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Income Tax Appellate Tribunal, “K”BENCH, MUMBAI
Before: SHRI SAKTIJIT DEYAND SHRI N.K. PRADHAN
Brief facts are, in respect of IT(TP)A no.1791/Mum./2016 and ITA no.2082/Mum./2014 the assessee was earlier known as BASF Coatings India Pvt. Ltd. However, by virtue of order dated 14th January 2011, passed by the Hon'ble Jurisdictional High Court, the erstwhile BASF Coatings India Pvt. Ltd., amalgamated with BASF India Ltd., w.e.f. 1st April 2010. Consequently, the erstwhile company BASF Coatings India Pvt. Ltd. stood dissolved without winding up. The fact of amalgamation of the erstwhile company BASF Coatings India Pvt. Ltd. with BASF India Ltd. was brought to the notice of the Assessing Officer as early as on 8th March 2011. The assessee also filed all the relevant documentary evidences connected with such amalgamation including the order passed by the Hon'ble Jurisdictional High Court. However, the Assessing Officer passed an assessment order in the name of the erstwhile company BASF India Ltd., vide order dated 11th April 2014,
4 BASF India Ltd. under section 143(3) r/w section 144C(13) of the Act. Similar is the factual position for the assessment year 2010–11. Insofar as the appeal being ITA no.8808/Mum./2011 is concerned, though, the relevant facts are more or less identical, there is a slight difference in the sense that the assessment order was passed in the name of BASF Polyurethanes (I) Ltd., which merged with BASF India Ltd. by virtue of an order passed by the Hon’ble High Court approving amalgamation and further, the assessment order was passed in pursuance to the direction of the DRP.
The basic contention of the learned Counsel for the assessee is, the assessment orders having been passed in the name of non–existing entities are invalid, hence, have to be quashed. To establish the fact that the assessee has communicated to the Assessing Officer the fact of amalgamation in case of both the erstwhile companies much before the assessment orders were passed, the learned Counsel for the assessee submitted before us various documentary evidences including letters filed before the Assessing Officer along with orders passed by the Hon'ble Jurisdictional High Court approving amalgamation.
The learned Departmental Representative more or less accepted the factual position submitted by the assessee regarding the amalgamation of the erstwhile companies with BASF India Ltd. However, he submitted that this is merely a technical lapse and can be rectified by 5 BASF India Ltd.
restoring the matter back to the Assessing Officer for passing fresh assessment orders in the correct name of the assessee.
We have considered rival submissions and perused the material on record. The fact that the assessment orders in all these cases have been passed in the name of entities (company) which are no more in existence is factually established. It is relevant to observe, on the direction of the Bench, the Assessing Officer has submitted a factual report dated 13th February 2020 through the learned Departmental Representative, wherein, he has admitted the fact that the assessee much before the completion of assessment has intimated about the amalgamation of the erstwhile companies with BASF India Ltd. and their consequent dissolution thereafter. The Assessing Officer has merely stated that since the computation of the income was generated by system, inadvertently names of the erstwhile companies have been mentioned. Keeping in view the aforesaid factual position, if we apply the law laid down by the Hon'ble Supreme Court in PCIT v/s Maruti Suzuki India Pvt. Ltd. [2019] 416 ITR 613 (SC), we cannot escape from the legal position that the impugned assessment orders passed against the non–existing entities are void ab initio. In fact, while deciding an identical nature of dispute in assessee’s own case in assessment year 2008–09 in the appeal being IT(TP)A no.278/Mum./ 2013, dated 19th November 2019, the Tribunal has quashed the 6 BASF India Ltd.
assessment order by holding that the assessment order passed in the name of a non–existing entity is invalid, hence, has to be quashed. The relevant observations of the Bench are reproduced herein below for better clarity.
―5. We have considered rival submissions and perused the material on record. The decision relied upon by the leaned Sr. Counsel for the assessee has also been examined by us carefully. Undisputedly, BASF Polyurethanes India Ltd., in whose name the final assessment order under section 144C(13) r/w section 143(3) of the Act has been passed on 19th November 2012, is no longer in existence as it had amalgamated / merged with BASF India Ltd., from the appointed day of 1st April 2010, by virtue of a scheme of amalgamation / merger approved by the Hon'ble Bombay High Court vide order dated 14th January 2011. The fact of amalgamation of BASF Polyurethanes India Ltd. with BASF India Ltd. was duly intimated to the Assessing Officer on 8th March 2011, along with all supporting evidence. In fact, learned DRP taking note of the amalgamation / merger has passed its directions by incorporating the name of amalgamated company i.e., BASF India Ltd. In spite of being informed about the fact that BASF Polyurethanes India Ltd. has amalgamated / merged and no longer in existence, still, the Assessing Officer passed the final assessment order in the name of erstwhile company i.e., BASF Polyurethanes India Ltd. Thus, undisputedly, the final assessment order has been passed in respect of an entity which has ceased to exist long back. Now, it is fairly well settled that no order can be passed in respect of a non– existing entity. The Hon'ble Delhi High Court in Spice Entertainment Ltd. v/s CIT, [2012] 247 CTR (Del.) 500, has held that once a company merges with another company by virtue of a scheme of amalgamation, it will lose its existence after such merger. The aforesaid view expressed by the Hon‘ble Delhi High Court was again reiterated in PCIT v/s Maruti Suzuki India Ltd., [2017] 397 ITR 681 (Del.). While affirming the view expressed by the Hon‘ble Delhi High Court in Maruti Suzuki India Ltd. (supra) and Spice Entertainment Ltd. (supra), the Hon'ble Supreme Court held that the order passed in respect of a non–existing entity is invalid. While doing so, the Hon'ble Supreme Court also upheld the view expressed by the Hon‘ble Bombay High Court and the Tribunal that the defect in passing the assessment order in respect of a non–existing entity cannot be cured under section 292B of the Act. Thus, the ratio decidendi which follows from the 7 BASF India Ltd. judicial precedents referred to above clearly indicate that an order passed against a non–existing entity has to be declared as invalid. Admittedly, in the facts of the present case, the Assessing Officer has passed the final assessment order in the name of a non– existing entity. Therefore, as per the ratio laid down in the judicial precedents referred to above, the assessment order has to be declared as invalid. Accordingly, we do so and quash the final assessment order dated 19th November 2012.‖
In view of the aforesaid, we hold that the assessment orders passed, which is under challenge in the present appeals, to be invalid, hence, deserves to be quashed. Accordingly, we do so.
In view of our decision, the other grounds raised by the assessee in these appeals have become redundant, hence, do not require adjudication.
In the result, appeals are allowed in terms indicated above.
9. Before we part, it is necessary for us to deal with a procedural issue relating to pronouncement of the order. The hearing of this appeal was concluded on 06.03.2020. As per rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963, ordinarily the appeal order has to be pronounced before expiry of ninety (90) days from the date of conclusion of hearing of appeal. However, on 24.03.2020 a nationwide lockdown was enforced by the Government of India in view of COVID– 19 pandemic. Due to the unprecedented situation arising out of such lockdown all activities ceased and no normal official work could be 8 BASF India Ltd.
done. For this reason only the appeal order could not be pronounced within the period of 90 days. Being faced with a similar situation the Tribunal in case of DCIT V/s JSW Limited, & 6103/Mum/2018, dated 14th May 2020, after interpreting rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963 as well as various decisions of the Hon’ble Supreme Court as well as the Hon’ble Jurisdictional High Court held that keeping in view the extraordinary situation prevailing due to the pandemic, the lockdown period has to be excluded for the purpose time limit fixed for pronouncement of order as per rule 34(5). The relevant observation of the Bench in this regard is reproduced hereunder for better clarity:–
―7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows: (5) The pronouncement may be in any of the following manners: — (a) The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of 9 BASF India Ltd. the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.
8. Quite clearly, ―ordinarily‖ the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ―ordinarily‖ has been used in the said rule itself. This rule was inserted as a result of directions of Hon‘ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that ―We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment‖. In the ruled so framed, as a result of these directions, the expression ―ordinarily‖ has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any ―extraordinary‖ circumstances.
Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon‘ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon‘ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the 10 BASF India Ltd.
lockdown by observing that ―In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown‖. Hon‘ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, ―It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly‖, and also observed that ―arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020‖. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus ―should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…‖. The term ‗force majeure‘ has been defined in Black‘s Law Dictionary, as ‗an event or effect that can be neither anticipated nor controlled‘ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ―ordinary‖ period.
In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon‘ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon‘ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed ―while calculating the time for 11 BASF India Ltd.
disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly‖. The extraordinary steps taken suo motu by Hon‘ble jurisdictional High Court and Hon‘ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words ―ordinarily‖, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.‘‘
10. Following the aforesaid decision of the Coordinate Bench, we proceed to pronounce the order today the 27th day of July, 2020 by placing in the notice board in terms of rule 34(4) of the Income Tax (Appellate tribunal) Rules, 1963.