Westlife Development Ltd vs. Pr. CIT (ITAT Mumbai)

DATE: June 10, 2016 (Date of pronouncement)
DATE: June 28, 2016 (Date of publication)
AY: 2011-12
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S. 263: In challenging the validity of a s. 263 revision order, the validity of the underlying s. 143(3) assessment order which is sought to be revised can be examined even if the said assessment order has not been challenged and has become final. If the assessment order is passed on a non-existent entity, the revision order is void

The assessee argued that the impugned order passed u/s 263 is bad in law on the jurisdictional ground, that is to say that the original assessment order passed u/s 143(3) dated 24-10-2013 which has been sought to be revised by the CIT was a nullity in the eyes of law, and therefore an order, which was a nullity in the eyes of law had no existence in the eyes of law and, therefore, the same could not have been revised by the CIT, thereby giving fresh life to the proceedings which had no legal existence in the eyes of law. In this regard, it has been further explained that the original assessment was framed u/s 143(3) upon an erstwhile company, viz. M/s ‘Westpoint Leisureparks Pvt Ltd’ (hereinafter called WLPL), which had already got amalgamated into another company namely M/s ‘Westlife Development Ltd’ (hereinafter called WDL) and therefore, on the date of framing of the assessment order, WLPL was not in existence. It was further submitted that this fact was brought to the knowledge of the Assessing Officer; despite that, the Assessing Officer framed the assessment upon a non-existing entity. It was submitted by him that framing of an assessment upon a company which has already been amalgamated by way of an order of the High Court is nullity in the eyes of law and in support of his arguments he placed reliance upon the following judgments: HELD by the Tribunal upholding the contentions of the assessee:

(i) Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263:

(a) The first issue that arises for our consideration is – whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as ‘primary proceedings’. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as ‘collateral proceedings’ in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the ‘primary proceedings’ can be set up in the ‘collateral proceedings’ and if yes, then of what nature?

(b) There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an ‘enforceable’ tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also.

(ii) Whether the impugned assessment order passed u/s 143(3) dated 24-10- 2013 was valid in the eyes of law or a nullity as has been claimed by the assessee on the ground that it was framed in the hands of a non-existing company. framing of assessment against non-existing entity/person would go to root of matter and was not mere procedural irregularity, but a jurisdictional defect and there could not be any assessment against a dead person.

(c) Thus, apparently, assessment proceedings having been initiated against non-existing company even after amalgamation of assessee company with another company were illegal, and thus order passed under such proceedings without jurisdiction and null & void.

(iii) If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order:

(d) The original assessment order passed u/s 143(3) dt 24-10-2013 was null & void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed u/s 263 by the CIT is also nullity in the eyes of law and therefore the same is hereby quashed.

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