2018 (7) TMI 823 - AT - Income Tax

Validity of assessment - assessment against non-existent company - Held that - Such assessment is a nullity in the eyes of law. Therefore the same is quashed. The ground raised by the assessee is accordingly allowed. SEE CIT vs. Dimension Apparels (P.) Ltd. 2014 (11) TMI 181 - DELHI HIGH COURT

Summary

Issues Involved:
1. Validity of assessment order passed on a non-existent amalgamating entity.
2. Applicability of Section 292B of the Income Tax Act to cure jurisdictional defects.

Detailed Analysis:

1. Validity of Assessment Order on a Non-Existent Amalgamating Entity:
The primary issue in this appeal was whether the assessment order passed by the Assessing Officer (AO) on a non-existent amalgamating entity is valid. The assessee argued that the AO erred in completing the assessment on the non-existing amalgamating entity instead of the amalgamated/successor company, rendering the assessment order void ab-initio and liable to be quashed.

The sequence of events presented by the assessee demonstrated that the amalgamation was effective from April 1, 2011, as per the High Court order dated March 26, 2014. Despite informing the Tax Authorities about the amalgamation through various submissions and letters, the AO continued to pass orders in the name of the non-existent entity, Vertex Customer Services India Pvt. Ltd., instead of the amalgamated entity, Vertex Customer Management India Pvt. Ltd.

The Tribunal referred to several judicial precedents, including the Hon'ble Karnataka High Court's decision in CIT vs. Intel Technology India (P.) Ltd. and the Hon'ble Delhi High Court's decision in Spice Entertainment Ltd. vs. CIT. Both cases established that framing an assessment against a non-existent entity is not a procedural irregularity but a jurisdictional defect, which goes to the root of the matter. The Tribunal concluded that the assessment order passed on a non-existent company is invalid and must be quashed.

2. Applicability of Section 292B of the Income Tax Act:
The Department argued that the provisions of Section 292B, which allow for the curing of procedural defects, should apply in this case. However, the Tribunal held that Section 292B cannot cure a jurisdictional defect. The framing of an assessment against a non-existent entity is not a mere procedural irregularity but a fundamental jurisdictional error. The Tribunal cited the Hon'ble Delhi High Court's decision in Spice Entertainment Ltd., which clarified that Section 292B does not apply to jurisdictional defects and cannot validate an assessment made on a non-existent entity.

The Tribunal also referred to the Hon'ble Delhi High Court's decision in CIT vs. Dimension Apparels (P.) Ltd., which reinforced that assessments made on non-existent entities are void and cannot be cured by Section 292B. The Tribunal emphasized that the AO's knowledge of the amalgamation and the continuation of proceedings in the name of the non-existent entity constituted a jurisdictional defect that invalidated the assessment.

Conclusion:
The Tribunal concluded that the assessment order passed on the non-existent amalgamating entity, Vertex Customer Services India Pvt. Ltd., is a nullity in the eyes of law and must be quashed. The provisions of Section 292B do not apply to cure such jurisdictional defects. Consequently, the appeal filed by the assessee was allowed, and the ground raised by the assessee was upheld. The other grounds of appeal were not adjudicated as they were rendered academic in nature.