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Pr. Commissioner Of Income Tax vs Maruti Suzuki India Limited on 25 July, 2019

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

Civil Appeal No 5409 of 2019
(Arising out of SLP(C) No 4298 of 2019)

Pr. Commissioner of Income Tax, New Delhi …Appellant

Versus

Maruti Suzuki India Limited …Respondent

JUDGMENT

Dr Dhananjaya Y Chandrachud, J

1 This appeal arises from a judgment of a Division Bench of the Delhi High Court

dated 9 January 2018 which upheld the decision of the Income Tax Appellate
Signature Not Verified

Tribunal1. The Tribunal held that the assessment made in the name of Suzuki
Digitally signed by
MANISH SETHI
Date: 2019.07.25
13:19:58 IST
Reason:

1 “the Tribunal”

1
Powertrain India Limited2 for Assessment Year3 2012-13 is a nullity since the entity

had been amalgamated with Maruti Suzuki India Limited4 under an approved scheme

of amalgamation and was not in existence. The High Court, while affirming this view

of the Tribunal followed its own decision for AY 2011-12 in Principal Commissioner

of Income Tax – 6, New Delhi v Maruti Suzuki India Limited (successor of SPIL)5

(“Maruti Suzuki”) . Holding that no question of law arose, the High Court dismissed

the appeal under Section 260A of the Income Tax Act 1961 6.

2 The Revenue is in appeal.

3 Against the decision of the High Court for AY 2011-12, a Special Leave Petition7

was dismissed by a two judge Bench of this Court on 16 July 2018 with the following

observations:

“Heard learned counsel for the parties.

Delay condoned.

In view of the order dated 02.11.2017 passed by this Court in
C.I.T., New Delhi Vs. M/s. Spice Enfotainment Ltd. (Civil
Appeal No. 285 of 2014 etc. etc.), this special leave petition
also stands dismissed. Pending applications, if any, shall stand
disposed of.”

2 “SPIL”
3 “AY”
4 “MSIL”
5 (2017) 397 ITR 681 (DEL.)
6 “SectionThe Act 1961”
7 SLP (C) Diary No. 14106 of 2018

2
On behalf of the respondent, it has been urged that in view of the dismissal of the

Special Leave Petition in relation to AY 2011-12, the same course of action must

follow in the present case which deals with the assessment for AY 2012-13.

4 We have heard submissions on behalf of the appellant by Mr Zoheb Hossain,

learned Counsel and for the respondents by Mr Ajay Vohra, learned Senior Counsel.

In order to appreciate the nature of the controversy, a narration of the facts would be

instructive.

5 The assessee is a joint venture between Suzuki Motor Corporation and MSIL.

The shareholding of the two companies in the assessee was 70 per cent and 30 per

cent. The assessee was known upon incorporation as Suzuki Metal India Limited.

Subsequently, with effect from 8 June 2005, its name was changed to SPIL.

6 On 28 November 2012, the assessee filed its return of income declaring an

income of Rs. 212,51,51,156/-. The return of income was filed in the name of SPIL

(no amalgamation having taken place on the relevant date).

7 On 29 January 2013, a scheme for amalgamation of SPIL and MSIL was

approved by the High Court with effect from 1 April 2012. The terms of the approved

scheme provided that all liabilities and duties of the transferor company shall stand

transferred to the transferee company without any further act or deed. On the scheme

3
coming into effect, the transferor was to stand dissolved without winding up. The

scheme stipulated that the order of amalgamation will not be construed as an order

granting exemptions from the payment of stamp duty or taxes or any other charges, if

payable, in accordance with law.

8 On 2 April 2013, MSIL intimated the assessing officer of the amalgamation. The

case was selected for scrutiny by the issuance of a notice under Section 143(2) on 26

September 2013, followed by a notice under Section 142(1) to the amalgamating

company.

9 On 22 January 2016, the Transfer Pricing Officer8 passed an order under

Section 92CA (3) determining the Arm’s Length Price of royalty at 3 per cent and

making an adjustment of Rs. 78.97 crores in respect of royalty paid by the assessee

for the relevant previous year.

10 On 11 March 2016, a draft assessment order was passed in the name of

Suzuki Powertrain India Limited” (amalgamated with Maruti Suzuki India Limited). The

draft assessment order sought to increase the total income of the assessee by Rs.

78.97 crores in accordance with the order of the TPO in order to ensure that the

8 “TPO”

4
international transactions with regard to the payment of royalty to the Associated

Enterprises is at Arm’s Length.

11 MSIL participated in the assessment proceedings of the erstwhile

amalgamating entity, SPIL, through its authorized representatives and officers. This

is evident from the copies of the order sheets of the assessment proceedings before

the assessing officer for AY 2012-13. Post amalgamation, on 30 September 2013, the

Chartered Accountants addressed a communication to the Commissioner of Income

Tax, Circle 9(1), pursuant to the notice under Section 143(2) for an adjournment of

the assessment proceedings for AY 2012-13 until the assessment proceedings for AY

2010-11 and AY 2011-12 were completed. On 27 October 2014, the Deputy

Commissioner of Income Tax Circle 9 (1) addressed a communication to the Principal

Officer, SPIL seeking a response to a detailed questionnaire. Thereafter, on 4

September 2015, the Deputy Commissioner of Income Tax Circle 16(1) called for

disclosure of information in the course of the assessment for AY 2012-13. The

communication was addressed to:

“The Principal Officer
M/s Suzuki Power Train India Limited
(Now known as M/s Maruti Suzuki India Limited).”

12 On 8 October 2015, a communication was addressed by the DGM (Finance)

for MSIL in response to the notice under Section 142 (1) adverting to the case of SPIL

for AY 2012-13.

5

13 On 12 April 2016, MSIL filed its appeal before the Dispute Resolution Panel9

as successor in interest of the erstwhile SPIL, since amalgamated. Form 35A was

verified by Mr Kenichi Ayukawa, Managing Director CEO of MSIL. The grounds of

appeal before the DRP did not allude to the objection that the draft assessment order

was passed in the name of SPIL (amalgamated with MSIL) or that this defect would

render the assessment proceedings invalid.

14 On 14 October 2016, the DRP issued its order in the name of MSIL (as

successor in interest of erstwhile SPIL since amalgamated).

15 The final assessment order was passed on 31 October 2016 in the name of

SPIL (amalgamated with MSIL) making an addition of Rs. 78.97 crores to the total

income of the assessee. While preferring an appeal before the Tribunal, the assessee

raised the objection that the assessment proceedings were continued in the name of

the non-existent or merged entity SPIL and that the final assessment order which was

also issued in the name of a non-existent entity, would be invalid.

16 By its decision dated 6 April 2017, the Tribunal set aside the final assessment

order on the ground that it was void ab initio, having been passed in the name of a

non-existent entity by the assessing officer. The decision of the Tribunal was affirmed

in an appeal under Section 260A by the Delhi High Court on 9 January 2018 following

9 “DRP”

6
its earlier decision in the case of the assessee for AY 2011-12. That has given rise to

the present appeal.

17 Mr Zoheb Hossain, learned Counsel appearing on behalf of the appellant

submitted that:

(i) The High Court was not justified in quashing the final assessment order under

Section 143 (3) only on the ground that the assessment was framed in the name

of the amalgamating company, which was not in existence, ignoring the fact

that the names of both the amalgamated company and the amalgamating

company were mentioned in the assessment order;

(ii) Even on the hypothesis that the assessment order was framed incorrectly in

the name of the amalgamating company, it would amount to a “mistake, defect

or omission” which is curable under Section 292B when the assessment is, “in

substance and effect, in conformity with or according to the intent and purpose”

of the Act;

(iii) During the assessment proceedings and the subsequent proceedings in

appeal, the amalgamating company was duly represented by the amalgamated

company. No prejudice was caused to any of the parties by the assessment

order and hence rendering the assessment order invalid on a ‘mere technicality’

would be incorrect in law. There was effective participation of the assessee in

the assessment proceedings and there was no doubt in the minds of those who

7
participated about the entity in relation to which the assessment proceedings

took place;

(iv) In Spice Entertainment Ltd. v Commissioner of Service Tax10 (“Spice

Entertainment”)11, the final assessment order only referred to the name of the

erstwhile entity which was non-existent and there was no reference to the

resulting company. In distinction, in the present case, in both the draft and the

final assessment orders, the names of both the amalgamating and

amalgamated companies were mentioned;

(v) In paragraph 11 of the decision of the Delhi High Court in Spice Entertainment,

it was held that:

“11. After the sanction of the scheme on 11th April, 2004, the
Spice ceases to exist w.e.f. 1st July, 2003. Even if Spice had
filed the returns, it became incumbent upon the Income tax
authorities to substitute the successor in place of the said ‘dead
person’. When notice under Section 143(2) was sent, the
appellant/amalgamated company appeared and brought this
fact to the knowledge of the AO. He, however, did not
substitute the name of the appellant on record. Instead, the
Assessing Officer made the assessment in the name of M/s
Spice which was non existing entity on that day. In such
proceedings and assessment order passed in the name of M/s
Spice would clearly be void. Such a defect cannot be treated
as procedural defect. Mere participation by the appellant would
be of no effect as there is no estoppel against law.”

10 2012 (280) ELT 43 (Del.)
11
This judgement has also been referred to as SectionSpice Infotainment v. Commissioner of Income tax in Current Tax
Reporter [(2012) 247 CTR (Del) 500]

8
From the above extract, it would emerge that if an assessment order had been

passed on the resulting company, it would not be void. Hence, in the present

case, the issuance of a notice under Section 143 (2) to SPIL cannot be

considered to be a jurisdictional effect when the assessment order categorically

mentions the names of the amalgamated and amalgamating companies;

(vi) The decision of the Delhi High Court in Skylight Hospitality LLP v Assistant

Commissioner of Income Tax, Circle-28(1), New Delhi12 (“Skylight

Hospitality LLP”), which was confirmed by this Court on 6 April 201813 dealt

with a situation where a notice under Section 148 was issued in the name of a

non-existent private limited company. The Court held that the defect in

recording the name of a non-existent company in a notice under Section 148

was a procedural defect or mistake curable under Section 292B, since no

prejudice was caused to the assessee. The Delhi High Court distinguished the

decision in Spice Entertainment on the ground that in that case even the final

assessment order was in the name of a non-existent company;

(vii) In the present case, both the draft assessment order and the final assessment

order contained the names of the amalgamated and amalgamating companies

and hence it cannot be held that the final order is in the name of a non-existent

company. The order of the TPO is not the subject of a challenge by the

assessee before any forum. The directions of the TPO were implemented by

12 (2018) 405 ITR 296 (Delhi)
13 (2018) 13 SCC 147

9
the assessing officer in the draft assessment order in accordance with Section

144C(1) which was then challenged by the assessee before the DRP under

Section 144C(2). Since the names of both the amalgamated and amalgamating

companies were mentioned in the draft assessment order and final assessment

order, there is no jurisdictional defect;

(viii) In view the decision of this Court in Kunhayammed v State of Kerala14

(“Kunhayammed”), though the doctrine of merger does not apply when a

Special Leave Petition is dismissed before the grant of leave to appeal, where

an order rejecting a Special Leave Petition is a speaking order and reasons

have been assigned for rejecting the petition, the law stated or declared in such

an order will attract Article 141; and

(ix) Consequently, in the alternative, in view of the order passed by this Court on 6

April 2018 in Skylight Hospitality LLP on the one hand and the order dated

16 July 2018 in the case of the present assessee for AY 2011-12 and the earlier

order dated 2 November 2017 in CIT, New Delhi v Spice Enfotainment Ltd.15

(“Spice Enfotainment Ltd”), there appears to be a direct conflict of views on

the principle whether a notice issued to a non-existent company would suffer

from a jurisdictional error or whether it is a mere defect or mistake which would

be governed by Section 292B.

14 (2000) 6 SCC 359
15 Civil Appeal No. 285 of 2014

10
18 On the other hand, Mr Ajay Vohra, learned Senior Counsel appearing on behalf

of the respondents submitted that:

(i) Upon a scheme of amalgamation being sanctioned, the amalgamated company

is dissolved without winding up, in terms of Section 394 of the Companies Act

1956. The amalgamating company ceases to exist in the eyes of law

[Saraswati Industrial Syndicate Ltd. v CIT16 (“Saraswati Industrial

Syndicate Ltd.”)];

(ii) The amalgamating company cannot thereafter be regarded as a “person” in

terms of Section 2(31) of the Act 1961 against whom assessment proceedings

can be initiated and an assessment order passed;

(iii) The jurisdictional notice under Section 143(2) of the Act, pursuant to which the

assessing officer assumed jurisdiction to make an assessment was issued in

the name of SPIL, a non-existent entity, and was invalid. Hence the initiation of

assessment proceedings against a non-existent entity was void ab initio.

• It has been held in the following decisions that, if a statutory notice is

issued in the name of a non-existent entity, the entire assessment would

be a nullity in the eyes of law:

– CIT v Intel Technology India (P) Ltd17

– PCIT v Nokia Solutions Network India (P) Ltd. (“Nokia
Solutions”)18

– Spice Entertainment

16 (1990) 186 ITR 278 (SC)
17 [2016] 380 ITR 272 (Kar.)
18 [2018] 402 ITR 21 (Del)

11

– Similarly, a notice to the amalgamating company, subsequent to the
amalgamation becoming effective and despite the fact of the
amalgamation having been brought to the notice of the assessing officer,
is void ab initio as held in the following decisions:

– BDR Builders and Developers Pvt. Ltd. v ACIT19

– Rustagi Engineering Udyog (P.) Ltd. v DCIT20

– Khurana Engineering Ltd. v DCIT21

– Takshashila Realties (P) Ltd. v DCIT22

– Alamelu Veerappan v ITO23 (“Alamelu Veerappan”)

(iv) The order passed by the TPO in the name of SPIL, a non-existent entity was

invalid in the eyes of the law:

• SPIL ceased to be an “eligible assessee”, in terms of Sectionsection 144C (15) (b)

of the Act. Consequently, there was no requirement to pass a draft

assessment order/reference to DRP etc.; and

• Furthermore, the final assessment order dated 31 October 2016 is beyond

limitation in terms of Section 153(1) read with Section 153 (4) of the Act.

(v) The assessment framed in the name of the amalgamating Company is invalid:

19 [2017] 397 ITR 529 (Del)
20 [2016] 382 ITR 443 (Del)
21 [2014] 364 ITR 600 (Guj)
22 [2017] 77 taxmann.com 160 (Guj.)
23 [2018] 257 Taxman 72 (Madras)

12
• In terms of Section 170(2) of the Act, once the amalgamation is effective,

assessment in respect of the income of the amalgamating company upto

the appointed date has to be in the name of the amalgamated company as

successor in interest of the amalgamating company.

• The Delhi High Court has held in Spice Entertainment that an assessment

framed in the name of the amalgamating company, which ceased to exist

in the eyes of law, was invalid and untenable in law. Such a defect would

not be cured in terms of Section 292B of the Act. Further, the fact that the

amalgamated company participated in the assessment proceedings would

not operate as estoppel.

• Following the aforesaid decision of the High Court in the case of Spice

Entertainment, the Delhi High Court quashed assessment orders which

were framed in the name of an amalgamating company, recording also the

name of the amalgamated company, in the following cases:

-CIT v Dimension Apparels Pvt. Ltd24 (“Dimension Apparels”);

affirmed by this Hon’ble Court vide Civil Appeal No. 3125 of 2015;

– CIT v Micron Steels P. Ltd. (“Micron Steels”)25; and

-CIT v Micra India (P) Ltd. (“Micra India”)26.

24 [2015] 370 ITR 288 (Del)
25 [2015] 372 ITR 386 (Del.) (MAG.)
26 [2015] 231 Taxman 809 (Del.)

13
The aforesaid judgments of the Delhi High Court have been approved by

this Court in Civil Appeal No.285 of 2014 ( other connected matters). Thus

applying the doctrine of merger, the law laid down by the Delhi High Court

has become a precedent under SectionArticle 141.

(vi) The Respondent’s case is squarely covered by the decision of this Court in its

own case for the immediately preceding year:

• The Delhi High Court by its judgment reported in Maruti Suzuki held in

favour of the Respondent by following the judgment in the case of Spice

Entertainment.

• Further, the Revenue’s SLP was dismissed by this Court on 16 July 2018

in SLP(C) D.No.14106/2018, following the judgment in Spice

Entertainment.

• Relying on the decision of this Hon’ble Court, in the following decisions,

assessments framed in the case of a non-existent entity (the amalgamating

company) have been held to be non-est in the eyes of law:

– CIT v BMA Capfin Ltd.27 (Revenue’s SLP dismissed against the same

vide order dated 19 November 201828 passed in SLP(C) Diary No.40486

of 2018).

– Nokia Solutions

27 [2018] 100 taxmann.com 329 (Del.)
28
[2018] 100 taxmann.com 330 (SC)

14

(vii) The judgment of the Delhi High Court in Skylight Hospitality LLP is

distinguishable and is not applicable to the facts of the present case:

• The judgment was rendered on its own peculiar facts.

• In that case, the tax evasion petition mentioned the factum of conversion of the

company into a Limited Liability Partnership29, which was also noticed in the

reasons to believe and approval of the Principal Commissioner (before

issuance of a notice under Section 148 of the Act). However, only because of

a clerical mistake, the notice was wrongly issued in the name of Skylight

Hospitality Pvt. Ltd. instead of Skylight Hospitality LLP.

• In the aforesaid facts, the High Court held that this was an irregularity and

procedural/ technical lapse which was curable under Sectionsection 292B of the Act.

• The decision in the case of Spice Enfotainment was not followed on the

ground that it pertained to the passing of an assessment order in the name of

a non-existent entity whereas the case at hand dealt with a notice under Section

148 of the Act.

• The SLP filed by the assessee against the decision of the Delhi High Court was

dismissed recording: “In the peculiar facts of this case, we are convinced

that wrong name given in the notice was merely a clerical error which could be

corrected under Section 292B of Act 1961”;

• Subsequently, various High Courts, including the Delhi High Court have in the

following decisions distinguished the judgment in the case of Skylight

29 “LLP”

15
Hospitality LLP and have quashed the notice/assessment framed in the name

of a non-existent entity:

– Rajender Kumar Sehgal v ITO (“Rajender Kumar Sehgal”)30

– Chandreshbhai Jayantibhai Patel v ITO (“Chandreshbhai Jayantibhai

Patel”)31; and

– Alamelu Veerappan

19 While assessing the merits of the rival submissions, it is necessary at the outset

to advert to certain significant facets of the present case:

(i) Firstly, the income which is sought to be subjected to the charge of tax for AY

2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This

is on account of a transfer pricing addition of Rs. 78.97 crores;

(ii) Secondly, under the approved scheme of amalgamation, the transferee has

assumed the liabilities of the transferor company, including tax liabilities;

(iii) Thirdly, the consequence of the scheme of amalgamation approved under

Section 394 of the Companies Act 1956 is that the amalgamating company

ceased to exist. In Saraswati Industrial Syndicate Ltd., the principle has been

formulated by this Court in the following observations:

“5. Generally, where only one company is involved in change
and the rights of the shareholders and creditors are varied, it
amounts to reconstruction or reorganisation of scheme of
arrangement. In amalgamation two or more companies are
fused into one by merger or by taking over by another.

Reconstruction or ‘amalgamation’ has no precise legal
meaning. The amalgamation is a blending of two or more

30 [2019] 260 Taxman 412 (Del.)
31 (2019) 261 Taxman 137 (Guj)

16
existing undertakings into one undertaking, the shareholders
of each blending company become substantially the
shareholders in the company which is to carry on the blended
undertakings. There may be amalgamation either by the
transfer of two or more undertakings to a new company, or by
the transfer of one or more undertakings to an existing
company. Strictly ‘amalgamation’ does not cover the mere
acquisition by a company of the share capital of other company
which remains in existence and continues its undertaking but
the context in which the term is used may show that it is
intended to include such an acquisition. See: Halsbury’s Laws
of England (4th edition volume 7 para 1539). Two companies
may join to form a new company, but there may be absorption
or blending of one by the other, both amount to amalgamation.
When two companies are merged and are so joined, as to form
a third company or one is absorbed into one or blended with
another, the amalgamating company loses its entity.”

(iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded

as a person under Section 2(31) of the Act 1961 against whom assessment

proceedings can be initiated or an order of assessment passed;

(v) Fifthly, a notice under Section 143 (2) was issued on 26 September 2013 to the

amalgamating company, SPIL, which was followed by a notice to it under Section

142(1);

(vi) Sixthly, prior to the date on which the jurisdictional notice under Section 143 (2)

was issued, the scheme of amalgamation had been approved on 29 January 2013

by the High Court of Delhi under the SectionCompanies Act 1956 with effect from 1 April

2012;

(vii) Seventhly, the assessing officer assumed jurisdiction to make an assessment in

pursuance of the notice under Section 143 (2). The notice was issued in the name

of the amalgamating company in spite of the fact that on 2 April 2013, the

17
amalgamated company MSIL had addressed a communication to the assessing

officer intimating the fact of amalgamation. In the above conspectus of the facts,

the initiation of assessment proceedings against an entity which had ceased to

exist was void ab initio.

20 In Spice Entertainment, a Division Bench of the Delhi High Court dealt with

the question as to whether an assessment in the name of a company which has been

amalgamated and has been dissolved is null and void or, whether the framing of an

assessment in the name of such company is merely a procedural defect which can be

cured. The High Court held that upon a notice under Section 143 (2) being addressed,

the amalgamated company had brought the fact of the amalgamation to the notice of

the assessing officer. Despite this, the assessing officer did not substitute the name

of the amalgamated company and proceeded to make an assessment in the name of

a non-existent company which renders it void. This, in the view of the High Court, was

not merely a procedural defect. Moreover, the participation by the amalgamated

company would have no effect since there could be no estoppel against law :

“11. After the sanction of the scheme on 11th April, 2004, the
Spice ceases to exit w.e.f. 1st July, 2003. Even if Spice had
filed the returns, it became incumbent upon the Income tax
authorities to substitute the successor in place of the said
„dead person‟. When notice under Section 143 (2) was sent,
the appellant/amalgamated company appeared and brought
this fact to the knowledge of the AO. He, however, did not
substitute the name of the appellant on record. Instead, the
Assessing Officer made the assessment in the name of M/s
Spice which was non existing entity on that day. In such
proceedings an assessment order passed in the name of M/s
Spice would clearly be void. Such a defect cannot be treated

18
as procedural defect. Mere participation by the appellant would
be of no effect as there is no estoppel against law.

12. Once it is found that assessment is framed in the name of
non-existing entity, it does not remain a procedural irregularity
of the nature which could be cured by invoking the provisions
of Section 292B of the Act.”

Following the decision in Spice Entertainment, the Delhi High Court quashed

assessment orders which were framed in the name of the amalgamating company in:

(i) Dimension Apparels;

(ii) Micron Steels; and

(iii) Micra India.

21 In Dimension Apparels, a Division Bench of the Delhi High Court affirmed the

quashing of an assessment order dated 31 December 2010. The Respondent had

amalgamated with another company and thus, ceased to exist from 7 December 2009.

The Court rejected the argument of the Revenue that the assessment was in

substance and effect in conformity with the Act by reason of the fact that the assessing

officer had used correct nomenclature in addressing the Assessee; stated the fact that

the company had amalgamated and mentioned the correct address of the

amalgamated company. It was the Revenue’s contention that the omission on the part

of the assessing officer to mention the name of the amalgamated company is a

procedural defect. The Delhi High Court rejected this contention. In doing so, it relied

on the holding in Spice Entertainment, where the High Court expressly clarified that

“the framing of assessment against a non-existing entity/person” is a jurisdictional

19
defect. The Division Bench also relied on the holding in Spice Entertainment that

participation by the amalgamated company in proceedings does not cure the defect

as “there can be no estoppel in law”, to affirm the quashing of the assessment order.

22 In Micron Steels, a notice was issued to Micron Steels Pvt Ltd (original

assessee) after it had amalgamated with Lakhanpal Infrastructure Pvt Ltd. A Division

Bench of the Delhi High Court upheld the setting aside of assessment orders, noting

that Spice Entertainment is an authority for the proposition that completion of

assessment in respect of a non-existent company due to the amalgamation order,

would render the assessment a nullity.

23 In Micra India, the original assessee Micra India Pvt. Ltd had amalgamated

with Dynamic Buildmart (P) Ltd. Notice was issued to the original assessee by the

Revenue after the fact of amalgamation had been communicated to it. The Court

noted that though the assessee had participated in the assessment, the original

assessee was no longer in existence and the assessment officer did not the take the

remedial measure of transposing the transferee as the company which had to be

assessed. Instead, the original assessee was described as one in existence and the

order mentioned the transferee’s name below that of the original assessee. The

Division Bench adverted to the judgment in Dimension Apparels wherein the High

Court had discussed the ruling in Spice Entertainment. It was held that this was a

20
case where the assessment was contrary to law, having been completed against a

non-existent company.

24 A batch of Civil Appeals was filed before this Court against the decisions of the

Delhi High Court, the lead appeal being Spice Enfotainment. On 2 November 2017,

a Bench of this Court consisting of Hon’ble Mr Justice Rohinton Fali Nariman and

Hon’ble Mr Justice Sanjay Kishan Kaul dismissed the Civil Appeals and tagged

Special Leave Petitions in terms of the following order :

“Delay condoned.

Heard the learned Senior Counsel appearing for the parties.

We do not find any reason to interfere with the impugned
judgment(s) passed by the High Court.

In view of this, we find no merit in the appeals and special leave
petitions.

Accordingly, the appeals and special leave petitions are
dismissed.”

25 The doctrine of merger results in the settled legal position that the judgment of

the Delhi High Court stands affirmed by the above decision in the Civil Appeals.

26 The order of assessment in the case of the respondent for AY 2011-12 was set

aside on the same ground. This resulted in a Special Leave Petition by the Principal

21
Commissioner of Income Tax – 6 Delhi32. The Special Leave Petition was dismissed

by a two judge Bench of this Court consisting of Hon’ble Mr Justice Rohinton Fali

Nariman and Hon’ble Ms Justice Indu Malhotra on 16 July 2018 in view of the order

dated 2 November 2017 governing Civil Appeal No. 285 of 2014 in Spice

Enfotainment and the connected batch of cases. Though, leave was not granted by

this Court, reasons have been assigned by this Court for rejecting the Special Leave

Petition. The law declared would attract the applicability of SectionArticle 141 of the

Constitution. For, as this Court has held in Kunhayammed:

“40…Where the order rejecting an SLP is a speaking order,
that is, where reasons have been assigned by this Court for
rejecting the petition for special leave and are stated in the
order still the order remains the one rejecting prayer for the
grant of leave to appeal. The petitioner has been turned away
at the threshold without having been allowed to enter in the
appellate jurisdiction of this Court. Here also the doctrine of
merger would not apply. But the law stated or declared by this
Court in its order shall attract applicability of SectionArticle 141 of the
Constitution. The reasons assigned by this Court in its order
expressing its adjudication (expressly or by necessary
implication) on point of fact or law shall take away the
jurisdiction of any other court, tribunal or authority to express
any opinion in conflict with or in departure from the view taken
by this Court because permitting to do so would be subversive
of judicial discipline and an affront to the order of this Court.

However this would be so not by reference to the doctrine of
merger.”

27 The submission however which has been urged on behalf of the Revenue is

that a contrary position emerges from the decision of the Delhi High Court in Skylight

Hospitality LLP which was affirmed on 6 April 2018 by a two judge Bench of this

32 Special Leave Petition (C) (D) No. 14106 of 2018

22
Court consisting of Hon’ble Mr Justice A K Sikri and Hon’ble Mr Justice Ashok

Bhushan33. In assessing the merits of the above submission, it is necessary to extract

the order dated 6 April 2018 of this Court:

“In the peculiar facts of this case, we are convinced that wrong
name given in the notice was merely a clerical error which
could be corrected under Section 292B of the Income Tax Act.

The special leave petition is dismissed.

Pending applications stand disposed of.”

Now, it is evident from the above extract that it was in the peculiar facts of the case

that this Court indicated its agreement that the wrong name given in the notice was

merely a clerical error, capable of being corrected under Section 292B. The “peculiar

facts” of Skylight Hospitality emerge from the decision of the Delhi High Court34.

Skylight Hospitality, an LLP, had taken over on 13 May 2016 and acquired the rights

and liabilities of Skylight Hospitality Pvt. Ltd upon conversion under the SectionLimited

Liability Partnership Act 200835. It instituted writ proceedings for challenging a notice

under Sections 147/Section148 of the Act 1961 dated 30 March 2017 for AY 2010-2011. The

“reasons to believe” made a reference to a tax evasion report received from the

investigation unit of the income tax department. The facts were ascertained by the

investigation unit. The reasons to believe referred to the assessment order for AY

2013-2014 and the findings recorded in it. Though the notice under Sections 147/Section148

was issued in the name of Skylight Hospitality Pvt. Ltd. (which had ceased to exist

33 Special Leave Petition (C) No. 7409 of 2018
34 “Sky Light Hospitality LLP v Assistant Commissioner of Income Tax : (2018) 405 ITR 296 (Delhi)
35 “LLP Act 2008”

23
upon conversion into an LLP), there was, as the Delhi High Court held “substantial

and affirmative material and evidence on record” to show that the issuance of the

notice in the name of the dissolved company was a mistake. The tax evasion report

adverted to the conversion of the private limited company into an LLP. Moreover, the

reasons to believe recorded by the assessing officer adverted to the approval of the

Principal Commissioner. The PAN number of the LLP was also mentioned in some of

the documents. The notice under Sections 147/Section148 was not in conformity with the

reasons to believe and the approval of the Principal Commissioner. It was in this

background that the Delhi High Court held that the case fell within the purview of

Section 292B for the following reasons:

“18…There was no doubt and debate that the notice was
meant for the petitioner and no one else. Legal error and
mistake was made in addressing the notice. Noticeably, the
appellant having received the said notice, had filed without
prejudice reply/letter dated 11.04.2017. They had objected to
the notice being issued in the name of the Company, which
had ceased to exist. However, the reading of the said letter
indicates that they had understood and were aware, that the
notice was for them. It was replied and dealt with by them. The
fact that notice was addressed to M/s. Skylight Hospitality Pvt.

Ltd., a company which had been dissolved, was an error and
technical lapse on the part of the respondent. No prejudice was
caused.”

28 The decision in Spice Entertainment was distinguished with the following

observations:

“19. Petitioner relies on SectionSpice Infotainment
Ltd. v. Commissioner of Service Tax, (2012) 247 CTR 500.

24
Spice Corp. Ltd., the company that had filed the return, had
amalgamated with another company. After notice under
Section 147/Section148 of the Act was issued and received in the
name of Spice Corp. Ltd., the Assessing Officer was informed
about amalgamation but the Assessment Order was passed in
the name of the amalgamated company and not in the name
of amalgamating company. In the said situation, the
amalgamating company had filed an appeal and issue of
validity of Assessment Order was raised and examined. It was
held that the assessment order was invalid. This was not a
case wherein notice under Section 147/Section148 of the Act was
declared to be void and invalid but a case in which assessment
order was passed in the name of and against a juristic person
which had ceased to exist and stood dissolved as per
provisions of the SectionCompanies Act. Order was in the name of
non-existing person and hence void and illegal.”

29 From a reading of the order of this Court dated 6 April 2018 in the Special Leave

Petition filed by Skylight Hospitality LLP against the judgment of the Delhi High

Court rejecting its challenge, it is evident that the peculiar facts of the case weighed

with this Court in coming to this conclusion that there was only a clerical mistake within

the meaning of Section 292B. The decision in Skylight Hospitality LLP has been

distinguished by the Delhi, Gujarat and Madras High Courts in:

(i) Rajender Kumar Sehgal;

(ii) Chandreshbhai Jayantibhai Patel; and

(iii) Alamelu Veerappan.

25
30 There is no conflict between the decisions of this Court in Spice Enfotainment

(dated 2 November 2017)36 and in Skylight Hospitality LLP (dated 6 April 201837).

31 Mr Zoheb Hossain, learned Counsel appearing on behalf of the Revenue urged

during the course of his submissions that the notice that was in issue in Skylight

Hospitality Pvt. Ltd. was under Sections 147 and Section148. Hence, he urged that despite

the fact that the notice is of a jurisdictional nature for reopening an assessment, this

Court did not find any infirmity in the decision of the Delhi High Court holding that the

issuance of a notice to an erstwhile private limited company which had since been

dissolved was only a mistake curable under Section 292B. A close reading of the

order of this Court dated 6 April 2018, however indicates that what weighed in the

dismissal of the Special Leave Petition were the peculiar facts of the case. Those facts

have been noted above. What had weighed with the Delhi High Court was that though

the notice to reopen had been issued in the name of the erstwhile entity, all the

material on record including the tax evasion report suggested that there was no

manner of doubt that the notice was always intended to be issued to the successor

entity. Hence, while dismissing the Special Leave Petition this Court observed that it

was the peculiar facts of the case which led the court to accept the finding that the

wrong name given in the notice was merely a technical error which could be corrected

36 Civil Appeal No. 285 of 2014 and connected cases
37 Special Leave Petition No. 7409 of 2018

26
under Section 292B. Thus, there is no conflict between the decisions in Spice

Enfotainment on the one hand and Skylight Hospitality LLP on the other hand.

It is of relevance to refer to Section 292B of the Income Tax Act which reads as

follows:

“292B. No return of income, assessment, notice, summons or
other proceeding, furnished or made or issued or taken or
purported to have been furnished or made or issued or taken
in pursuance of any of the provisions of this Act shall be invalid
or shall be deemed to be invalid merely by reason of any
mistake, defect or omission in such return of income,
assessment, notice, summons or other proceeding if such
return of income, assessment, notice, summons or other
proceeding is in substance and effect in conformity with or
according to the intent and purpose of this Act.”

In this case, the notice under Section 143(2) under which jurisdiction was assumed

by the assessing officer was issued to a non-existent company. The assessment order

was issued against the amalgamating company. This is a substantive illegality and

not a procedural violation of the nature adverted to in Section 292B.

In this context, it is necessary to advert to the provisions of Section 170 which deal

with succession to business otherwise than on death. Section 170 provides as follows:

“170. (1) Where a person carrying on any business or
profession (such person hereinafter in this section being
referred to as the predecessor) has been succeeded therein by
any other person (hereinafter in this section referred to as the
successor) who continues to carry on that business or
profession,—

27

(a) the predecessor shall be assesseed in respect of the
income of the previous year in which the succession took place
up to the date of succession;

(b) the successor shall be assesseed in respect of the income
of the previous year after the date of succession.

(2) Notwithstanding anything contained in sub-section (1),
when the predecessor cannot be found, the assessment of the
income of the previous year in which the succession took place
up to the date of succession and of the previous year preceding
that year shall be made on the successor in like manner and to
the same extent as it would have been made on the
predecessor, and all the provisions of this Act shall, so far as
may be, apply accordingly.

(3) When any sum payable under this section in respect of the
income of such business or profession for the previous year in
which the succession took place up to the date of succession
or for the previous year preceding that year, assesseed on the
predecessor, cannot be recovered from him, the 99[Assessing]
Officer shall record a finding to that effect and the sum payable
by the predecessor shall thereafter be payable by and
recoverable from the successor and the successor shall be
entitled to recover from the predecessor any sum so paid.

(4) Where any business or profession carried on by a Hindu
undivided family is succeeded to, and simultaneously with the
succession or after the succession there has been a partition
of the joint family property between the members or groups of
members, the tax due in respect of the income of the business
or profession succeeded to, up to the date of succession, shall
be assesseed and recovered in the manner provided in Sectionsection
171, but without prejudice to the provisions of this section.

Explanation.—For the purposes of this section, “income”
includes any gain accruing from the transfer, in any manner
whatsoever, of the business or profession as a result of the
succession”

Now, in the present case, learned Counsel appearing on behalf of the respondent

submitted that SPIL ceased to be an eligible assessee in terms of the provisions of

Section 144C read with clause (b) of sub Sectionsection 15. Moreover, it has been urged that
28
in consequence, the final assessment order dated 31 October 2016 was beyond

limitation in terms of Section 153(1) read with Section 153 (4). For the purposes of the

present proceeding, we do not consider it necessary to delve into that aspect of the

matter having regard to the reasons which have weighed us in the earlier part of this

judgment.

32 On behalf of the Revenue, reliance has been placed on the decision of this

Court in Commissioner of Income Tax, Shillong v Jai Prakash Singh38 (“Jai

Prakash Singh”). That was a case where the assessee did not file a return for three

assessment years and died in the meantime. His son who was one of the legal

representatives filed returns upon which the assessing officer issued notices under

Section 142 (1) and Section 143 (2). These were complied with and no objections

were raised to the assessment proceedings. The assessment order mentioned the

names of all the legal representatives and the assessment was made in the status of

an individual. In appeal, it was contended that the assessment proceedings were void

as all the legal representatives were not given notice. In this backdrop, a two judge

Bench of this Court held that the assessment proceedings were not null and void, and

at the worst, that they were defective. In this context, reliance was placed on the

decision of the Federal Court in Chatturam v CIT39 holding that the jurisdiction to

assess and the liability to pay tax are not conditional on the validity of the notice : the

liability to pay tax is founded in the charging sections and not in the machinery

38 (1996) 3 SCC 525
39 (1947) 15 ITR 302 (FC)

29
provisions to determine the amount of tax. Reliance was also placed on the decision

in Maharaja of Patiala v CIT40 (“Maharaja of Patiala”). That was a case where two

notices were issued after the death of the assessee in his name, requiring him to make

a return of income. The notices were served upon the successor Maharaja and the

assessment order was passed describing the assessee as “His Highness…late

Maharaja of Patiala”. The successor appealed against the assessment contending

that since the notices were sent in the name of the Maharaja of Patiala and not to him

as the legal representative of the Maharaja of Patiala, the assessments were illegal.

The Bombay High Court held that the successor Maharaja was a legal representative

of the deceased and while it would have been better to so describe him in the notice,

the notice was not bad merely because it omitted to state that it was served in that

capacity. Following these two decisions, this Court in Jai Prakash Singh held that an

omission to serve or any defect in the service of notices provided by procedural

provisions does not efface or erase the liability to pay tax where the liability is created

by a distinct substantive provision. The omission or defect may render the order

irregular but not void or illegal. Jai Prakash Singh and the two decisions that it placed

reliance upon were evidently based upon the specific facts. Jai Prakash Singh

involved a situation where the return of income had been filed by one of the legal

representatives to whom notices were issued under Section 142(1) and Section143(2). No

objection was raised by the legal representative who had filed the return that a notice

should also to be served to other legal representatives of the deceased assessee. No

40 (1943) 11 ITR 202 (Bombay)

30
objection was raised before the assessing officer. Similarly, the decision in Maharaja

of Patiala was a case where the notice had been served on the legal representative,

the successor Maharaja and the Bombay High Court held that it was not void merely

because it omitted to state that it was served in that capacity.

33 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. This position now holds the field in view

of the judgment of a co-ordinate Bench of two learned judges which dismissed the

appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in

Spice Enfotainment has been followed in the case of the respondent while

dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has

relied on the decision in Spice Enfotainment.

34 We find no reason to take a different view. There is a value which the court

must abide by in promoting the interest of certainty in tax litigation. The view which

has been taken by this Court in relation to the respondent for AY 2011-12 must, in our

view be adopted in respect of the present appeal which relates to AY 2012-13. Not

doing so will only result in uncertainty and displacement of settled expectations. There

31
is a significant value which must attach to observing the requirement of consistency

and certainty. Individual affairs are conducted and business decisions are made in the

expectation of consistency, uniformity and certainty. To detract from those principles

is neither expedient nor desirable.

35 For the above reasons, we find no merit in the appeal. The appeal is accordingly

dismissed. There shall be no order as to costs.

…….……..………………….……………………..J.

[DR DHANANJAYA Y CHANDRACHUD]

……….…..…….………..……………….………..J.

[INDIRA BANERJEE]

New Delhi;

July 25, 2019.

32

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