assessing Officer bringing to itsnotice the factum of amalgamation only then.appeared before the Assessing Officer bringing to itsnotice the factum of amalgamation only then. iv)On 14.09.2017, OGT brings to the notice of the Departmentthe merger of OAS with OGT and specifically requests theDepartment to handover the notice to its office staff,one Mr.Suresh. the merger of OAS with OGT and specifically requests theDepartment to handover the notice to its office staff,one Mr.Suresh. v)Subsequent notices have been issued to ‘OGT (formallyknown as OAS)’ and the order of assessment has also beenpassed in the name of Oasys Greentech Pvt. Limited, i.e.,the petitioner.known as OAS)’ and the order of assessment has also beenpassed in the name of Oasys Greentech Pvt. Limited, i.e.,the petitioner. vi)OGT has admittedly filed a return of income in the nameof OAS for A.Y.2013-14 even subsequent to amalgamationand also received refunds issued to OAS. of OAS for A.Y.2013-14 even subsequent to amalgamationand also received refunds issued to OAS. 14. The stand of the petitioner to the effect thatproceedings for re-assessment ought to have been issued onlyin the name of OGT is clearly misconceived insofar as theDepartment has not been put to notice of the factum ofamalgamation by OGT till 14.09.2017 and the petitioner hasalso, by filing a return in the name of OAS and receivingrefunds addressed to OAS, furthered the impression that OAS isan existing entity. This argument is rejected. I thus find noinfirmity in law insofar as the impugned proceedings for re-assessment are concerned and the same are held to be valid. 15. By letter dated 20.12.2017, the petitioner has soughtconfirmation as to whether a return of income can be filedmanually by it, since it was unable to upload a returnelectronically, the successor company not having beenincorporated for that assessment year. No reply has beengiven to this letter and instead the impugned order ofassessment has come to be passed on 30.12.2017, exparte. 16. For this reason, order dated 30.12.2017 is set aside.The petitioner is permitted to file a return within a periodof two (2) weeks from today. It is made clear that theassumption of jurisdiction by the respondent/Assessing Officeris perfectly in order. After hearing the petitioner, theOfficer shall complete the proceedings for re-assessment onhttps://hcservices.ecourts.gov.in/hcservices/ merits within a period of four (4) weeks from date of filingof return. 17. These Writ Petitions are dismissed, however, grantingliberty as set out above. No costs. Connected MiscellaneousPetitions are also dismissed. Sd/- Assistant Registrar (CS-IV) //True Copy// Sub Assistant Registrar 16. For this reason, order dated 30.12.2017 is set aside.The petitioner is permitted to file a return within a periodof two (2) weeks from today. It is made clear that theassumption of jurisdiction by the respondent/Assessing Officeris perfectly in order. After hearing the petitioner, theOfficer shall complete the proceedings for re-assessment onhttps://hcservices.ecourts.gov.in/hcservices/ merits within a period of four (4) weeks from date of filingof return. 17. These Writ Petitions are dismissed, however, grantingliberty as set out above. No costs. Connected MiscellaneousPetitions are also dismissed. Sd/- Assistant Registrar (CS-IV) //True Copy// Sub Assistant Registrar SlToIncome Tax Officer, Corporate Ward – 5(1)RoomNo.412,4[th] Floor, Aayakar Bhawan, 121, Mahatma Gandhi Road,Nungambakkam, Chennai – 600 034. +1cc to Mr.Hema Muralikrishnan, Advocate, S.R.No. 3870+2cc to Mr.Arun Karthik Mohan, Advocate, S.R.No. 4183 & 4184W.P.Nos.21858 and 1759 of 2018and WMP Nos.25634, 2180, 16198 and 18734 of 2018 BS(CO)GN(10/03/2020) https://hcservices.ecourts.gov.in/hcservices/