2025 (5) TMI 678 - AT - Income Tax

Assessment made in the name of a non-existent entity - liability of non-existent entity following a scheme of amalgamation - whether assessment order passed by AO in the name of non-existing entity is to be held as null and void or not? HELD THAT - It is not in dispute that assessee had duly intimated the fact of amalgamation of erstwhile SPNI with Sony Pictures Network India Pvt. Ltd. later on name changed to Culver Max Entertainment Private Limited. Even the judgment of the Hon ble Bombay High Court sanctioning the scheme of amalgamation with an appointed date of 01/04/2015 was also filed alongwith letter dated 02/01/2017 requesting the ld.AO to drop the assessment proceedings initiated in the name of non- existing entity and issue a fresh notice in the name of amalgamated entity. Once this fact was brought on record ld. AO was bound to pass the order in the name of amalgamated entity which he has failed to do so. Under these facts the assessment order passed in the case of non-existing entity cannot be sustained. Appeal of the Revenue is dismissed.

The core legal questions considered by the Tribunal in the appeals pertain primarily to the validity and jurisdictional competence of the assessment orders passed by the Assessing Officer (AO) in the name of a non-existent entity following a scheme of amalgamation. The issues raised by the Revenue and considered by the Tribunal include:

1. Whether an assessment order passed in the name of a non-existent entity is without jurisdiction and hence void ab initio.

2. Whether the assessee has a business connection in India under section 9(1) of the Income Tax Act, 1961, considering the business operations carried out through Multi Screen Media P. Ltd.

3. Whether the assessee has a Permanent Establishment (PE) within the meaning of Article 5(4) of the India-USA Double Taxation Avoidance Agreement (DTAA), through Multi Screen Media P. Ltd.

4. Whether Multi Screen Media P. Ltd. is an independent agent of the assessee under section 9(1)(i) read with Article 5(5) of the Indo-USA DTAA.

5. Whether transactions between the assessee and Multi Screen Media P. Ltd. can be considered at arm's length in the absence of Transfer Pricing Officer (TPO) adjustments, particularly in relation to functions undertaken by the dependent agent PE.

6. Whether Multi Screen Media P. Ltd. was working wholly or almost wholly for the assessee or its group in India, thereby constituting a dependent agent PE under Article 5(4) of the treaty.

However, the Tribunal noted that the only issue actively argued by both parties was the first issue regarding the validity of the assessment order passed in the name of a non-existent entity. The other issues raised by the Revenue were not pursued in detail.

Issue-wise Detailed Analysis:

1. Validity of Assessment Order Passed in the Name of a Non-Existent Entity

Relevant Legal Framework and Precedents: The Tribunal relied heavily on the Supreme Court judgment in Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Ltd., which held that an assessment order passed against a non-existent entity is without jurisdiction and void ab initio. Additionally, judgments from the Delhi High Court in cases such as Intel Technology India (P) Ltd. and Sony Mobile Communications India (P) Ltd. were cited, supporting the principle that assessments against non-existent entities cannot be sustained. The Tribunal also referred to its own earlier decisions for assessment years 2012-13 and 2013-14, which were affirmed by the Bombay High Court, reinforcing this legal position.

Court's Interpretation and Reasoning: The Tribunal examined the factual matrix wherein the scheme of amalgamation sanctioned by the Bombay High Court merged SPE Networks India Inc. (SPENI) into Sony Pictures Networks India Pvt. Ltd. (SPNI) with effect from 1 April 2015. The assessee had duly informed the AO and TPO about the amalgamation through letters dated 2 January 2017 and 27 January 2017, requesting the assessment proceedings to be conducted in the name of the amalgamated entity. Despite this, the AO passed the final assessment order dated 12 February 2018 in the name of the non-existent entity SPENI.

The Tribunal held that since SPENI ceased to exist on the date of the assessment order, the AO lacked jurisdiction to pass the order in its name. This constituted a jurisdictional defect, which cannot be cured even by procedural provisions such as section 292B of the Income Tax Act. The Tribunal emphasized that the AO was bound to pass the assessment order in the name of the amalgamated entity, SPNI, which was the legal successor.

Key Evidence and Findings: The Tribunal reviewed the chronology of notices and communications, highlighting that all notices and the final assessment order were issued in the name of SPENI after the amalgamation order had taken effect. The assessee's timely intimation to the AO and TPO was uncontested. The Tribunal also noted the absence of any challenge by the Revenue to the factual position of amalgamation and intimation.

Application of Law to Facts: Applying the legal principle from Maruti Suzuki and related precedents, the Tribunal concluded that the assessment order passed in the name of a non-existent entity was void ab initio. The factual scenario squarely fell within the ambit of these precedents, mandating quashing of the assessment order.

Treatment of Competing Arguments: The Revenue relied on the Supreme Court judgment in PCIT vs. Mahagun Realtors Pvt. Ltd., which was distinguished on facts. In Mahagun Realtors, no intimation of amalgamation was given to the AO and the assessee had suppressed the amalgamation facts. In contrast, the assessee in the present case had proactively informed the AO. The Tribunal also referred to a recent decision in Uber India Systems Pvt. Ltd., which followed the Maruti Suzuki principle in similar circumstances. Thus, the Tribunal rejected the Revenue's contention.

Conclusions: The Tribunal upheld the CIT(A)'s order quashing the assessment order for AY 2014-15 and 2015-16 as null and void due to jurisdictional defect arising from issuance in the name of a non-existent entity. The Revenue's appeal was dismissed accordingly.

2. Issues Regarding Business Connection, Permanent Establishment, and Transfer Pricing Adjustments

Though raised by the Revenue, these issues were not actively argued before the Tribunal. The Tribunal noted that the cross objections filed by the assessee would become infructuous if the assessment order was quashed. Therefore, no detailed analysis or adjudication was made on these points in the present judgment.

Significant Holdings:

The Tribunal's crucial legal reasoning is encapsulated in the following verbatim excerpt from the CIT(A)'s order, which the Tribunal upheld:

"Assessment made in the name of a non-existing entity is without jurisdiction, hence null and void ab initio. Such type of order suffers from 'jurisdictional defect' and not from 'procedural defect', hence same can't be cured even by section 292B, even if, the assessee has participated in the assessment proceedings."

The Tribunal reaffirmed the principle that an assessment order passed against a non-existent entity post-amalgamation, despite intimation to the tax authorities, is invalid and must be quashed. This principle was consistently supported by Supreme Court and High Court precedents, as well as the Tribunal's own prior rulings.

Accordingly, the Tribunal dismissed the Revenue's appeal and the assessee's cross objections, effectively setting aside the assessments for AY 2014-15 and 2015-16.

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