2022 (9) TMI 1669 - AT - Income Tax

Assessment order passed in the name of a non-existing entity - notice issued in the name of company merged - scheme of Amalgamation approved - HELD THAT - Undisputedly the draft assessment order and the directions of the DRP are in the name of SPENI i.e. the erstwhile entity. The Hon ble Bombay High Court approved the Scheme of Amalgamation of SPENI with SPNI vide order dated 01/07/2016. The assessee vide communication dated 16/01/2017 informed the Assessing Officer about the fact of merger of SPENI with SPNI and the consequent change in name. The fact of intimation of change in name has not been disputed by Revenue. The ld. Counsel for the assessee has placed on record photocopy of the communication dated 16/01/2017 bearing the office stamp of DCIT(IT) Circle 4(2)(1) to substantiate that the AO was informed about the change in name of assessee consequent to amalgamation well before passing of the final assessment order. AO passed the final assessment order on 31/01/2017. The documents on record clearly indicate that the AO was informed about the change in name. Despite intimation the AO passed the final assessment order in the name of a non-existing entity. Apex Court in the case of PCIT vs. Maruti Suzuki India Ltd 2019 (7) TMI 1449 - SUPREME COURT held that where assessee company was amalgamated with another company and thereby lost its existence assessment order passed subsequently in the name of the said non-existing entity is without jurisdiction hence liable to be set-aside. Assessee appeal allowed.

Summary

Issues Presented and Considered

The core legal question considered by the Tribunal was whether an assessment order passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961, in the name of a non-existing entity, is valid and sustainable in law. Specifically, the issue arose due to the amalgamation of the original assessee company with another entity, resulting in the cessation of existence of the former. The Tribunal examined the validity of the final assessment order passed in the name of the erstwhile entity after it had ceased to exist, despite the Assessing Officer being informed of the change in the legal status and name of the assessee.

Issue-wise Detailed Analysis

Issue: Validity of Assessment Order Passed in the Name of a Non-Existing Entity

Relevant Legal Framework and Precedents: The assessment order was passed under the provisions of the Income Tax Act, 1961, specifically sections 143(3) and 144C(13). The pivotal precedent relied upon was the Supreme Court's decision in PCIT vs. Maruti Suzuki India Ltd., wherein it was held that an assessment order passed in the name of a company that had ceased to exist due to amalgamation is without jurisdiction and hence unsustainable.

Court's Interpretation and Reasoning: The Tribunal meticulously analyzed the sequence of events and the legal implications of the amalgamation. The draft assessment order and directions of the Dispute Resolution Panel (DRP) were issued in the name of the original entity, SPE Networks India Inc. (SPENI). However, the Bombay High Court had approved a Scheme of Amalgamation whereby SPENI merged into Sony Pictures Networks India Private Limited (SPNI), effectively ceasing SPENI's existence from the scheme's effective date.

The assessee duly informed the Assessing Officer of this change by communication dated 16/01/2017, enclosing a copy of the High Court's order approving the amalgamation and requesting the final assessment order be passed in the name of the successor entity, SPNI. The Assessing Officer, despite this intimation and knowledge of the amalgamation, passed the final assessment order dated 31/01/2017 in the name of the non-existing entity, SPENI.

The Tribunal emphasized that the Assessing Officer's action violated the principle established by the Supreme Court in the Maruti Suzuki case. The Court held that once an entity ceases to exist by virtue of amalgamation, any subsequent assessment order passed in its name is non-est and lacks jurisdiction. The Tribunal found that the Assessing Officer had been duly informed and was aware of the change, yet failed to pass the order in the name of the legal successor, thereby committing a jurisdictional error.

Key Evidence and Findings: The assessee's communication dated 16/01/2017 bearing the stamp of the Deputy Commissioner of Income Tax (DCIT) was pivotal evidence establishing that the Assessing Officer was formally notified of the amalgamation and the consequent change in the assessee's legal identity. The Tribunal noted that the Revenue did not dispute the receipt or timing of this intimation.

Application of Law to Facts: Applying the legal principle from the Supreme Court, the Tribunal concluded that the final assessment order passed in the name of SPENI, which had ceased to exist, was invalid. The Assessing Officer's failure to amend the name in the final order despite adequate notice amounted to passing an order without jurisdiction.

Treatment of Competing Arguments: The Department contended that since the draft assessment order and DRP directions were issued in the name of SPENI, and the intimation regarding the change of name was conveyed only after these steps, the final order in the same name was justified. The Tribunal rejected this argument, emphasizing that the final order was passed after the intimation was received and that the Assessing Officer was duty-bound to pass the order in the name of the existing legal entity. The Tribunal held that the mere fact that earlier proceedings were in the name of SPENI did not validate passing the final order in the name of a non-existent entity once the Assessing Officer was informed of the change.

Conclusions: The Tribunal concluded that the impugned assessment order suffered from a jurisdictional defect as it was passed in the name of a non-existing entity. Consequently, the order was set aside, and the appeal was allowed on this ground. Other grounds raised by the assessee were not considered as they became academic following this determination.

Significant Holdings

"Where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in the name of the said non-existing entity is without jurisdiction, hence, liable to be set-aside."

This principle underscores that the legal identity of the assessee is paramount in tax proceedings, and any assessment order must be passed in the name of the entity that exists at the time of such order. Failure to do so renders the order non-est and void.

The Tribunal's final determination was that the impugned assessment order passed in the name of SPENI, a non-existing entity post-amalgamation, was invalid and set aside accordingly.