M/S. NOKIA SOLUTIONS AND NETWORKS INDIA PVT. LTD.,GURGAON vs. DCIT, NEW DELHI

PER SUDHANSHU SRIVASTAVA, JM This appeal has been filed by the assessee against the order

dated 29/04/2016 u/s 254/144C r.w.s. 143(3) of the Income Tax

Act, 1961 (hereinafter called “the Act”) passed subsequent to the

directions of the Hon’ble Dispute Resolution Panel-2, New Delhi

dated 26.02.2016 for assessment year 2006-07.

software development services. The return for the year under

consideration was filed declaring an income of Rs.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 28,52,36,663/-. In the course of assessment proceedings,

reference was made by the AO to the TPO in respect of the

international transactions with the assessee’s associated

enterprise. The order under section 92CA of the Income Tax Act,

1961 (‘the Act’) was passed by the Ld. TPO determining the arm’s

length price of the international transactions at Rs.

1,50,19,55,712/- and the proposed adjustment was Rs.

8,14,15,61,720/-. In the draft assessment order, the AO

computed the assessee’s total income at Rs. 53,99,25,657/-

which included adjustment made under section 92CA on the

basis of the Ld. TPO’s order as well as re-computation of the

deduction allowable under section 10 A of the Act at Rs.

10,05,44,163/-. Other adjustments/disallowances were also

made by the AO. The assessee then filed objections before the

Hon’ble DRP and the Hon’ble DRP agreed with the Ld. TPO on

majority of the issues. Subsequently, the assessee approached

the ITAT and raised a preliminary objection that the AO had

framed the order in the name of a non-existing company M/s

Nokia Siemens Network India Private Limited which had merged

with Nokia Siemens Network Private Limited in terms of the order

of the Hon’ble High Court dated 09/01/2009 under which the

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 merger had taken place with effect from 01/04/2008. It was the

contention of the assessee before the ITAT that the assessee

company had ceased to exist on 01/04/2008 and, therefore, the

assessment order passed on 28th of October 2010, which was

much after the date of the merger, was void ab initio. The

assessee filed documents in support of its claim before the ITAT.

The ITAT Delhi Bench vide order dated 16/04/2014 in ITA

number 5801/DEL/2010 restored the matter to the file of the

Hon’ble DRP, as this ground was not raised before the Hon’ble

DRP, with the following observations –

“7.1 Ld. Counsel drew our attention to the copy of the Hon’ble High Court dated 09/01/2009 placed on Paper Book No C at Pages No 6 to 38. In this order the Hon’ble High Court has sanctioned the petition in the case of M/s Nokia Siemens Network India Private Limited, the transferor company seeking sanction of amalgamation with M/s Nokia Siemens Network Private Limited (transferee company) so as to make the same binding on all the shareholders, secured and unsecured activities of the transferor as well as transferee company.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 pleaded that since the order has been passed on a non- existent entity, it is a nullity. Ld. Counsel admitted that this ground has not been raised before the DRP. However, he submitted that this is a purely question of law. Reliance was placed on the decision of the Hon’ble Supreme Court in the case of National Thermal Power Corporation Ltd versus CIT (1998) 229 ITR 383. The Ld. DR objected the admission of the additional ground.

2.1 Subsequent to the directions of the ITAT, the Hon’ble DRP

examined the issue and decided against the assessee by

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 observing in Para 6 of its directions (vide directions dated

26/02/2016) as under –

“Para 6. The DRP has perused the provisions of section 292B of the Income Tax Act which mandates that no assessment or notice shall be held to be invalid, because of the mistake, defect or omission, if it is in substance and effect in conformity with or according to the intent or purposes of this Act.

It is not the case of the assessee that principles of natural justice has been violated, that it wanted to submit some detail but because of wrong notice it was prevented from submitting it. Nor it is the case of assessee that excess liability has been thrust upon it because of notice in the name of amalgamating company. The assessee willingly cooperated before AO/TPO/DRP. It is only in ITAT that assessee took this objection keeping in mind the possibility of getting the order deleted on this technical plea. It would be a travesty of justice if the assessee is allowed to escape with less payment of tax on this specious, hyper technical plea. There are hardly any jurisdictions in the world which allow a taxpayer to get away from substantive tax liability on this kind of hyper technical interpretation, shifting the burden of just taxation on poor citizen. This is notwithstanding the presence of section 292B, to handle precisely this kind of malaise.

Further DRP proceedings are a continuation of assessment proceedings and mistakes found in the assessment can be 5

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 cured at DRP level. Geodis Overseas P. Ltd. 14 ITR 325 (Delhi Trib.). Vodafone India services Pvt. Ltd. TS-320-HC-2013 (Bom)- TP.

The DRP is of the view that assessment made on amalgamating company, in the facts of this case, is a curable defect. Therefore the TPO and Assessing Officer is directed to issue notice in the name of amalgamated company and frame the assessment in its name after giving the assessee an opportunity of being heard.”

2.2 Subsequent to the directions of the Hon’ble DRP, the AO

passed the assessment order on 29/04/2016 under section

254/140 4C/143 (3) of the Income Tax Act, 1961 giving effect to

the directions of the Hon’ble DRP.

2.3 Now the assessee has approached the ITAT and has raised

the following grounds of appeal-

“1. That on the facts and circumstances of the case and in law, the assessment order dated April 29, 2016 passed by the Deputy Commissioner of Income-Tax, Circle-18(2), New Delhi (herein after referred as 'learned AO’) post the directions dated February 26, 2016 passed by Hon’ble Dispute Resolution Panel (hereinafter referred as ‘Hon’ble DRP’), is bad in law and void ab-initio. 2. That the Hon’ble DRP grossly erred in law in not appreciating that the learned AO has framed the assessment on a non-existent entity in the assessment order dated 28th October, 2010, which is bad in law and void.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 2.1 That the Hon’ble DRP grossly erred in law in coming to the conclusion that framing of an assessment on a non- existing entity is merely a procedural defect, which is curable under Section 292B of the Income Tax Act, 1961 (“the Act”). 2.2 That the Hon’ble DRP also erred in law in coming to the conclusion that the intimation given by the Appellant of the factum of amalgamation vide its letters intimating merger and the transfer of records did not tantamount to an intimation to the learned AO of the factum of amalgamation. 2.3 Without prejudice, that the directions issued by the Hon’ble DRP dated February 26, 2016 are grossly bad in law as even after having adjudicated on the issue, the directions have still been issued in the name of a company which is no longer in existence. 3. That the directions dated February 26, 2016 issued by the Hon'ble DRP to the learned AO / learned Transfer Pricing Officer (‘learned TPO') are beyond powers vested in the Hon’ble DRP in terms of Section 144C (8) of the Act.

Transfer Pricing Grounds -

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 4.2 That the learned AO/ learned TPO erred, on facts and in law, in changing the filters applied by the Appellant in the selection of the appropriate comparable companies for determination of the arm's length price of the impugned transaction using Transactional Net Margin Method ("TNMM') as the most appropriate method in the documentation maintained under section 92D of the Act read with Rule 10D of the Rules.

4.3 That the learned TPO erred, on facts and in law, in using single year financial data (i.e. data for FY 2005-06 only) as against multiple year financial data used by the Appellant for determination of the arm's length price of impugned transaction.

4.4 That the learned TPO has erred, on facts and in law, in rejecting Sonata Software Limited identified by the Appellant for having related party transactions of more than 25 percent considering the standalone financials instead of the consolidated results. The Appellant had considered the consolidated results in only those cases where the software related income of the Indian operations constituted more than 75 percent of the consolidated company-wide/ segmental revenues.

4.5 That the learned TPO erred in rejecting Orient Information Technology Limited and Visualsoft Technologies Limited as a comparable by concluding that the comparable failed the filter of having onsite revenue greater than 75% of the export revenue.

4.6 That, the learned TPO has erred, on facts and in law, in not considering Goldstone Technologies Limited appearing as comparable companies without appreciating that the company satisfies the Functional, Asset and Risk ("FAR") test vis-a-vis the Appellant in relation to impugned transaction.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 4.7 That the learned TPO has erred, on facts and in law, by exercising his powers under section 133(6) of the Act to obtain information which was not available in public domain and relying on the same for comparability purposes.

4.8 That the learned TPO has erred, on facts and in law, in selecting Accel Transmatics Limited, Bodhtree Consulting Limited, Flextronics Software Systems Limited, iGate Global Solutions Limited, Infosys Limited, Kals Infosystem Limited, Lucid Software Limited, Megasoft Limited, Persistent Systems Limited, R Systems International Limited, Synfosys Business Solutions Limited and Tata Elxsi Limited as comparables without appreciating that these comparables did not satisfy the FAR test vis-a-vis the Appellant in relation to software services provided to AE.

4.9 That the learned TPO has erred, on facts and in law, in violating the principle of natural justice by failing to give any show cause notice and/ or provide any reasonable opportunity to the Appellant before selecting Megasoft Limited as comparable in relation to the impugned transaction .

4.10 That the learned TPO has erred, on facts and in law, by considering reimbursement of expenses as business expense and thereby including the same in the total cost base and revenue while calculating the operating margin of the impugned transaction relating to the provision for software services.

4.11 The learned TPO/ Hon'ble DRP have erred, on the facts and in law, by failing to include foreign exchange gains/ losses and provisions written back as an operating income/ expenditure while computing the operating margins of the Appellant and the comparable companies for the application of the TNMM.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 4.12 That the learned AO/ learned TPO erred, on facts and in law, in rejecting companies by applying following filters -

4.12.1 By applying lower turnover filter of INR 1 crore to reject companies which are otherwise comparable and not applying an upper turnover filter to reject companies having significantly higher turnover vis-a-vis the Appellant; 4.12.2 By rejecting companies having economic performance contrary to the industry behavior, having different accounting year (i.e. companies having accounting year other than March 31) and having employee cost less than 25 percent to total cost; and 4.13 That the learned TPO erred, on facts and in law, by not making appropriate adjustment for risk differences between the Appellant and the selected comparable companies in the arm's length price so determined for the impugned transaction, as the Appellant is remunerated on cost plus basis for impugned transaction and bears minimal risk. 4.14 That the learned AO/ learned TPO has erred in not providing the benefit of the arm's length range as provided under proviso to Section 92C of Act for purposes of computing the arm's length price under Section 92F of the Act. Corporate tax Grounds - 5. The learned AO has erred in law and in fact in holding the capital receipt of Rs. 10,84,21,198 being secured loan waived off in accordance with the notification issued by the Government of West Bengal [under Central Sales Tax Act, 1956 read with Bengal Finance (Sales Tax) Act, 1941], as remission of trading liability, taxable under the provisions of section 41(1)(a) of the Act. 5.1 Without prejudice, based on the facts and circumstances of the case and in law, learned AO has erred in not appreciating that waiver of deferred sales tax loan was in fact settled as per the provisions of Rule 127A of the West Bengal Sales Tax Rules, 1995, which provides for settlement of such loan at equivalent to Net 10

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 Present Value and accordingly, there was no remission of trading liability so as to attract section 41(1 )(a) of the Act. 5.2 That the AO erred in not appreciating that, for the provision of Section 41(1) of the Act to be applicable, the amount in question had to be allowed as a deduction in the preceding years and on the facts of the present case upon a deferral of the sales tax liability, the amount got converted into a loan which was never claimed as a deduction by the Appellant. 6. The AO has erred in law and in facts in reducing the data communication charges incurred in foreign currency amounting to Rs. 53,34,082 from Export Turnover, while computing the amount of deduction under section 10A of the Act, without appreciating that no part of data communication expenses incurred in foreign currency has been invoiced to the customers as ‘consideration’ in respect of export of computer software.

6.1 Without prejudice, the AO has erred in law and in facts in not deducting the aforesaid data communication charges from the total turnover, while calculating the deduction under section 10A of the Act.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 9. Based on the facts and circumstances of the case, the learned AO has erred in limiting the credit for tax deducted at source to Rs. 3,23,89,317 as against Rs. 3,90,38,743 claimed by the Appellant in the return of income.

2.1 The assessee has also filed additional grounds of appeal on

01/11/2016 which read as under -

“10.1 Without prejudice, on the facts and circumstances of the case and in law, the learned AO has erred in levying interest under Section 234B of the Income-tax Act, 1961 (‘Act’) beyond January 31, 2011, being the date on which whole of the tax demand for subject AY was adjusted against the refund determined for AY 2009-10. 10.2 Without prejudice, on the facts and circumstances of the case and in law, the learned AO has erred in levying interest under Section 234D of the Act upto order dated April 29, 2016 even when the base tax demand remained same as calculated in order dated October 28, 2010 which shall be the terminal point of levy of interest under Section 234D of the Act.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 10.3 Without prejudice to the above Ground 10.2 above, on the facts and circumstances of the case and in law, the learned AO has erred in levying interest under Section 234D of the Act upto the date of order passed under Section 254 read with Section 143(3) and Section 144C of the Act (i.e. till April 29, 2016) in complete ignorance of the fact that refund granted to the appellant for subject AY was recovered on January 31, 2011, by way of adjustment of refund determined for AY 2009-10. 10.4 Without prejudice, that on the facts and circumstances of the case and in law, the learned AO has erred in computing interest under Section 234C of the Act.”

appeal is heard on merits, he should be heard on the legal issue

as agitated in Ground Nos. 2, 2.1, 2.2, 2.3 of the appeal. The Ld.

AR submitted that the assessment vide order dated 28/10/2010

was framed on a non-existent entity and, therefore, the essential

question to be adjudicated first was as to whether such

assessment was sustainable in the eyes of law. The Ld. CIT (DR)

also agreed to the plea of the Ld. AR. Accordingly, we proceed to

hear both the parties on the legal issue of the validity of the

assessment proceedings in the present appeal and the arguments

on merits will be heard at a later stage, if so required.

3.1 The Ld. AR submitted that the fact of amalgamation of the

assessee company was very much within the knowledge of the

I.T.A. No. 3169/Del/2016 Assessment year 2006-07

AO/ revenue authorities and that in view of the aforesaid, the

assessment made on a company which had ceased to exist and

was non-existent as on the date of passing of the assessment

order was beyond jurisdiction, bad in law and void ab-initio and

accordingly liable to be quashed.

3.2 The Ld. AR submitted the following date chart to buttress

the assessee’s claim that the information of amalgamation having

taken place was well within the knowledge of the revenue

authorities -

Sl. Date Event No.

1 November The Appellant filed its Return of Income in name of Nokia Siemens Networks India Pvt Ltd (,NSNIPL') 29, 2006 Appointment date of merger of Nokia Siemens Networks 'India Private Limited (,NSNIPL') with Nokia April 01, 2 Siemens Networks Private Limited (,NSNPL') (Surviving entity/ Amalgamated Entity) vide order of the 2008 Hon'ble High Court of Karnataka dated January 09, 2009 Letters filed with the Income-tax authorities intimating the merger of Nokia Siemens Networks India Private Limited (,NSNIPL') with Nokia Siemens Networks Private Limited (,NSNPL') and requesting transfer of tax files from the jurisdictional officer of Nokia Siemens Networks India Private Limited (,NSNIPL') in 3 Bangalore to the jurisdictional officer of Nokia Siemens Networks Private Limited (,NSNIPL') in Bangalore to the jurisdictional officer of Nokia Siemens Networks Private Limited (‘NSNPL’) in Delhi. The letters were filed with the following Income Tax Authorities: July 02, Chief Commissioner of Income-tax, Bangalore - 1 2009 June 30, The Commissioner of Income Tax - Ill, Bangalore 2009 June 30, The Commissioner of Income-tax (Appeals) - IV, Bangalore 2009 June 30, The Additional Commissioner of Income Tax, Range 12, Bangalore 2009 June 30, The Chief Commissioner of Income Tax -V, New Delhi 2009 June 30, The Commissioner of Income Tax - V, New Delhi 2009 June 30, The Deputy Commissioner of Income Tax, Circle 13(1), New Delhi 2009 July 17, Joint Director of Income-tax (TPO), Banqalore 2009 Notice under Section 142(1) of the Income-tax Act, 1961 ('Act') issued by the Deputy Commissioner of August 4 Income-tax, Circle 12(2), Bangalore in the name of Nokia Siemens Networks India Private Limited 10,2009 (,NSNIPL') Order under section 92CA of the Act passed by the Joint Director of Income-Tax (TPO), Bangalore in the October 5 name of Nokia Siemens Networks India Private Limited (,NSNIPL'Siemens Networks India Private Limited 29, 2009 (,NSNIPL’) 6 December Draft assessment order passed under Section 143(3) read with Section 144C of the Act by the Deputy

I.T.A. No. 3169/Del/2016 Assessment year 2006-07

29, 2009 Commissioner of Income- tax, Circle 12(2), Bangalore in the name of Nokia Siemens Networks India Private Limited (,NSNIPL') September Directions under Section 144C(5) read with section 144C(8) of the Act issued by the Dispute Resolution 7 20,2010 Panel (,DRP'), Bangalore in the name of Nokia Siemens Networks India Private Limited (,NSNIPL') October 28 Final assessment order passed under Section 143(3) of the Act by the Assistant Commissioner of 8 2010 Income-Tax, Circle 13(1), New December Filing of appeal by the Appellant against order passed under Section 143(3) read with Section 144C of the 9 15 , 2010 Act before the Hon'ble Delhi ITAT May 20, Additional grounds of appeal filed by the Appellant with Bench E of Hon'ble Delhi ITAT in the name of 10 ,2011 Nokia Siemens Network: Private Limited (,NSNPL') Order Passed by Hon'ble Delhi ITAT whereby the matter was restored to the Dispute Resolution Panel April 16, (,DRP') on the issue of assessment being framed in the name of amalgamating company instead on the 11 2014 amalgamated company. Directions under section 144C(5) read with section 144C(8) of the Act issued by the DRP, Delhi, in the name of Nokia Siemens Networks India Private Limited (,NSNIPL') wherein DRP held that assessment February 12 made on amalgamating company is a curable defect and therefore directed AO and TPO to issue notice in 26, 2016 the name of amalgamated company and frame the assessment b) givinq the assessee an opportunity of being heard. April 27, Received a notice dated April 22, 2016, from the AO giving opportunity of being heard as per the 13 2016 directions of Hon'ble DRP Case was fixed for hearing on April 29, 2016 Final assessment order passed under Section 143(3) of the Act by the Respondent in the name of Nokia April 29, 14 Siemens Networks Private Limited (,NSNPL') wherein the tax demand of Rs 13,85,05,350 was raised 2016 against the Appellant.

3.3 The Ld. AR referred to the various dates as mentioned in the

date chart and submitted that it is undisputed that the fact of

amalgamation of the assessee company was very much within

the knowledge of the AO/ revenue authorities. He reiterated that

in view of the undisputed facts, the assessment made on a

company which had ceased to exist and was non-existent as on

the date of passing of the assessment order was beyond

jurisdiction, bad in law and void ab-initio and accordingly liable

to be quashed.

3.4 The Ld. Authorised Representative submitted that the

Hon’ble Delhi High Court had an occasion to consider an

identical issue in the case of Spice Entertainment Ltd versus

Commissioner of Service Tax in ITA numbers 475 and 476 of

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 2011. The question that arose for consideration before the

Hon’ble Delhi High Court was as to whether the assessment in

the name of a company which had been amalgamated and had

been dissolved with the amalgamating company will be null and

whether the framing of assessment in the name of such a

company was a mere procedural defect which can be cured. It

was submitted that the Hon’ble Delhi High Court had

adjudicated that in the facts of the case the irresistible

conclusion would be that provisions of section 292B of the Act

were not applicable. The Hon’ble Court held that the framing of

assessment against a non-existing entity/person went to the very

root of the matter which was not a procedural irregularity but a

jurisdictional defect as there cannot be any assessment against

dead person. Reliance was also placed on another judgment of

the Hon’ble Delhi High Court in the case of CIT versus Dimension

Apparels Private Limited reported in 370 ITR 288 (Delhi) wherein

the Hon’ble Delhi High Court had held that while section 292B

could cure technical defects, it could not cure jurisdictional

defect in assessment notice. The court therein held that framing

of assessment against non-existing entity/person was a

jurisdictional defect and participation by the amalgamated

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 company in the assessment proceedings could not cure the

defect because there could be no estoppel in law. It was

submitted that in view of the settled judicial precedents, the

impugned assessment was bad in eyes of law and had to be

quashed.

3.5 The Ld. Authorised Representative also drew our attention

to the final assessment order dated 29/04/2016 and submitted

that even after the directions of the Hon’ble DRP, the assessing

officer had framed the assessment in the name of the

amalgamated company.

case in the case of the assessee were different from the facts of

the case in Spice Entertainment Ltd (supra) and, therefore, the

same was distinguishable on facts. It was also submitted that in

the case of Spice Entertainment Ltd. (supra) the assessee had

brought it to the notice of the AO that there had been an

amalgamation but the same was not the case in the case of this

assessee.

4.1 It was further submitted by the Ld. CIT DR that in the

assessee’s case the notice under section 143 (2) of the Income

Tax Act was issued 12/10/2007 and at that point of time the

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 assessee company was very much existence. It was submitted

that as per provisions of section 124 (3) of the Act, the assessee

was not authorised to question the jurisdiction of the AO at that

point of time. It was further submitted that the assessee’s letter

to the income tax authorities did not mention the fact of the

pendency of assessment proceedings and, therefore, the

assessee’s contention that the Department was aware of the

amalgamation during the pendency of assessment proceedings

itself was factually incorrect.

4.2 It was also submitted that the assessee had participated in

the assessment proceedings but had not raised any objection

regarding the name and, therefore, this issue could not be raised

at a later stage.

4.3 The Ld. CIT DR also filed written submissions which are

being reproduced as a under: – “1. The following written submissions are made to supplement oral arguments and the detailed reasoning already given by Ld DRP and Ld AO/TPO in their respective orders on how the ground raised on jurisdiction issue (Ground No 2) is not sustainable. 2. The letter referred to at Page.9 of the order of Hon’ble ITAT dtd 16/4/2014 is addressed to Public Relations Officer

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 Bangalore and not to the AO /TPO or DRP with copies marked to different authorities. 3. This letter also does not make any mention about any ongoing tax proceedings under the Act. 4. The letter only asks for transfer of file to Delhi from Bangalore. This is a letter specifically asking to issue orders u/s 127 of the Act. But the authorities (AO/TPO/DRP) were not referred to / informed about the pending IT proceedings. 5. Further, the Counsel of the Appellant has appeared on so many occasions before the Authorities below during assessment, Transfer pricing and DRP proceedings; but on none of the occasions he has drawn attention to the fact that the notice or any of the orders are being addressed in the amalgamating company’s name and still they were complying. It is noted here that even when the addressee is the old amalgamating company, it is the amalmagated company that has been presenting itself before the authorities below.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 existing assessee. But that is not the case in the present case. Notice u/s 143(2) was issued on the assessee even before amalmagation. The chronology of events in the present case are as under: a. 29/11/2006 - R/I filed b. 27/6/2007-143(1) c. 12/10/2007 -Notice u/s 143(2) issued 8. Further, in that case the AO had passed the order even after the protest by the Assessee and that is why the Hon’ble High Court arrived at such a seemingly harsh decision. There is a finding of fact in the Hon'ble High Court’s order that the appellant on receipt of notice in the old name had promptly approached the AO and appraised him of the mistake and still the AO had gone ahead with proceedings and order in the old name. Relevant portion is reproduced below:

Para 11 When notice under Section 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s Spice which was non existing entity on that day

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 has a material bearing. In this kind of facts, Hon’ble High Court would not have come to the same conclusion.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 13. The fact that the proceedings have been validly initiated in the correct name of the then existing company and the appellant had duly participated in the proceedings without any objections (May pi refer to S. 124(3) of I.T.Act 1961), would make the mistake, if any, only a technical error covered by the provisions of S.292B of the Income Tax Act 1961. 14. DRP proceedings are continuation of assessment proceedings: The Hon’ble High Court of Delhi in the case of Spice Entertainment Ltd. vs. CIT (supra) has held that the AO can proceed to take follow up action within the time limit permitted by the Act. In the present appeal, the assessment u/s 143(3) has been ultimately made on 29/4/2016 in the name of the amalgamated company within the time limit provided under the statute. 15. The ratio of Spice Infotainment Ltd. vs. CIT (supra) w.r.t. jurisdiction issue is not applicable in the present facts of the case as : a. There was no objection taken by the assessee when it received the notices for assessment (unlike in Spice case) b. Objection was first raise before Hon’ble ITAT. c. DRP proceedings were not there in Spice case. Since DRP proceedings are continuation of assessment proceedings the assessment which has been completed on 29/4/2016 is a valid assessment and suffers no jurisdictional deficiency. 16. It is submitted that the mentioning of amalgamating company’s in the 1st round was a mere clerical error committed by the Authorities below which is covered by provisions of

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 S.292B of the Act. 17. The same error has also been committed by the Appellant also when it tiled the application in Form no 35A tiled before Ld.DRP Bangalore - the appellant had given the name of assessee as Nokia Siemens Networks India Pvt. Ltd which is the name of the amalgamating company. 18. Further in the decision of Hon’ble High Court of Delhi in the case of Spice Infotainment Ltd. vs. CIT: 1TA No. 475 of 201 I, decided on August 3, 2011 (on which every other case laws on the issue are based) the following pronouncements of Hon’ble Apex court on the battle between technical considerations and substantial justice have not been considered. It is therefore submitted with due respect that the said decision is per incuriam and need not be taken as a valid precedent in the given facts. a. The Hon’ble Supreme Court in Hindustan Steel Limited vs. Dilip Construction Company, Air 1969 S.C. 1238(5) has held,- "THE Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of I technicality to meet the case of his opponents. The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument."

b. In Collector, Land Acquisition, Anantnag and another vs. Mst. Katiji and others 7 AIR 1353, the Hon’ble Supreme

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 Court has observed as under:

i. "THE legislature has conferred the powers to condone delay by enacting S. 5 of the Indian Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on merits. The expression "sufficient cause" employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose for the existence of the institution of Courts…..

ii. When substantial justice consideration and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay....

iii. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so…….

iv. The fact that it was the 'State' which was seeking condonation and not a private party was altogether irrelevant. The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an even handed manner. There is no warrant for according a step motherly

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 treatment when the 'State' is the applicant praying for condensation of delay.

v. In fact experience shows that on account of an impersonal machinery (no one in charge of the matter is directly hit or hurt by the judgment sought to be subjected to appeal) and the inherited bureaucratic methodology imbued with the note- making file pushing, and passing- on-the-buck ethos, delay on its part is less difficult to understand though more difficult to approve.

vi. In any event, the State which represents the collective cause of the community, does not deserve a litigant non grate status. The Courts, therefore, have to inform with the spirit and philosophy of the provision in the course of the interpretation of the expression "sufficient cause". So also the same approach has to be evidenced in its application to matters at hand with the end in view to do evenhanded justice on merits in preference to the approach which scuttles a decision on merits.

c. The Division Bench of Madhya Pradesh in Rameshwar Prasad and anr. Vs. Narayandas, AIR 1969 S.C. 1238(5), while following aforesaid judgment in Hindustan Steel (supra) has observed as under: "ONE has only to bear in mind that the Stamp Act is a fiscal measure enacted to secure revenue for the State and it has not been enacted to arm a litigant with a weapon of technicality.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 d. The obligation of the Court to do substantial justice has been reiterated in Mrs. Margaret Lalita Samuel vs. Indo Commercial Bank Ltd. 1979 AIR 102. The Court has observed in this case as under: "IF the Supreme Court is satisfied that as a result of the order of remand substantial justice has been done to the parties in the consequential proceedings, the Supreme Court may decline to exercise its discretionary power to interfere. The jurisdiction under Art. 136 is not meant to correct an illegality brought to the notice of the Supreme Court, nor to undo, merely on account of such illegality, an adjudication which has done substantial justice to the parties."

e. Lastly observations made by the Division Bench of the Hon’ble Karnataka High Court in Mangalore Ganesh Beedi Works and others and Mangalore Ganesh Beedi Workers and Allied Beedi Factories Workers Association, Akbar Road Mandi Mohalla, Mysore [2004 (103) FLR 387] are submitted here since the same are material in view of the facts of the present case.

i. "The judicial review power vested in this Court under Article 226 of the Constitution of India should be exercised in such a way as to advance the objectives of law and not to thwart those objective. Technicalities cannot be permitted to hijack the divine rhythm of justice. The parties should win or lose on substantive grounds and not on technical tortures. The relief to be granted by the High Court must be such as could be considered permissible in law and worked out by application of legally recognized principles. The

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 decision must have legitimacy of legal reasoning and should not incur the criticism of lacking the objectivity of purpose and rational and legal justification." 19. The crux of all the leading cases of the Supreme Court and of various High Courts is the technical lacunas, if any, cannot defeat the substantial justice and deficiency or technical mistakes in any manner would not give a right to a litigant to take benefit of the same and defeat justice. 20. It is submitted here that the Income Tax Act is also a fiscal measure enacted to secure revenue for the State and it has not been enacted to arm a litigant with a weapon of technicality.

Cases cited:

the relevant material placed on record before us. It is seen that

the issue is squarely covered by the order of the Hon’ble Delhi

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 High Court in the case of Spice Entertainment Ld. (supra)

wherein an identical issue was settled in favour of the assessee

be applying the ratio of decision of the Hon’ble Delhi High Court

in the case of Spice Infotainment Ltd. Vs. CIT (Supra). The

Hon'ble Jurisdictional High Court held as follows:-

"16. When we apply the ratio of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of s. 292B of the Act are not applicable in such a case. The framing of assessment against a non- existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a 'dead person'.

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 5.1 At the very outset, we respectfully note the dicta laid down

by the Hon’ble High Court is that the provisions of section 292B

of the Act are not applicable in such a case where the assessment

has been framed in the name of a non-existent amalgamated

company. Their Lordships have further held that the framing of

assessment against non-existent entity/person goes to the root of

the matter which is not a procedural irregularity but a

jurisdictional defect as there cannot be any assessment against a

dead person. In the case of Spice Entertainment Ltd. (supra),

their Lordships also pointed out that the returns were filed by

M/s Spice on the day when it was in existence. It would be

permissible to carry out the assessment on the basis of those

returns after taking the proceedings afresh from the stage of

issuance of notice u/s 143(2) of the Act. It was also held that in

substitute, the name of the appellant/amalgamated company in

the place of the amalgamating company may be given and then

notice may be issued as per provisions of the Act.

5.2 In the present case, undisputedly and admittedly, the

return was filed by the assessee company on 29/11/2006. The

Hon’ble High Court of Karnataka passed the order for the merger

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 on 09/01/2009 with the directions that the merger was to take

effect 01/04/2008. Thus, pursuant to the aforesaid order, the

assessee company stood dissolved without the process of

winding up on a copy of the order being filed with the Registrar of

Companies. The assessee filed letters intimating the merger to

the various tax authorities between 02/07/2009 and

17/07/2009. The Department has disputed the assessee’s

contention that it was informed about the amalgamation/merger

and has submitted that the assessee had only conveyed a request

for transfer of the files from Bangalore to Delhi. However, a

perusal of the communication of the assessee dated 25/05/2009

addressed to the PRO, a copy of which was received by the Office

of Addl. CIT, Range -12, Bangalore shows that the said

communication clearly mentions that “pursuant to the order of the

Hon’ble High Court at Karnataka, NSNIPL has merged with Nokia

Siemens Networks Pvt. Ltd (‘NSN’ India), a company incorporated

under the Companies Act, 1956, with is registered office at 2nd

Floor, Commercial Plaza, Radisson Complex, National Highway - 8,

New Delhi – 110037 with effect from April 1, 2008.” Thus, this

contention of the Department does not have any basis and the

same is rejected. It is also borne out from the records that the

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 Assessing Officer issued notice u/s 143(2) on 12/10/2007 when

the company was in existence. However, another notice u/s

142(1) of the Act was issued in the name of assessee company on

10/08/2009 although the assessee had already informed the

department about the merger through various communications

between 02/07/2009 and 17/07/2009. Thus, the undisputed

fact remains that the AO issued notice in furtherance of the

assessment proceedings for the assessment year to a company

which had ceased to exist in the eyes of law and was non-existent

on the date of the issue of notice u/s 142(1). Thus, on the facts

and the circumstances of the case, we have no hesitation in

holding that the framing of assessment against a non- existing

entity/person goes to the root of the matter and is a jurisdictional

defect as there cannot be any assessment against a 'dead person'.

Accordingly, the impugned assessment is bad in law and is liable

to be quashed being void ab initio. We observe that the facts of

the present case are quite similar to the facts of the case in Spice

Entertainment (supra), wherein their Lordships have held that

framing of assessment against non-existent entity/person goes to

the root of the validity of the assessment which is not a

procedural irregularity curable u/s 292B of the Act or under any

I.T.A. No. 3169/Del/2016 Assessment year 2006-07 other provision of the Act but it is a jurisdictional defect because

there cannot be framing of any assessment order against a dead

person or entity which is non-existent on the date of

framing/passing assessment order.

5.3 Respectfully following the ratio of the judgment of the

Hon'ble High Court in the case of Spice Entertainment (supra),

we are inclined to hold that the assessment in the name of non-

existent amalgamating company having jurisdictional defect is

not sustainable and therefore, we quash the same.

5.4 Since we have quashed assessment order being without valid

jurisdiction, the other grounds of the assessee become academic

and infructuous and we also dismiss the same being infructuous

without any deliberations on merit.

Order pronounced in the open court on 31st May, 2017.

Sd/- Sd/-

(R.K. PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNANT MEMBER JUDICIAL MEMBER

DT. 31st MAY, 2017 ‘GS’

I.T.A. No. 3169/Del/2016 Assessment year 2006-07