ITAT Delhi Rules on Reassessment Jurisdiction and Wrong PAN: Section 68 Addition of ₹2.95 Crore Deleted

1. Overview of the Dispute

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in ACIT Vs Argentium International Pvt. Ltd. (ITAT Delhi Bench) examined two core issues arising out of a reassessment under Section 147 for A.Y. 2012-13:

  1. Whether the reassessment was void because the notices were issued using the PAN of an amalgamating company which had ceased to exist.
  2. Whether an addition of ₹2,95,00,000/- under Section 68 could survive when the Assessing Officer (AO) had not made any addition on the very issue for which the assessment was originally reopened.

The Tribunal ultimately upheld the reassessment as valid despite the wrong PAN, but struck down the ₹2.95 crore addition under Section 68, thereby sustaining the relief granted by the CIT(A). The Revenue’s appeal was dismissed and the assessee’s cross-objection on jurisdiction was also rejected.

2. Corporate Restructuring and PAN Trail

2.1 Name Changes and Amalgamation

The corporate evolution relevant to the case was as follows:

  • AKA Impex India Private Limited (PAN: AABCA1148F) was incorporated on 14.02.1996 and engaged in trading/wholesale activities.
  • The company subsequently changed its name to Argentium International Private Limited (still under PAN: AABCA1148F).
  • Thereafter, Argentium International Private Limited (PAN: AABCA1148F) (the amalgamating company) was amalgamated with M/s Shakti Commodities Pvt. Ltd. (PAN: AAFCS2998K) (the amalgamated company) pursuant to an NCLT order dated 06.02.2018.
  • The amalgamation was taken on record by the Registrar of Companies on 23.02.2018, from which date the amalgamating entity (PAN: AABCA1148F) stood dissolved.
  • After amalgamation, the surviving entity M/s Shakti Commodities Pvt. Ltd. (PAN: AAFCS2998K) was renamed to Argentium International Private Limited (PAN: AAFCS2998K).

Resultantly, both the pre-amalgamation company and the post-amalgamation surviving company bore the identical name Argentium International Private Limited, but different PANs (AABCA1148F and AAFCS2998K).

2.2 Status as per MCA

On the Ministry of Corporate Affairs portal, the erstwhile Argentium International Pvt. Ltd. (PAN: AABCA1148F) was reflected as "Amalgamated", confirming that it no longer existed independently after 23.02.2018.

3. Trigger for Reopening and Course of Assessment

3.1 Information From Investigation Wing and Recorded Reasons

The AO received inputs from the Investigation Wing, Kolkata (ITO (Inv.), Unit 4), indicating that the assessee had allegedly obtained accommodation entries in the nature of sales and purchases amounting to ₹2,55,00,000/-. On this basis, the AO formed a belief that commission income of ₹5,10,000/- (computed at 2% of ₹2,55,00,000/-) had escaped assessment.

  • Reasons for reopening were recorded on 27.03.2019.
  • Notice under Section 148 was issued on 28.03.2019.

The reasons for reopening explicitly mentioned M/s Argentium International Private Limited, previously known as AKA Impex India Private Limited, and noted the PAN as AABCA1148F (Now AAFCS2998K), evidencing that the AO had in mind the amalgamated entity and was cognizant of the change.

3.2 Notices and Use of Old PAN

Despite the above clarity in the recorded reasons:

  • The notice under Section 148 dated 28.03.2019 was issued in the name of Argentium International Pvt. Ltd. but with the old PAN AABCA1148F.
  • Subsequent notices under Section 143(2) and Section 142(1) were also issued to Argentium International Pvt. Ltd. quoting PAN AABCA1148F.
  • The reassessment order under Section 143(3) r.w.s. 147 dated 11.12.2019 was passed in the name Argentium International Private Limited (Previously known as AKA Impex India Private Limited) with PAN AABCA1148F.

3.3 Return Filing and Participation by the Surviving Entity

In response to the Section 148 notice:

  • The surviving amalgamated company Argentium International Private Limited (PAN: AAFCS2998K) filed the return of income on 11.05.2019.
  • The assessee thereafter fully engaged in the reassessment proceedings as the amalgamated entity with PAN: AAFCS2998K.

This participation clearly showed that the surviving company understood the proceedings as being directed at it and not at some separate or confused entity.

3.4 Addition Made Under Section 68

Although the reopening was expressly grounded on alleged commission income of ₹5,10,000/- on accommodation entries of ₹2,55,00,000/-, the AO did not make any addition on this recorded ground. Instead, he examined an unsecured loan transaction and:

  • Treated an unsecured loan of ₹2,95,00,000/- from Supriya Fincom Pvt. Ltd. as unexplained cash credit.
  • Made an addition of ₹2,95,00,000/- under Section 68 to the total income in the reassessment order dated 11.12.2019.

No addition whatsoever was made in respect of the supposed accommodation-entry commission of ₹5,10,000/-.

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