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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI AMARJIT SINGH, AM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Assessing Officer dated 25.01.2017 pursuant to Dispute Resolution Panel (DRP)-02, Mumbai passed 27.12.2016 passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter “the Act”).
At the outset, the Ld. Senior Counsel for the assessee drew our attention to the additional grounds of appeal raised by the assessee, which according to him is a legal issue and which need to be adjudicated first, since if the legal issue is upheld then, it goes to the root of the jurisdiction of the AO to have passed the final assessment order. The legal issue raised by assessee reads as under;- ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. “1:0 Re: Validity of the order 1: 1 The appellant submits that the draft assessment order (and the consequent final assessment order) passed by the Assessing Officer is ab-initio void since the impugned order(s) per se have been passed in the name of non- existent entity viz ‘PPG Coatings India Pvt. Ltd., without appreciating that the erstwhile ‘PPG Coatings India Pvt. Ltd.’ has undergone a merger, in terms of the order dated 06 July 2012 passed by the Hon’ble Bombay High Court sanctioning the composite scheme of arrangement for merger and demerger, to form ‘Asian PPG Industries Ltd,’ w.e.f. 01 August 2012 (which name was changed to ‘PPG Asian Paints Pvt. Ltd. w.e.f. 18 September 2012), thereby vitiating the entire assessment proceedings. 1:2 The appellant submits that considering the facts and circumstances of the case, the Assessing Officer has failed to appreciate that there cannot be any assessment against a non-existent assessee and accordingly, the assessment order passed in the name of ‘PPG Coatings India Pvt. Ltd,’ is illegal, null, ab-initio void and deserves to be struck down. 1: 3 The appellant submits that the impugned order be struck down void ab initio and bad in law.”
Since the aforesaid issue is a legal issue, we admit the same in the light of the decision of the Hon’ble Supreme Court in the case of NTPC Vs. CIT (229 ITR 383) (SC) and proceed to adjudicate it.
Brief facts regarding the legal issue is that assessee company which was named as ‘M/s. PPG Coatings India Pvt. Ltd’ had undergone merger, in terms of the order dated 06.07.2012 passed by ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. the Hon’ble Bombay High Court sanctioning the composite scheme of arrangement for merger & demerger, to form ‘Asian PPG Industries Ltd.’ w.e.f. 01.08.2012 (which name was subsequently changed to ‘M/s. PPG Asian Paints Pvt. Ltd.’ w.e.f. 18.09.2012). Even though, the aforesaid information regarding merger was brought to the notice of the AO/TPO/Ld. DRP, the AO passed the draft assessment order dated 23.03.2016 as well as the final assessment order dated 25.01.2017 in the name of non-existing entity ‘M/s. PPG Coating India Pvt. Ltd.’. In order to prove that the assessee had duly brought to the notice the fact of merger (supra) to all the authorities i.e, AO/TPO/Ld. DRP, except AO, both the other authorities i.e. TPO/Ld. DRP had acknowledged the fact of merger and the existence of new entity as on 01.08.2012 as ‘M/s. Asian PPG Industries Ltd w.e.f. 01.08.2012 and thereafter from 18.09.2012 as ‘M/s. PPG Asian Paints Ltd, which fact can be seen from a perusal of the TPO order dated 18.01.2016 wherein at the caption of his (TPO) order u/s 92CA(3) of the Act, he has acknowledged the fact of merger and new name of assessee has been noted as under: - Name & Address of the assessee M/s. PPG Coating India Pvt. Ltd. (now merged with M/s. PPG Asian Paints Pvt. Ltd.) 158, Vidyanagari marg, Dani Wool Tex Compound, Kalina, Santacruz (E), Mumbai-400098. Further it is noted that the TPO at para no. 3 of his order while describing the business profile of the assessee has taken note of the fact of merger pursuant to the order passed by the Hon’ble High Court by observing as under: - “Recently a composite scheme of restructuring was filed with the Hon’ble High Court of Judicature at Mumbai in February, ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. 2012, whereby Asian Paints Coatings Limited and PPG Coatings India Private Limited merger with Asian PPG Industries Limited. The composite scheme has come into effect from 1st August 2012. The said merger has been made effective 01.04.2012”.
Thereafter, the Ld. Senior Counsel drew our attention to the Ld. DRP direction dated 27.12.2016 wherein at the caption of its order this fact of merger and new entity is noted as under:- Name of the assessee M/s. PPG Coatings India Pvt. Ltd. (now merged with PPG Asian Paints Pvt. Ltd.)
Thus, according to the Ld. Senior Counsel when the fact/information regarding merger order passed by the Hon’ble Bombay High Court sanctioning the composite scheme of arrangement for merger & demerger, to form ‘Asian PPG Industries Ltd.’ w.e.f. 01.08.2012 (which name was changed to ‘M/s. PPG Asian Paints Pvt. Ltd.’ w.e.f. 18.09.2012) was brought to the notice of AO, he while passing the draft assessment order dated 23.03.2016 ought to have at least taken note of the TPO order dated 18.01.2016 wherein the TPO has acknowledged the fact of merger with ‘M/s. PPG Asian Paints Pvt. Ltd. and the Ld. DRP direction dated 27.12.2016 wherein also the fact of merger has been acknowledged by it (supra), the AO ought to have passed the final assessment order dated 25.01.2017 in the name of ‘M/s. PPG Asian Paints Pvt. Ltd. and not in the name of erstwhile M/s. PPG Coating India Pvt. Ltd. According to Ld. Sr. Counsel, when the un-controverted fact is that the AO has passed the final assessment order in the name of the non-existing entity namely ‘M/s. PPG ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. Coatings India Pvt. Ltd.’ the same is bad in law and prayed that the order passed in the name of non-existing entity being non-est be quashed.
Per contra, the Ld. DR submitted that he had called for report from the AO [five (5) times] from Nov, 2022 onwards and still the AO has not submitted any report/explanation about the legal issue. Nevertheless, the Ld. DR on the strength of the Hon’ble Supreme Court decision in the case of PCIT Vs. Mahagun Realtors (P.) Ltd. (2022) 137 taxmann.com 91 (SC) as well as M/s. Sky Light Hospitality LLP Vs. ACIT (2018) 92 taxmann.com 93 (SC), wants us to dismiss the legal issue. 8. We have heard both the parties and perused the records. We note that the assessee company ‘M/s. PPG Coatings India Pvt. Ltd pursuant to the order dated 06.07.2012 of the Hon’ble Bombay High Court got merged with ‘M/s. Asian PPG Industries Ltd w.e.f. 01.08.2012 (which name subsequently got changed to ‘M/s. PPG Asian Paints Pvt. Ltd. w.e.f. 18.09.2012), by which the Hon’ble High Court sanctioned the composite scheme of arrangement for merger and demerger. It is noted that even though, the Transfer Pricing Officer (TPO) as well as the Dispute Resolution Panel (DRP) has acknowledged the fact of merger order passed by the Hon’ble High Court (supra), and the existence of the new entity ‘M/s. PPG Asian Paints Pvt. Ltd [as noted (supra) TPO in the caption of TP order dated 18.01.2016 and Ld. DRP order dated 27.12.2016 has acknowledged the merger and existence of new entity]. Despite the TP ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. order/DRP directions acknowledging the merger of assessee company to form ‘M/s. PPG Asian Paints Pvt. Ltd, the AO passed the draft assessment order dated 23.03.2016 (after TP order) and final assessment order dated 25.01.2017 (after Ld. DRP Order) in the name of the non-existing entity ‘M/s. PPG Coatings India Pvt. Ltd. Further, it is noted that even though, the Ld. DR had sought report from the AO several times [five (5) times] from the Nov, 2022, the AO has not bothered to file any report explaining as to why he has passed the order in the name of non-existing entity ‘M/s PPG Coatings India Pvt. Ltd.’ instead of ‘M/s. PPG Asian Paints Pvt. Ltd.’ Since we have taken note that the AO has passed the draft assessment order dated 23.03.2016 after having taken note of the TPO order dated 18.01.2016 wherein the TPO has clearly acknowledged the merger of the assessee company with ‘M/s. PPG Asian Paints Pvt. Ltd. in the caption of his order as well as at para no. 3 while describing the business profile of the assessee (supra), it is found that the AO still passed the draft assessment order in the name of non-existing entity i.e. ‘M/s. PPG Coatings India Pvt. Ltd.’ It is further noted that in the caption of the DRP order dated 27.12.2016 the fact of merger of the assessee company with ‘M/s. PPG Asian Paints Pvt. Ltd.’ has been stated, and despite that the AO has passed the final assessment order dated 25.01.2017 in the name of the non-existing entity ‘M/s. PPG Coatings India Pvt. Ltd.’ which is per-se bad in law. Therefore, in the light of the aforesaid facts as well as the fact that the AO despite being asked by the Ld. DR [five (5) times from Nov, 2022] did not bother to give ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. any explanation as to why he has passed the final assessment order in the name of the non-existing entity. Therefore, we presume that the assessee company despite having brought to the notice of the Assessing Officer the fact of the amalgamation pursuant to the order of Hon’ble High Court (supra) omitted to pass the assessment order in the name of the amalgamating entity and thus has erred in passing the same in the name of erstwhile non-existing company M/s. PPG Coating India Pvt. Ltd. which is held to be bad in law.
For coming to such a conclusion, we rely on the decision in the case of Hon’ble Supreme Court in the case of Spice Entertainment Ltd, Vs. CST, 12 ITR 134 (SC) (i) PCIT Vs. Maruti Suzuki India Ltd, 416 ITR 613 (Delhi) (ii) PCIT Vs. Maruti Suzuki India Ltd, 107 taxmann.com 375 (SC) and (iii) Marshall Sons & Co. (India) Ltd. Vs. ITO 223 ITR 809 (SC).
The Hon’ble Supreme Court in the case of PCIT Vs. Maruti Suzuki India Ltd., 416 ITR 613 (SC) after taking note of its own earlier decision in the case of CIT Vs. Infotainment Ltd. 12 ITR-OL 134 (SC) and Saraswati Industrial Syndicate Ltd. Vs. CIT 186 ITR 278 (SC) on this issue held as under: - “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 ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. 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 (supra) 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 (supra).”
The Hon’ble Bombay High Court in the case of Teleperformance Global Services Pvt. Ltd. Vs. ACIT, 435 ITR 725 (Bom) held that the assessment order passed against non-existing company was null in the eyes of law. And further held that such defect cannot be treated as a procedural defect and cannot be cured and mere participation of an assessee in the assessment proceedings has not effect as there is no estoppel against law and held as under: - “22. The Supreme Court in the case of Maruti Suzuki India Ltd. (supra) had considered that income, which was subject to be charged to tax for the assessment year 2012-13 was the income of erstwhile entity prior to amalgamation. Transferee had assumed liabilities of transferor company, including that of tax. The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under section 143(2) of the Act was issued on 26-9- 2013, ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. the scheme of amalgamation had been approved by the high court with effect from 1-4-2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292(b) of the Act. The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. v. CIT [1990] 53 Taxman 92/186 ITR 278. The Supreme Court has also referred to decision of Delhi high court in the case of CIT v. Spice Enfotainment Ltd. [2018] 12 ITR-OL 134 (SC) and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B. The Supreme Court had also taken note of decision in Spice Entertainment Ltd. (supra) was followed by Delhi high court in matters, viz.CIT v. Dimension Apparels (P.) Ltd. [2014] 52 taxmann.com 356/[2015] 370 ITR 288, CIT v. Micron Steels (P.) Ltd. [2015] 59 taxmann.com 470/233 Taxman 120/372 ITR 386 (Mag.); CIT v. Micra India (P.) Ltd. [2015] 57 taxmann.com 163/231 Taxman 809 and in CIT v. Intel Technology India Ltd. [2016] 380 UTE 272 Karnataka high court has held, if a statutory notice is issued in the name of non-existing entity, entire assessment would be nullity in the eye of law. It has also been so held by Delhi high court in the case of Pr. CIT v. Nokia Solutions & Network India (P.) Ltd. [2018] 90 taxmann.com 369/253 Taxman 409/402 ITR 21 23. The Supreme Court in Spice Infotainment Ltd. v. CIT [IT Appeal No. 475 of 2011, dated 3-8- ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. 2011] found that there is no reason to interfere with the impugned judgment of Delhi high court and it found no merits in the appeal and special leave petition and were dismissed accordingly. The Supreme Court had taken note of revenue resistance contending that contrary position emerges from decision of Delhi high court decision in Sky Light Hospitality LLP v. Asstt. CIT [2018] 92 taxmann.com 93/254 Taxman 390 (SC) and that it had been affirmed by the Supreme Court. However, the Supreme Court had also taken note of Sky Light Hospitality LLP (supra) was in peculiar facts of the case, where the high court had catgegorically concluded that there was clerical mistake within the meaning of section 292B and the case had been distinguished by decisions of Delhi, Gujarat and Madras high courts in Rajender Kumar Sehgal v. ITO [2019] 101 taxmann.com 233/260 Taxman 412/414 ITR 286; Chandreshbhai Jayantibhai Patel v. ITO [2019] 101 taxmann.com 362/261 Taxman 137/413 ITR 276; and Alamelu Veerappan v. ITO [2018] 95 taxmann.com 155/257 Taxman 72.
In the circumstances, though the respondents refer to decision of Delhi High Court in case of Sky Light Hospitality LLP v. Asstt. CIT [2018] 90 taxmann.com 413/254 Taxman 109/405 ITR 296 it would be of little avail for the respondents. The decision in the case of Maruti Suzuki India Ltd. (supra) would hold sway over present facts and circumstances.”
In the light of the aforesaid discussion, we are of the opinion that the AO erred in passing the impugned final assessment order in the name of the non-existing entity ‘M/s. PPG Coatings India Pvt. Ltd, when the fact of merger was acknowledged by both TPO as well as DRP. And since the AO despite being given opportunity by the Ld. ITA (TP) No.2168/Mum/2017 A.Y. 2012-13 M/s. PPG Coatings India Pvt. Ltd. DR, failed to file any explanation as to why he passed the order in the name of non-existing entity. Therefore, we hold the action of the AO to be bad in law and quash the assessment order dated 27.01.2017 passed u/s 143(3)/144C(1) of the Act.
Since we have allowed the legal issue, all other ground of appeal has become academic and has become in fructuous.