1. The controversy with respect to the validity of the assessment in the hands of non-existing entity has been recently settled in favour of the Assessee by Hon’ble Supreme Court by passing a speaking order on the subject matter in the case of PCIT v. Maruti Suzuki India Limited, (2019) (SC).
2.
While delivering the said judgment, Hon’ble Supreme Court also ruled on
the aspects of Consistency, uniformity, and certainty
in Judiciary by making following observation: -
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 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.Despite having the landmark judgment by the
Hon’ble Supreme Court in case of Maruti Suzuki India Limited (Supra), still the
Revenue is constantly trying to distinguish the said landmark judgment by
casting onus on the Assessee to intimate to Department with respect to the
status of anon-existent entity or death of a
person.
3.
In the article,
cover these types of endeavours by the Department to validate the assessment on a non-existent entity or a
dead person by taking shelter of the plea that the Assessee failed to intimate
the department regarding
ceasure of the entity or death of the person..
4.
A very recent judgment by the Hon’ble
Delhi High Court in the case of Savita
Kapila legal heir of late Shri Mohinder Paul Kapila Vs ACIT in W.P.(C) 3258/2020
is the new landmark with respect to the revenue
pleading Oblivious of death of the Assessee. In the facts of the said case, the
AO had reopened the Assessment u/s 148 of the Act after the death of the
Assessee and issued notices in the name of the dead person. Later on the AO
traced a telephone number and made a phone call. The said phone call was
answered by the petitioner (Savita Kapila) and she informed the AO with respect
to the death of the Assessee. She also uploaded the death certificate of the
Assessee on the E-Portal. The AO transferred
to the proceedings to the PAN of the
legal heir and framed the Assessment in her name. She challenged the entire
proceedings as the jurisdictional notice u/s 148 of the Act was issued in the
name of the dead person and pleaded that once the jurisdiction fails, then
entire proceedings would also fail.
5
. 1 The Revenue argued in the said case that the
factum of the death of the Assessee was not communicated before issuance of the
notice u/s 148 and also argued that the Revenue was not obliged under the
law to suo motu maintain Birth and Death
record of 44.50
crore PAN card
holders in the country.
5.2
Hon’ble Delhi High Court heard the matter in detail and then ruled on
various important aspects of the law relating to the issue on hand, as under: -
a)
On alternate remedy
- An alternative statutory remedy does not operate as a bar to maintainability of a writ petition
where the order
or notice or proceedings are wholly without
jurisdiction. If the assessing officer had no jurisdiction to initiate
assessment proceeding, the mere fact that subsequent orders have been passed would not render
the challenge to jurisdiction infructuous.
b)
On Bar by Limitation - No notice under section 148 of the act, 1961
was ever issued upon the legal heir during the period of limitation.
Consequently, the proceedings against the legal heir are barred by limitation as per section
149(1)(b) of the act, 1961.
c)
On Non-Applicability of Section 159 - As in the present case proceedings were not
initiated / pending against the Assessee when he was alive and after his death
the legal representative did not step
into the shoes of the deceased Assessee. Section 159 of the act, 1961 does not apply
to the present case.
d)
On duty of the legal heir to intimate the AO - There is no statutory requirement imposing
an obligation upon legal
heirs to intimate the death of the Assessee. Whether PAN record was
updated or not
or whether the Department was made aware by the legal representatives or not is irrelevant.
e)
On Non-Applicability of Section 292B - Issuance of notice upon a dead person and non-service of notice
does not come
under the ambit
of mistake, defect or omission. Consequently, Section 292B of the Act, 1961 does not apply to the present case.
f)
On Non-Applicability of Section 292B to legal
heir - the
applicability of Section 292BB of the Act, 1961 has been held to be attracted to an Assessee
and not to legal representatives.
g)
On Supreme Court
Decision in Maruti
Suzuki - The High
Court held that
judgment in PCIT
v. Maruti Suzuki India Limited
(supra) offers no assistance to the revenue. However, the said
judgment nowhere states that there is an obligation upon
the legal representative to inform the Income Tax
Department about the death of the assessee or to surrender
the PAN of the deceased
assessee.
5.3
The High Court
has categorically ruled that there is no provision under the Income Tax Act, 1961 which obligates the legal
heir to intimate the death of the Assessee to the department. Therefore, the
revenue cannot plead oblivious.
6
Similarly, before the Karnataka
High Court in the case of M/s
eMUDHRA LTD. vs ACIT in Writ Petition
No.56004/2018 (T-IT) ,
the Revenue has also taken plea of
the fact of amalgamation of the Assessee Company and pointed out that the
petitioner had not informed the fact of amalgamation of the Assessee
to Revenue.
6.1 The Revenue argued that it was not the party to the proceedings
relating to the amalgamation of the company and also attempted to distinguish
the Maruti Suzuki judgment of the Supreme Court on Assessment of Non Exist
Entity.
6
. 2 Hon’ble Karnataka High Court observed that
though the Ld counsel of the revenue made and
endeavour to contend that the Income Tax department not being arrayed as party to
the Company proceedings, the order was not within its knowledge, cannot be countenanced
for the reason that the Registrar of Companies before filing the appropriate
affidavit before this Court in the said proceedings had issued notice to the
Income Tax Department. Based on the
reply received, wherein, it was observed by the department that M/ s eMudra
Ltd, is required to adhere to the provisions of the Income Tax Act and Rules and also notifications and instructions. Upon
the claim being sanctioned and particularly on the subsequent transfer memo
issued and the Compliance Response Sheet submitted, the department cannot
feign ignorance of the amalgamation
order merely for the reason that no specific objection was raised by the
petitioner on this aspect in the objections filed to the reasons recorded by
the Assessing Officer.
6.3 Hon’ble
Karnataka High Court make a speaking
observation that once notice is issued by the Registrar of Companies to the
Income Tax Department with respect
to the proceedings of the Amalgamation, then
subsequently the Department cannot plea oblivious
of the fact of the amalgamation.
7
Concluding Remarks: -
7.1
Both the above-mentioned judgments are landmark on two different
situations, Delhi High Court in the case of the Death of the Assessee and Karnataka High Court on the issue of Amalgamation of Companies.
7.2 Both the above judgments have been delivered
after the Supreme Court judgment in the case of PCIT v. Maruti Suzuki India Limited, (2019)
(SC) and after duly considering the ratio of the Hon’ble Supreme Court.
7.3 Both the above judgments are going to be the
crucial support for the Assessee in the cases of the Assessment of Non-Exist Entities
wherever the Revenue
endeavour to plea oblivious.
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