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Income Tax Appellate Tribunal, MUMBAI BENCH “K”, MUMBAI
Before: SHRI G.S.PANNU & SHRI AMARJIT SINGH
ORDER PER G.S.PANNU,A.M:
The captioned appeal filed by the assessee pertaining to assessment year 2008-09 is directed against the order of the ACIT, Cir.7(2), (in short the Assessing Officer ) passed under section 144C(1) r.w.s 143(3) of the Income Tax Act, 1961 ( in short the Act) dated 16/08/2012, which is in conformity with the direction of the Dispute Resolution Pannel-2, Mumbai dated 27/07/2012.
In this appeal, assessee has raised the following Grounds of appeal:-
“That on the facts and circumstances of the case, and in law:
That the assessment order dated August 16, 2012 passed in pursuance to the directions issued by the Learned Dispute Resolution Panel ('Ld. DRP') is a vitiated order as the Ld. DRP erred both on facts and in law confirming the addition proposed by the Ld. Assessing Officer ('Ld. AO)') to the Appellant's income.
2. The Ld. DRP erred both on facts and in law in confirming the addition of Rs. 1,12,46,145 to the income of the Appellant by holding that its international transaction of 'Provision of Business Support Services' does not satisfy the arm's length principle envisaged under the Income-tax Act, 1961 ('the Act').” 3. The appellant filed a return of income for assessment year 2008-09 on 21/09/2008 declaring a total income of Rs.51,54,659/-, which was subject to a scrutiny assessment and in terms of an order passed under section 144C(1) r.w.s 143(3) of the Act dated 16/08/2012 the total income has been assessed at Rs.1,64,00,800/-. Apart from assailing the addition made to the returned income, the assessee company has raised an Additional Ground of appeal which read as under:-
On the facts and in the circumstances of the case and in law, the Appellant submits that the impugned assessment order dated 16 August 2012 passed by the learned Assessing Officer under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961, is bad in law as Siemens Corporate Finance Private Limited has ceased to exist on the date of the impugned order on account of its merger with Siemens Technology and Services Private Limited with effect from 1 October 2011, thereby the entire assessment proceedings be regarded to be void ab initio.
In terms of the aforesaid Ground, it is sought to be canvassed that the assessment order passed by the Assessing Officer in the name of Siemens Corporate Finance Pvt. Ltd. is void-ab-initio because as on the date of the order of assessment the said concern had ceased to exist on account of its merger with Siemens Technology and Services Pvt. Ltd. w.e.f. 01/10/2011. The aforesaid Additional Ground of appeal involves a point of law, for which the 3 (Assessment Year 2008-09) necessary facts emerge from the record, and no fresh investigation of facts is required and, therefore, it is admitted for adjudication following the ratio of the judgement of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. vs. CIT, 229 ITR 383(SC). Since the aforesaid plea goes to the root of the jurisdiction of the impugned assessment, the rival counsels were heard on this aspect at the thresh-hold itself.
5. In the context of the aforesaid objection, the relevant facts are that a composite scheme of amalgamation under sections 391 to 394 of the Companies Act, 1956 was approved by the Hon'ble Bombay High Court on 26/08/2011, whereby, inter-alia, Siemens Corporate Finance Pvt. Ltd. merged with Siemens Technology and Services Pvt. Ltd. w.e.f. 01/10/2011.
The Ld. Representative for the assessee referred to the relevant material placed on record, viz. copy of the order of the High Court dated 26/08/2011 and also the scheme of amalgamation approved by the Hon'ble Bombay High Court, etc. In the course of assessment proceedings, assessee vide its communication dated 6/12/2011 (duly acknowledged in the office of ACIT, Cir. 7(2) dated 14/12/2011) intimated to the Assessing Officer the fact of its amalgamation with Siemens Technology and Services Pvt. Ltd. in pursuance to order passed by the Hon'ble Bombay High Court dated 26/08/2011, a copy of such communication has also been placed on record. Now, the grievance of the assessee is that the subsequent assessment finalized by the Assessing Officer on 16/08/2012 is in the name of Siemens Corporate Finance Pvt. Ltd., which is a non-existent assessee as on the date of passing of such assessment order and, therefore, the assessment order is void- ab-initio. It has also been pointed out that after passing of the draft
4 (Assessment Year 2008-09) assessment order under section 144C(1) of the Act dated 22/11/2011 assessee had raised objections before the DRP also wherein, the fact of the merger stood disclosed. For this, reliance has been placed on the decision of the Mumbai Tribunal in the cases of Ambuja Cement Rajasthan Ltd., WTA No.11/Mum/2014 dated 24/02/2016 and M/s. Instant Holdings Ltd., ITA No.4593/Mum/2011 dated 09/03/2016 wherein, under similar circumstances, the assessment orders passed in the name of non-existent assessees have been quashed. In support, reliance has also been placed on the judgment of the Hon'ble Bombay High Court in the case of Jitendra Chandralal Navlani & Anr., Writ Petition No.1069 of 2016 dated 08/06/2016, wherein it has been held that framing of assessment in respect of a non-existent entity goes to the root of the jurisdiction of the Assessing Officer and an order passed in the name of non-existent assessee is untenable in the eyes of law.
The Ld. Departmental Representative has not controverted any of the factual matrix brought out by the appellant but has referred to a report furnished by the Assessing Officer dated 17/03/2016, a copy of which is placed on record. In terms of the said report, the sum and substance of the plea is that the point raised by the assessee is hyper-technical and not on the merits of the additions.
We have carefully considered the rival submissions. The fact-situation in the present appeal clearly brings out that at the time of finalization of assessment order in the name of Siemens Corporate Finance Pvt. Ltd. on 16/08/2012, the said concern was non-existent as it stood amalgamated with Siemens Technology and Services Pvt. Ltd. consequent to the scheme of amalgamation approved by the Hon'ble Bombay High Court vide order dated 26/08/2011(supra). It is also a fact that the assessee brought to the notice of the Assessing Officer the factum of its amalgamation with Siemens Technology Pvt. Ltd. vide communication dated 6/12/2011, a copy of which is also placed on record. In fact, such a position was also in the knowledge of the DRP, which was approached by the assessee by filing Form No.35A containing objections with respect to the draft assessment order, and in such Form No.35A, the name of the correct entity was mentioned. In this context, the decision of the Mumbai Tribunal in the case of Instant Holdings Ltd.(supra), relied upon by the assessee before us is squarely applicable. The following discussion in the order of the Tribunal is relevant:- 7. We have carefully considered the rival submissions. The crux of the controversy in the present appeal revolves around the validity of the action of the Assessing Officer in finalizing the assessment order on 19.12.2008 in the name of ITICL, a company which was non-existent as on that date, since it stood amalgamated with IHL w.e.f. 1.4.2007 and stood dissolved and struck-off from the records of the Registrar of Companies on 5.2.2008 consequent to the scheme of amalgamation approved by the Hon'ble Bombay High Court on 14.12.2007.
8. In the case of Spice Infotainment Ltd. (supra), the facts were that a return was filed for Assessment Year 2002-03 on 30.10.2002 by M/s. Spice Corp Ltd., i.e., the amalgamating company. Subsequently, vide order dated 11.2.2004 passed by the Hon'ble High Court, the said company stood amalgamated with M/s. MCorp Private Ltd., i.e., the amalgamated company w.e.f. 1.7.2003. The return so filed was picked up for scrutiny assessment vide notice u/s. 143(2) of the Act dated 18.10.2003 in the name of M/s. Spice Corp Ltd., i.e., the amalgamating company. In the course of assessment proceedings, the factum of M/s. Spice Corp Ltd. having been dissolved as a result of amalgamation with M/s. MCorp Private Ltd. was brought to the notice of the Assessing Officer. However, the Assessing Officer vide order dated 28.3.2005 passed u/s. 143(3) of the Act framed the assessment on M/s. Spice Corp Ltd., i.e., the amalgamating company. In this factual background, the plea raised by the assessee before the Hon'ble High Court was that the assessment was framed against a non-existing entity as M/s. Spice Corp Ltd. had already amalgamated with M/s. MCorp Private Ltd., and therefore, the assessment order dated 28.3.2005 suffered from a jurisdictional defect. In that case, the Tribunal had taken a view that the action of the Assessing Officer in framing assessment in the name of M/s.
Spice Corp Ltd. even after the said entity stood dissolved consequent upon its amalgamation with M/s. MCorp Private Ltd. w.e.f. 1.7.2003 was a mere procedural defect. In this background, the Hon'ble Delhi High Court formulated the following questions of law:
“(i) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the action of the Assessing Officer in framing assessment in the name of “Spice Corp Ltd.”, after the said entity stood dissolved consequent upon its amalgamation with Mcorp Private Limited w.e.f 01.07.2003, was a mere “procedural defect”? (ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that in view of the provisions of section 292B of the Act, the assessment, having in substance and effect, been framed on the amalgamated company which could not be regarded as null and void?”
9. The Hon'ble Delhi High Court after referring to the judgement of the Hon'ble Supreme Court in the case of (i) Saraswati Industrial Syndicate v. CIT, 186 ITR 278 and (ii) General Radio and Appliances Co. Ltd. v. M.A. Khader (1986) 60 Comp Case 1013 held that framing of assessment against a non- existing entity goes to the root of the matter, which did not constitute a procedural irregularity but a jurisdictional defect. Accordingly, it answered the aforesaid questions of law in favour of the assessee and against the Revenue and allowed the stand of the assessee.
Similarly, even in the case of Intel Technology India Pvt. Ltd. (supra) the Hon'ble Karnataka High Court has reached to a similar conclusion. In the case before the Hon'ble Karnataka High Court, one M/s. SSS Ltd. stood amalgamated with Intel Technology India Pvt. Ltd. w.e.f. 1.4.2004; prior to that, it filed a return of income on 28.11.2003 for Assessment Year 2003-04 and an assessment order was passed on 27.3.2006 in the name of the predecessor amalgamating company, i.e., M/s. SSS Ltd. This assessment order was sought to be challenged on the ground that as on 27.3.2006, i.e., the date of passing of assessment order, the said concern had ceased to exist upon its amalgamation with the successor company. In this factual background, the Hon'ble Karnataka High Court, following the judgement of the Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. (supra), answered the following questions of law in favour of the assessee and against the Revenue.
“(1) Whether the Tribunal was correct in holding that the order passed by the Assessing Officer on M/s Software & Silicon Systems
India Pvt. Ltd., after being intimated about the merger with M/s Intel Technology India Pvt. Ltd., was without jurisdiction against the said company and null and void ?
(2) Whether the Tribunal was correct in holding that the provisions of section 292B of the Act will not make the assessment valid as a defect/omission to incorporate the name of M/s Intel Technology India Pvt. Ltd., in the assessment order as the same is not in substance and effect in confirmative with or according to the intend and purpose of this Act ?
(3) Whether the Tribunal has to examine the matter on merits and record finding on the controversy raised before it both by the revenue as well as the assessee in their separate appeals ?”
To the similar effect are the judgements of the Hon'ble Delhi High Court in the case of Dimensions Apparel Pvt. Ltd. and Micra India Pvt. Ltd. (supra). Apart therefrom, the judgement of the Hon'ble Calcutta High Court in the case of I.K. Agencies (P) Ltd. v. Commissioner of Wealth Tax, 347 ITR 664 also supports the proposition sought to be canvassed by the assessee before us. In sum and substance, it is safe to deduce that an order of assessment made on an entity which is otherwise non-existent on the date of such assessment is invalid.
Factually speaking, in the present case the aforesaid proposition applies on all fours, as before the finalization of the impugned assessment on 19.12.2008, it was brought to the notice of the Assessing Officer that ITICL stood amalgamated with IHL w.e.f. 1.4.2007 in terms of a scheme of amalgamation approved by the Hon'ble High Court vide order dated 14.12.2007. In our considered opinion, the aforesaid error on the part of the Assessing Officer is liable to be construed as a jurisdictional defect which goes to the root of the matter and such an assessment order is liable to be set-aside. We hold so. At this point, we may take note of the argument set up by the Revenue, which is to say that the amalgamating company, i.e., ITICL was in existence throughout the previous year relevant to assessment year under consideration, and therefore, the order passed in the name of the amalgamating company, i.e., ITICL was a valid assessment. The aforesaid reason has prevailed with the CIT(A) also to reject the plea of the assessee. In our considered opinion, the aforesaid argument of the Revenue deserves to be repelled considering the ratio of the judgement of the Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. (supra). A reading of the judgement of the Hon'ble Delhi High Court in Spice Infotainment Ltd. (supra) reveals that a similar position was canvassed by the Revenue, but the Hon'ble High Court held that the assessment order passed in the name of the erstwhile company was void and such a defect cannot be treated as a procedural defect. In our considered opinion, the stand of the Revenue as well as the CIT(A) on this aspect is clearly untenable having regard to the aforesaid discussion.
In the result, we set-aside the action of the Assessing Officer in framing the assessment against ITICL on 19.12.2008 as the said company was non-existent as it stood amalgamated with IHL w.e.f. 1.4.2007, following the scheme of amalgamation approved by the Hon'ble Bombay High Court on 14.12.2007 To the similar effect is the decision of the Mumbai Tribunal in the case of Ambuja Cements Rajasthan (supra). The Hon'ble Bombay High Court in the case of Jitendra Chandralal Navlani & Anr. (surpa) also upholds the proposition that no assessment can be made in respect of non-existent entity. In fact, the judgment of the Hon'ble Bombay High Court also brings out that framing of assessment in respect of a non-existent entity goes to the root of the jurisdiction of the Assessing Officer to assess the non-existent concern and, thus, said decision also clearly answers the objection of the Revenue in the present case that the plea of the assessee is merely hyper-technical.
8.1 Considering the entirety of facts and circumstances of the case, we set- aside the action of the Assessing Officer in framing the impugned assessment against the Siemens Corporate Finance Pvt. Ltd. on 16/08/2012, because on the said date, it was a non-existing concern on account of its amalgamation with Siemens Technology and Services Pvt. Ltd. w.e.f. 01/10/2011 following the scheme of amalgamation approved by the Hon'ble Bombay High Court on 26/08/2011(supra). As a consequence, the assessment order dated 16/08/2012 is held to be as invalid and void-ab-initio. Since we have upheld the preliminary plea of the assessee, which goes to the root of the jurisdiction and the assessment order has been set-aside as void-ab-initio, the necessity to examine the other Grounds of appeal raised by the assessee on merits of the assessment are obviated. Thus, in conclusion, we allow the appeal of the assessee, as above.
In the result, the appeal of the assessee is allowed as above. Order pronounced in the open court on 16/11/2016