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Facts
The assessee, Adani Power Maharashtra Ltd., which had amalgamated with Adani Power Ltd., filed an appeal against an order passed by the Ld. PCIT under Section 263. The assessee argued that the PCIT's order was invalid because it was passed in the name of a non-existent entity after amalgamation.
Held
The Tribunal held that the order passed by the Ld. PCIT under Section 263 was void ab initio as it was issued in the name of a non-existent entity. The Tribunal noted that the fact of amalgamation was duly intimated to the PCIT before the order was passed, making the PCIT's action illegal.
Key Issues
Whether an order passed under Section 263 by the PCIT in the name of a non-existent entity, after due intimation of amalgamation, is void ab initio and liable to be quashed.
Sections Cited
263, 37(1), 148, 153C, 144C, 292(b), 153A
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2018-19) Adani Power Ltd., Vs. Principal Commissioner of (Previously known as Adani Power Income Tax, Maharashtra Ltd. now amalgamated Ahmedabad-1 with Adani Power Ltd.), 1, Adani House, Nr. Mithakhali Six Roads, Navrangpura, Ahmedabad- 380009 [PAN No.AABCA2957L] (Appellant) .. (Respondent) Appellant by : Shri Biren Shah on behalf of Shri Manish J Shah, A.R. Respondent by: Shri Prathvi Raj Meena, CIT DR Date of Hearing 21.11.2024 Date of Pronouncement 23.01.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
1. This appeal has been filed by the Assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (in short “Ld. PCIT”), Ahmedabad-1 vide order dated 30.03.2023 passed for A.Y. 2018-19.
The assessee has raised the following grounds of appeal:
“1. In law and in facts and circumstances of the Appellant’s case, the impugned order u/s. 263 passed by Ld. CIT is bad in law and deserves to be quashed.
2. In law and in the facts and circumstances of the Appellant’s case, the Ld. CIT has erred in holding that the assessment order was passed without examining facts of the case and on that ground, invoking provisions of Section- 263 of the Income Tax Act. 2.1 The Ld. CIT has failed to appreciate that the appellant has submitted all relevant details during assessment proceeding which are on record of Ld. Adani Power Ltd. vs. PCIT Asst.Year –2018-19 - 2– Assessing Officer and he duly applied his mind and not made disallowance of CSR expenditure amounting to Rs.99,10,385/-. Thus, the assessment order was not erroneous and prejudicial to the interest of revenue. 2.2 The Ld. CIT has failed to appreciate that the appellant has submitted all relevant details during assessment proceeding which are on record of Ld. Assessing Officer and he duly applied his mind and not made disallowance of Foreign Exchange Fluctuation loss of Rs.9,52,38,730/-. Thus, the assessment order was not erroneous and prejudicial to interest of revenue.
In law and in the facts and circumstances of the Appellant’s case, the Ld. PCIT is not justified in ignoring decision of Jurisdictional High Court pronounced in appellant’s own case and group concern deciding issue of CSR in favour of appellant.
In law and in the facts and circumstances of the Appellant’s case, the order passed by the Ld. CIT may please be held to be unjustified, unwarranted and may please be quashed.
5. The appellant craves leave to add to amend or to raise any further grounds of appeal
as case may arise.”
3. The assessee has also raised the following additional grounds of appeal:
“1. On facts and circumstances of the appellant’s case, Ld. PCIT has erred in passing order in the name of a non-existing entity, though duly intimated by the assessee during the revision proceedings, therefore, the order passed by PCIT deserves to be quashed. 2. The appellant craves to leave, to add, to amend or to raise any further grounds of appeal as case may arise.”
4. The brief facts of the case are that the PCIT observed that on examination of assessment records, it was noticed that assessee had debited a sum of Rs. 1.47 crores on account of CSR activities in the Profit & Loss Account. However, as perused of the computation of income filed by the assessee, Ld. PCIT observed that only an amount of Rs. 47,80,840/- was added back to the total income, for the year under consideration. The PCIT observed that the case of the assessee was assessed as a business entity and therefore, as per provision of Section 37(1) of the Act, the whole of CSR expenses amounting to Rs. 1.47 Adani Power Ltd. vs. PCIT Asst.Year –2018-19 - 3– crores should have been disallowed. Therefore, PCIT held that the excess amount of Rs. 99,10,385/- debited on account of CSR expenses was required to be disallowed by the Assessing Officer and failure to do so made the assessment order as being erroneous in so far as prejudicial to the interest of the Revenue.
The assessee is in appeal before us against the aforesaid order passed by Ld. PCIT setting aside the assessment order as being erroneous and prejudicial to the interest of the Revenue.
At the outset, the Counsel for the assessee took an additional ground before us that the order passed by Ld. PCIT under Section263 of the Act is non-est in law since the same was passed in the name of a non- existing entity, despite the fact that this fact was brought to the notice of Ld. PCIT by the assessee during the course of revision proceedings. Therefore, on this ground itself, order under Section 263 of the Act is liable to be set-aside. The Counsel for the assessee placed reliance on various judicial precedents which have upheld the principle that no order can be passed in the name of a non-existing entity and such order framed in the name non-existent entity is void-ab-initio and hence liable to be set-aside.
On going through the case, we observe that vide letter dated 14.03.2023 the fact that the assessee viz. “Adani Power Maharashtra Ltd.” had amalgamated with “Adani Power Ltd.” was intimated to the Ld. PCIT. It would be useful to reproduce the relevant extracts of the letter dated 14.03.2023 addressed to the Ld. PCIT, for ready reference:
Adani Power Ltd. vs. PCIT Asst.Year –2018-19 - 4– “To, The Principal Commissioner of income tax, PCIT, Ahmedabad- 1.
Respected sir, Sub: Reply to the notice of revision proceeding under section 263 of the income tax act, 1961 for the A.Y. 2018-19 Ref.: Notice no. ITBA/COM/F/17/2022-23/1050497572(1) dated 07/03/2023 1. At the outset we would humbly like to draw your honours attention to the fact that company Adani Power Maharashtra Limited has been amalgamated with Company Adan Power Limited with appointed date of 1st October 2021 vide order dated 8 February 2023 Copy of the Tribunal Order along with communications as made to the stock exchange is attached herewith vide Exhibit - 1. Despite the fact relating to amalgamation being intimated to the Income Tax Department and this fact is evident from the copy of order passed by Hon. National Company Law Tribunal ('NCLT'), in this case the notice under section 263 of the Act has been issued on predecessor company which is non-existent in law. This action has rendered the proceedings so initiated to be bad in law from.”
8. On going through the contents of the letter, we observe that the asessee had specifically intimated the Ld. PCIT that the assessee M/s. Adani Power Maharashtra Ltd. had amalgamated with Adani Power Ltd. w.e.f. 01.10.2021 and therefore, notice under Section 263 issued in the name of M/s. Adani Power Maharashtra Ltd., which is a non-existent entity cannot be proceeded with. Therefore, at the time when the order under Section 263 of the Act was passed (30.03.2023), it is an undeniable fact that the fact of the assessee company having amalgamated into Adani Power Ltd. was brought to the knowledge of Ld. PCIT. We also take note of the fact that the PCIT initiated proceedings under Section 263 of the Act by issuing notice dated 07.03.2023, fixing the date of hearing for 15.03.2023. It is noted that on this date itself, vide letter dated 14.03.2023 the assessee intimated the Ld. PCIT about the fact of M/s. Adani Power Maharashtra Ltd., having amalgamated into M/s. Adani Power Ltd. The contents of the above letter filed by the assessee to Ld. PCIT have not been disputed by the Ld.
Adani Power Ltd. vs. PCIT Asst.Year –2018-19 - 5– D.R. The view of the High Courts and Tribunals is unanimous on this issue that once the relevant order had been passed in the name of a non- existent entity and the fact of amalgamation has been duly intimated to the concerned Tax Authorities, then the order passed is void-ab-initio. In view of the above settled position of law, we are of the considered view that the order passed under Section 263 of the Act is void and hence, liable to be set-aside. In the case of PCIT v. Maruti Suzuki India Ltd 107 taxmann.com 375 (SC), the Hon'ble Supreme Court held that where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity, would be without jurisdiction and was to be set aside. In the case of Vahanvati Consultants (P.) Ltd.138 taxmann.com 52 (SC), the Hon'ble Supreme Court held that where assessee-company merged into another company under an approved scheme and thereby lost its existence and order of said merger was made available to revenue, impugned notice issued under section 148 in name of non- existent company was bad in law. In the case of Micra India (P.) Ltd.57 taxmann.com 163 (Delhi), the Hon'ble Court held that where assessee- company had amalgamated with transferee-company, notice under section 153C ought to have been sent to latter, and since such notice had not been issued to transferee-company, assessment made in hands of assessee-company was a nullity. In the case of FedEx Express Transportation v. DCIT 108 taxmann.com 542 (Mumbai - Trib.), the ITAT held that where draft assessment order under section 144C was passed in name of amalgamating company, which was a non-existent entity in eyes of law on date of passing of such order, it became an illegal order and, thus, entire assessment proceedings based on such an invalid draft assessment order were void ab initio and deserved to be Adani Power Ltd. vs. PCIT Asst.Year –2018-19 - 6– quashed. In the case of Siemens Ltd. v. DCIT 147 taxmann.com 118 (Mumbai - Trib.), the ITAT held that where draft assessment order under section 144C was passed in name of amalgamating company, which was a non-existent entity on date of passing of such order, it became an illegal order and thus, entire assessment proceedings based on such an invalid draft assessment order were void ab initio and deserved to be quashed. In the case of Boeing India (P.) Ltd. v. ACIT 121 taxmann.com 276 (Delhi - Trib.), the ITAT held that where draft assessment order under section 144C was passed in name of amalgamated company which was non-existent company, said order was void ab initio. In the case of Dimension Data Asia Pacific PTE Ltd. v. DCIT 96 taxmann.com 182 (Bombay), the Hon'ble High Court held that where in case of foreign assessee, Assessing Officer passed final assessment order under section 144C(13), read with section 143(3) without passing a draft assessment order under section 144C(1), said order being violative of provisions of section 144C(1), deserved to be set aside. In the case of Vedanta Ltd. v. ACIT 126 taxmann.com 283 (Delhi - Trib.), the ITAT held that Draft/final assessment order framed in name of non-existent entity is void ab initio and such order is not curable defect under section 292(b) of the Act.
We are of further view that the case of PCIT vs. Mahagun Realtors Pvt. Ltd. 137 taxmann.com 91 (SC), on which reliance was placed by the Ld. D.R., would not have relevance to the instant facts, since the Hon’ble Supreme Court had passed the aforesaid order in light of the fact that in that case post amalgamation, no indication was given to the Assessing Officer during the search conducted at the premises of the assessee / amalgamating company about amalgamation and return was filed by the assessee pursuant to the notice under Section 153A of Adani Power Ltd. vs. PCIT Asst.Year –2018-19 - 7– the Act suppressing the fact of amalgamation. In the light of these facts, Hon’ble Supreme Court held that since the conduct of the assessee reflected that it consistently projected itself as assessee, assessment order passed in the name of assessee amalgamating company was valid. However, in the instant facts, we have noted that on the first date of hearing scheduled in the 263 proceedings, the fact of assessee company having amalgamated into Adani Power Ltd. was brought to the knowledge of Ld. PCIT and hence, in our view, the case of Mahagun Realtors Pvt. Ltd. (supra) would have no applicability to the instant facts, since the same was rendered on a different set of facts. In the result, assessee’s appeal challenging the validity of 263 order passed in the name of a non-existent entity is hereby allowed.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 23/01/2025
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 23/01/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,