Wtax/704/2022 Of Rrj Infra Industries Pvt Ltd v. Principal Commissioner Of Income Tax And 4 Others

Case :- WRIT TAX No. - 704 of 2022 Petitioner :- Rrj Infra Industries Pvt Ltd Respondent :- Principal Commissioner Of Income Tax And 4 Others Counsel for Petitioner :- Suyash AgarwalCounsel for Respondent :- A.S.G.I.,Gaurav Mahajan,Krishna Agarawal Hon'ble Pritinker Diwaker,Acting Chief JusticeHon'ble Saumitra Dayal Singh,J. 1. Heard Shri Shashi Nandan, Senior Advocate, assisted by ShriSuyash Agarwal, learned counsel for the petitioner and ShriKrishna Agarwal, learned counsel for the revenue. 2. Challenge has been raised to the re-assessment order dated29.3.2022 passed in the case of the assessee M/s Kanpur BuildersPvt. Ltd. whereby it has been assessed to tax on alleged escapedincome Rs. 189,15,91,521/-. Undisputedly, that re-assessmentproceeding had been drawn up under Section 147 and 148 of theIncome Tax Act 1961 (hereinafter referred to as the Act), oncertain information received by the assessing officer arising fromthe transaction of sale of immovable property of value Rs. 68crores. 3. Undisputedly, re-assessment notice was issued on 28.3.2021 inthe name and at the address of the company M/s Kanpur BuildersPvt. Ltd. It remained unresponded. Consequently, re-assessmentorder was also passed ex-parte. In such facts, submission oflearned senior counsel for the petitioner is, earlier, there existedtwo companies M/s Kanpur Builders Pvt. Ltd. (hereinafter referredto as the 'transferor') and M/s Kanpur Constructions Pvt. Ltd.(hereinafter referred to as the 'transferee'). Those two companies experienced amalgamation under the provisions of the CompaniesAct 1956. By order of the company judge, dated 8.1.2016, thescheme of amalgamation proposed between the transferorcompany and the transferee company was approved with effectfrom 1.4.2014 i.e. with effect from previous year 2014-15. Itwould relate to A.Y. 2015-16. 4. Also, subsequent to such merger, the name of the transfereecompany was changed. Presently, it stands registered under thename R.R.J Infra Industries Ltd. with the Registrar of Companies,Kanpur, with effect from 14.12.2017. 5. Taking note of the aforesaid merger, the assessing authority ofthe transferee company completed its assessment for the A.Y.2015-16 vide assessment order dated 30.12.2017. In paragraph 4of the said assessment order, the factum of merger was specificallytaken note of. Then, in the course of that assessment proceeding,the assessing authority of the present petitioner clearly consideredthe impact of tax assessment arising from sale of immovableproperty - 16/14 Civil Lines, Kanpur to M/s A.R.A. India LLP, forsale consideration Rs. 68 crores, vide sale deed dated 19.2.2015. 6. That regular assessment made under Section 143(3) of the Actwas challenged before the CIT (Appeals) and later before theTribunal. That assessment is stated to be pending considerationbefore this Court in appeal filed under Section 260A of the Actbeing I.T.A Nos. 45 of 2020 and 18 of 2021. 7. While the assessment of the petitioner stood thus concluded, theassessing authority of the erstwhile/transferor company chose toinitiate re-assessment proceedings against that entity. Thus, re-assessment notice was first issued against the transferor company on 28.3.2021. That re-assessment notice and further notices issuedin those proceedings were never directed at and were never servedon the petitioner company. Those were served through e-mail onthetransferorcompany.Thesameremainedunreplied/unresponded. 8. Consequently, the assessing authority of the transferor companyhas passed the impugned re-assessment order taking a view that isin conflict with the opinion formed by the assessing authority ofthe present petitioner in the original assessment proceedings, forthe same Assessment Year, vide assessment order dated30.12.2017. on 28.3.2021. That re-assessment notice and further notices issuedin those proceedings were never directed at and were never servedon the petitioner company. Those were served through e-mail onthetransferorcompany.Thesameremainedunreplied/unresponded. 8. Consequently, the assessing authority of the transferor companyhas passed the impugned re-assessment order taking a view that isin conflict with the opinion formed by the assessing authority ofthe present petitioner in the original assessment proceedings, forthe same Assessment Year, vide assessment order dated30.12.2017. 9. In such facts, it has been submitted, in the first place, thetransferor company was not in existence on the date of issue of there-assessment notice dated 28.3.2021. Therefore, the re-assessmentproceedings lack in jurisdiction. Second, no re-assessment noticeor procedural notice ever came to be served on the present assesseeas may have given rise to a valid jurisdiction with the assessingauthority to reassess either the petitioner or the transferorcompany. Third, it has been submitted, in face of the originalassessment order dated 30.12.2017 passed in the case of thepresent petitioner, a different view may never have been taken on asimple change of opinion that too without considering the materialand reasoning contained in the original assessment order dated30.12.2017. 10. On the other hand, learned counsel for the revenue wouldcontend, the transferor company never surrendered its PANidentity and it never informed the revenue about the merger.Second, referring to the existence of the material to indicateescapement of income (in the original assessment order dated 30.12.2017), it has been submitted, there exists material to subjectthe petitioner to tax. Third, inasmuch as the present petitioner didnot appear and participate in the re-assessment proceedings, itcannot be permitted to seek indulgence of the Court in exercise ofextra-ordinary jurisdiction of this Court under Article 226 of theConstitution of India. It may be relegated to the forum ofalternative remedy. Last, it has been submitted, in any case,provisions of Section 150 of the Act would protect the revenue. Tothat extent, learned counsel for the revenue prays leave of theCourt to issue fresh re-assessment notice to the petitioner companyfor A.Y. 2015-16. He has also placed reliance on the decision ofthe Supreme Court in Principal Commissioner of Income Tax(Central)-2 Vs. Mahagun Realtors (P) Ltd., (2022) SCCOnlineSC 407. 11. Having heard learned counsel for the parties and havingperused the record, it is a sine qua non that a re-assessmentproceedings may arise only on a valid assumption of jurisdiction.There is no plenary power to reassess an assessee. In the presentcase, it is undisputed to the revenue that on 28.3.2021, there didnot exist the transferor company i.e. M/s Kanpur Builders Pvt.Ltd., in that status or corporate identity. That corporate entity stoodmerged in the transferee company i.e. the present petitioner, witheffect from 1.4.2014 i.e. with effect from "previous year" 2014-15as would relate to the A.Y. 2015-16. 12. Consequently, the decision being relied upon by learnedcounsel for revenue would rather support the petitioner's case. Inthat decision, merger took place with effect from 01.04.2006whereas assessment year in dispute was A.Y. 2007-08 ("previousyear" 2006-07). Thus, the facts of the present case are similar to those involved in the decision relied upon by the learned counselfor the revenue. In paragraph 17 of the said decision, it wasobserved as below: 12. Consequently, the decision being relied upon by learnedcounsel for revenue would rather support the petitioner's case. Inthat decision, merger took place with effect from 01.04.2006whereas assessment year in dispute was A.Y. 2007-08 ("previousyear" 2006-07). Thus, the facts of the present case are similar to those involved in the decision relied upon by the learned counselfor the revenue. In paragraph 17 of the said decision, it wasobserved as below: "17. The relevant provision of the Act is Section 170. It inter alia, providesthat where a person carries on any business or profession and is succeeded(to such business) by some other person (i.e., the successor), the predecessorshall be assessed to the extent of income accruing in the previous year inwhich the succession took place, and the successor shall be assessed inrespect of income of the previous year in respect of the income of the previousyear after the date of succession." 13. Consequently, it must be noted, the income for the A.Y. 2015-16 had to be assessed at the hands of the petitioner/transfereecompany and not the transferor. In fact, that was also done bymeans of the assessment order dated 30.12.2017. 14. What prompted the assessing authority of the transferorcompany to subsequently issue the reassessment notice to thatcompany, well after the completion of the original assessmentorder against the present petitioner as also well after the effectivedate 01.04.2014 is not for the Court to speculate. As a directconsequence in law, that notice was inherently and fundamentallydefective. The reasoning contained in Commissioner of IncomeTax (Central)-2 Vs. Mahagun Realtors (P) Ltd. (supra) reliedupon by learned counsel for the revenue is inapposite to the factsof the present case. There proceedings had arisen from the regularassessment and not by way of reassessment. It also does notappear, in that case, the assessee/transferee company had no noticeof such proceedings. 15. Since issue of lack of jurisdiction was not involved in thatcase, the reasoning had emerged that no fundamental or inherentlack of jurisdiction in the assessment proceedings may beconcluded against the transferor company. Here, proceedings being of reassessment, to that extent, the defect is critical and incurableas may warrant exercise of jurisdiction under Article 226 of theConstitution of India. Unless reassessment proceedings are shownto have arisen on a firm jurisdiction, those may not be protected. 16. In the present case involving reassessment, it has materialbearing that the reassessment notice was never issued against thetransferee company i.e. the present petitioner. In fact, no noticewas ever issued to the petitioner company at its email address etc. 17. Also, in the context of reasssessment proceedings, theassessing authority is always required to act mindful of the earlierassessment, if any. On the own showing of the revenue, theassessing authority of the transferor company has proceeded toissue the reassessment notice without examining the record of thatassessee and without taking note of the event of merger and thesubsequent order dated 30.12.2017 passed in the case of themerged entity i.e. the present petitioner. Unless that assessmentorder had been first examined by the assessing authority, it isdifficult to visualize a situation where he may have entertained any"reason to believe" that any income had escaped assessment. Thepresent observation has been made conscious of the discussion inthe original assessment order dated 30.12.2017 wherein not onlythe fact of the merger of the two entities had been taken note of butalso that assessing authority had taken note of the transaction ofsale of immovable property at Rs. 68 crores. That transaction aloneappears to have given rise to re-assessment proceedings against thetransferor company. Therefore, it does appear, it has escaped theattention of assessing authority to examine the effect of originalassessment order dated 30.12.2017. material is left to be considered by that authority. Any observationmade in this order may not bind that authority to that extent. 19. However, for the reason noted above, it must be concluded, atpresent, the assessment order made against the transferor companyis without jurisdiction. It deserves to be set aside. 20. Since, the inherent jurisdiction is lacking and the impugnedorder has arisen thereon without opportunity of hearing granted tothe petitioner, no useful purpose would be served in relegating thepetitioner to the forum of alternative remedy, that too afterexchange of affidavits. Accordingly, writ petition is allowed andthe impugned order dated 29.3.2022 is set aside leaving it open tothe revenue to proceed in accordance with law keeping in mind theprovision contained in Section 150 of the Act as also theobservations made herein. Order Date :- 17.2.2023Prakhar (Saumitra Dayal Singh, J.) (Pritinker Diwaker, Acting Chief Justice)