GENESYS WORLDEYE LTD ( NOW AMALGAMAED WITH GENESYS INTERNATIONAL CORPORATION LTD),MUMBAI vs. ASST CIT CIR 10(2), MUMBAI

Order : आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), Mumbai- 21 {(in short ‘CIT(A)’}, dated 02.04.2012 passed against assessment order u/s 143(3) dated 31.10.2011 for the Assessment Year 2009-10 on the following grounds: “

2. On the facts and in the circumstances of the case and in law the CIT(A) ought to have directed the assessing officer to assess the Interest Income of Rs.49,77,989/-, which was offered in return as Income from Other Sources, as capital receipt and hence be adjusted against the Expenditure Capitalized during the setting up of the New Unit as same was earned in a period before the commencement of business.

3. The Commissioner of Income tax (Appeal) erred in upholding the Ld AO order for disallowing I adding Rs.2,58,827/- out of Legal & Professional Fees on the ground or grounds as alleged in the assessment order.

4. The Commissioner of Income tax (Appeal) erred in upholding the Ld AO order for disallowing adding Rs.1,30,300 out of Salaries on the ground or grounds as alleged in the assessment order.

5. The Commissioner of Income tax (Appeal) erred in upholding the Ld AO Order for disallowing/ adding Rs.88,254 out of Miscellaneous Expenses on the ground or grounds as alleged in the assessment order.

6. The appellant craves leave, to add, amend, alter, modify and/or withdraw any of the above grounds of appeal as the situation may warrant, on or before the date of hearing of appeal.”

1.

2. The learned AO failed to appreciate that the assessment order was passed for AY 2009-10, on a entity which was not in the existence at the time of passing order and issuing demand notice date 31-10-2011 in the non-existence Company namely of M/s Genesys Worldeye Limited is null and void, though the return of income was filed on 29 Sep 2009 in the name of M/s Genesys Worldeye Limited.

It is noted that in the additional grounds the assessee has raised solitary issue that assessment order was passed in the hands of an erstwhile company which stood dissolved before passing the assessment order pursuant to its amalgamation with another company and was non-existing entity on the date of passing of order, and thus the order passed upon a non- existing company was bad in law and nullity. It is noted by us that the additional grounds raising this issue are purely legal and can be decided by us on the basis of facts which already exist on record and brought before us. It was claimed by Ld Counsel of the assessee that these facts were existing on the record of the lower authorities and no objection was raised by Ld CIT-DR in this regard. Thus, we proceed on the premise that facts narrated and evidences brought before us were available before the lower authorities as well. Under these circumstances, we find it appropriate to admit the additional grounds in the interest of justice. No serious objection was raised by other side with regard to admission of the additional grounds. Thus, the additional grounds are admitted for adjudication.

4.2. It has been argued by the Ld. Counsel drawing our attention upon various pages of the paper book that M/s. Genesys Worldeye Ltd. (erstwhile company) got amalgamated with another company namely M/s. Genesys International Corporation Ltd. in pursuance to the order of amalgamation passed by Hon’ble Bombay High Court dated 3rd January 2011 w.e.f. 1st April 2010. It was further submitted that information about the amalgamation was submitted by the assessee to the AO at more than two occasions. It was further submitted that inspite of the knowledge of the amalgamation, the AO framed the assessment order in the hands of erstwhile company namely M/s. Genesys Worldeye Ltd. (hereinafter referred to as GWL). It was submitted that the assessment order was nullity in the eyes of law, as it was akin to framing the assessment upon the dead person which was not permitted in the law. He placed reliance upon the judgments of Hon’ble Delhi High Court in the case Spice Entertainment Ltd. (ITA No.475 -476 of 2011 dated 03.08.2011) and CIT vs. Dimension Apparels Pvt. Ltd., (ITA No. 327 to 332 of 2014 order dated 08.07.2014).

4.3. Per contra, Ld. DR supported the order of the AO as well as Ld. CIT(A). It was pointed out by him that this legal ground was taken by the assessee for the first time before the Tribunal. It was further submitted by him the assessee had made participation in the proceedings before the AO and therefore, the assessee should not be benefitted from raising this jurisdictional issue now before the tribunal for the first time. It was lastly submitted by him that in any case, the impugned defect in framing the order was a curable defect and merely an irregularity which was not fatal and therefore, assessee’s arguments should be rejected. But in response to a query from the bench, he did not bring any contrary judgment in response to the judgments relied upon by the Ld. Counsel.

4.5. We have gone through the facts of the case and have considered submissions made by both the sides. The undisputed facts brought before us are that assessment order was framed in the hands of GWL on 16.12.2010 whereas GWL had got amalgamated with GICL (Genesys International Corporation Ltd.) in pursuance to the order of Hon’ble Bombay High Court order dated 16.12.2010. It is thus, apparent that on the date of passing of the assessment order, GWL had amalgamated with GICL and therefore did not have any legal existence in the eyes of law. Our attention was also brought upon two letters submitted by the assessee to the AO dated 27.06.2011 (submitted on 2nd August 2011) and letter dated 25th August 2011, showing that requisite information about the amalgamation was brought to the notice of the AO. The Ld. DR did not negate these facts. Under these circumstances, it can be said that it is clear case where assessment order has been passed upon a ‘non-existing’ person. We analysed the legal effect of passing the assessment order in the hands of a company which it dissolved on account of its amalgamation with another company before the passing of the assessment order. The Law in this regard is well settled that assessment order framed upon a non-existing or dead person is nullity in the eyes of law. Thus, the impugned assessment order is clearly not sustainable in the eyes of law due to this reason. But Ld. DR has made two more arguments to save the assessment order. It was argued by him that the defect in the assessment order by passing the same in wrong name was merely a procedural defect and further in any case since assessee had made participation in the proceedings before the AO, therefore, he should be precluded from raising this legal issue now before the tribunal.

4.6. We have carefully gone through these arguments of the Ld. DR as well but find none of them as sustainable in the eyes of law. Framing of an assessment order upon a proper person is not a matter of mere procedure. It creates a liability in the hands of a person, which should be enforceable in the eyes of law. It is noted from the facts before us that the demand notice was also issued in the name of non-existing entity namely GWL despite their being this fact on record that GWL was no more existence. It was not legally or practically possible to recover this demand from GWL. The name of GWL cannot be substituted with any other name for recovery of demand except with the process of law. Thus, it cannot be said that framing of the assessment order in the name of GWL was merely an act of procedure and mentioning a wrong name was merely a procedural lapse. In our considered view, as per law, it was a substantive and jurisdictional error which cannot be cured by simply taking help of section 292B. The law in this regard is well settled which we shall discuss subsequently after dealing with another arguments of the Ld. DR. 4.7. It has been further contended by the Ld. DR that the assessee had participated in the proceedings before the AO and therefore, he should be precluded from raising this issue before the Tribunal.

4.8. In our view, this argument of the Ld. DR is also not in accordance with law. The assessment is to be made by the AO in accordance with law. The jurisdiction to frame the assessment order upon a particular person can be made by the AO in accordance with the law only. The jurisdiction to frame an assessment can neither be conferred nor can it be taken away by an assessee or any other person from the AO on the basis of their consent or otherwise. If the assessment orders are framed on the basis of consent or objection of the assessee’s alone then it would given rise a chaotic situation. Thus, it is for the AO to carefully determine his jurisdiction to make an assessment in a lawful manner upon the appropriate person and the obligation to do so rest solely upon the shoulders of the AO which he is obliged to fulfill by following due process of law. There is no estoppel against law. If an assessment order is framed without the authority of law, then, the same would be nullity in the eyes of law, as no tax can be collected without the authority of law, as has been clearly laid down in Article 265 of our constitution.

4.9. It is noted by us that all these issues and arguments have already been dealt with and this entire controversy has already been put to rest by various courts in their judgments. Hon’ble Delhi High Court in the case of Spice Entertainment Ltd (Supra) has analysed this entire controversy in detail and held that assessment order passed under such circumstances would be nullity in the eyes of law. The relevant observations of the Hon’ble High Court in the said case are very useful to deal with this controversy and the same are reproduced hereunder for the sake of ready reference: “6. On the aforesaid reasoning and analysis, the Tribunal summed up the position in para 14 of its order which reads as under:- "In the light of the discussions made above, we, therefore, hold that the assessment made by the AO, in substance and effect, is not against the non-existent amalgamating company. However, we do agree with the proposition or ration decided in the various cases relied upon by the learned counsel for the assessee that the assessment made against non-existent person would be invalid and liable to be struck down. But, in the present case, we find that the assessment, in substance and effect, has been made against amalgamated company in respect of assessment of income of amalgamating company for the period prior to amalgamation and mere omission to mention the name of amalgamated company alongwith the name of amalgamating company in the body of assessment against the item "name of the assessee" is not fatal to the validity of assessment but is a procedural defect covered by Section 292B of the Act. We hold accordingly."