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2015 (11) TMI 1300 - ITAT DELHI

2015 (11) TMI 1300 - ITAT DELHI - TMI - Assessment order u/s 144C on amalgamating company - assessment against non-existent entity/person - Held that:- In the light of the ratio of the judgment of Hon'ble High Court in the case of Spice (2011 (8) TMI 544 - DELHI HIGH COURT ), when we analyze the facts and circumstances of the present case, we clearly observe that undisputedly and admittedly, the return was filed by amalgamating company on 26.9.2009. The Assessing Officer issued notices u/s 143(2 .....

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amating company. The Assessing Officer passed draft assessment order u/s 144C of the Act on amalgamating company. Finally, the Assessing Officer passed final assessment order u/s 143(3) r/w section 144C of the Act on amalgamating company in pursuance to the directions of the ld. DRP dated 19.2.2013 u/s 144C(5) of the Act.

Thus framing of assessment against non-existent entity/person goes to the root of the validity of the assessment which is not a procedural irregularity curable u/s 2 .....

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eraj Jain, Adv. Sahil Mehta, Mrs. Nitya Gupta, CA For the Respondent : Ms Y. Kakkr, Sr. DR ORDER Per C. M. Garg, Judicial Member These appeals by the assessee and the revenue have been preferred against the assessment orders passed u/s 143(3) r/w section 144C of the Act in pursuance to the directions of the Dispute Resolution Panel-III, New Delhi (The DRP) u/s 144C(5) of the Income Tax Act, 1961 (for short the Act) dated 19.12.2013 and 11.10.2014 for assessment year 2009-10 and 2010-11 respectiv .....

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t entity which was merged with Sapient Consulting Pvt. Ltd. w.e.f. April 1, 2011 3. We have heard the rival submissions and carefully perused the relevant material placed on record before us. The ld. Senior counsel of the assessee submitted that the assessment order dated 20.1.2014 u/s 143(3) r/w section 144C of the Act was passed in the name of Sapient Corporation Pvt. Ltd. (the amalgamating company) which was non-existent entity on the date of passing impugned said final assessment order since .....

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00 and order of ITAT Delhi D Bench in I.T.A. No. 6452/Del/2013 for assessment year 2006-07 (which was delivered by one of us viz. C.M. Garg, JM) wherein the order of Hon'ble Delhi High Court in the case of Spice Infotainment (supra) was followed while granting relief to the assessee. Elaborating aforesaid facts of the case, the ld. Senior counsel of the assessee placed request of the assessee for admission of additional grounds as reproduced hereinabove in both assessment years i.e. assessme .....

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les, 1963 the additional ground may kindly be admitted for consideration and adjudication on merits. 4. Ld. Ld. DR, replying to the above, contended that when the assessee participated assessment proceedings despite merger, then no legal objection or contention can be raised in this regard in the subsequent appellate proceedings. Ld. DR strongly objected to the admission of additional grounds. 5. Ld. Senior counsel also placed rejoinder and contended that on receipt of the DRP/Assessing Officer .....

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her investigation of fact and which pertains to a legal issue and facts pertaining to this legal and factual issue are already on record which goes to the root of the matter. Merely because the assessee did not raise this legal objection before authorities below does not take away the legal right of the assessee to raise the same before higher appellate forum. Hence, in view of dicta laid down by Hon'ble Apex Court in the case of NTPC vs CIT (supra), the additional ground being mixed issue o .....

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1), C.R. Building, New Delhi. On 13.11.2013, a new company in the name of Sapient Consulting Pvt. Ltd. (hereinafter referred to as amalgamated company ) was incorporated and the amalgamating company merged with new amalgamated company under scheme of amalgamation u/s 391 and 394 of the Companies Act 1956 in pursuance to order of Hon'ble Delhi High Court dated 12.10.2011 and 6.1.2012 w.e.f. the appointed date i.e. 1.4.2011. Ld. Senior counsel further pointed out that in pursuance to aforesaid .....

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Officer issued notice u/s 143(2) of the Act on 18.8.2010 against the amalgamating company but after amalgamation w.e.f. 1.4.2011, the Assessing Officer on 12.10.2012 issued notices against the assessee u/s 143(3) and 142(1) against the amalgamating company and subsequently on 5.12.2012 & 13.2.2013, additional questionnaires were also issued to the amalgamating company. The ld. Senior counsel vehemently contended that the Assessing Officer passed draft assessment order u/s 144C of the Act on .....

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tent entity since it was merged with amalgamated company in pursuance to order of Hon'ble Delhi High Court dated 12.10.2011 and 6.1.2012 and thus said order being void ab initio is liable to be quashed in view of proposition laid down by Hon'ble Jurisdictional Delhi High Court in the case of CIT vs Spice Infotainment Pvt. Ltd. (supra). 9. Replying to the afore noted submissions and contentions of the assessee, the ld. Ld. DR contended that the orders/judgements as relied by the assessee .....

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n by Hon'ble Supreme Court in the case of Bhagwandass Chopra vs Untied Bank of India 1988 AIR 215 (S.C.), has held that these proceedings will continue to operate against and also binding on the transferee company or corporation in the same way in which they operate against a person on whom any interest has devolved in any of the ways mentioned in Rule 10 of order 22 of Civil Procedure Code 1908. Learned Departmental Representative also placed reliance on following orders/judgements:- i) Gud .....

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h Court have not been considered. Learned Departmental Representative submitted that if for the sake of argument, it is found that the assessment has been framed against non-existing entity, then the same is rectifiable u/s 292B of the Act and no prejudice has been caused to the assessee who participated in the entire assessment proceedings and explained his stand before the Assessing Officer. Ld. DR also submitted that the case laws relied by the ld. Senior counsel of the assessee in the case o .....

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of ignorance of the fact of amalgamation and for this reason, the assessment could not be held to be invalid and the right course was to set aside the assessment and restore the matter to the file of the Assessing Officer with a direction to re-frame the assessment in the correct name of the assessee. 11. Learned counsel of the assessee placing rejoinder to the above contention of the revenue has drawn our attention towards section 2(31) r/w section 4 of the Act and submitted that as per section .....

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es which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of merger as the amalgamated company formed as a result of merger as the amalgamated company and from the date of merger the legal existence of amalgamating company as a legal entity or person ceased to exist and order of assessment passed against such non-existing entity or legal person cannot be held as valid and the same should be annulled. 12. Ld. .....

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Consulting Pvt. Ltd., the amalgamated company in pursuance to the order of Hon'ble Delhi High Court dated 12.10.11 censuring merger of the assessee as per scheme of amalgamation u/s 391 to 394 of the Companies Act, 1956 dated 6.1.12 w.e.f. the appointed date viz. 1.4.11 which is also apparent from the scheme of amalgamation available at pages 79-80 of the assessee s paper book. Ld. Senior counsel further pointed out that the assessee is not challenging the validity of notice u/s 143(2) of th .....

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which is dissolved. Ld. Senior counsel lastly placed his reliance on the decision of Spice Infotainment vs CIT and submitted that their lordships have explicitly held that the irresistible conclusion would be that provisions of section 292B of the Act are not applicable in such a case where the assessment has been framed in the name of amalgamating company and the framing of assessment against a non-existing person or entity goes to the root of the matter which is not a procedural irregularity .....

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Consulting Ltd. an amalgamated company and on 18.11.11, the assessee filed form 21 along with copy of the Hon'ble Delhi High Court order (supra) sanctioning the scheme of amalgamation with ROC and on 6.1.12 as per scheme of amalgamation and under Companies Act, the assessee amalgamating company merged with Sapient Consulting Ltd. in pursuance to the order of Hon'ble Delhi High Court w.e.f. 1.4.11 i.e. appointed date. It is also important to note that on 27.1.2012, the assessee filed a l .....

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ssessment order u/s 143(3) r/w section 144C of the Act on amalgamating company on 20.1.2014 in pursuance to the directions of the DRP dated 19.2.13 u/s 144C(5) of the Act. 15. In the light of above noted dates of events having taken place in the present case, we proceed to decide the legal objection of the assessee against validity of impugned assessment orders. At the very outset, we are required to consider the ratio of the decision of Hon ble High Court of Delhi in the case of Spice Entertain .....

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as there cannot be any assessment against a 'dead person'. 17. The order of the Tribunal is, therefore, clearly unsustainable. We, thus, decide the questions of law In favour of the assessee and against the Revenue and allow these appeals. 18. We may, however, point out that the returns were filed by M/s Spice on the day when it was in existence it would be permissible to carry out the assessment on the basis of those returns after taking the proceedings afresh from the stage of issuanc .....

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name of non-existent amalgamated company. Their lordships further held that the framing of assessment against non-existent entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person. In the case of Spice Infotainment Ltd. (supra), their lordships also pointed out that the returns were filed by M/s Spice on the day when it was in existence. It would be permissible to carry out the assessm .....

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observe that undisputedly and admittedly, the return was filed by amalgamating company on 26.9.2009. The Assessing Officer issued notices u/s 143(2) of the Act in the name of amalgamating company on 18.8.2010. Subsequently, letter dated 27.1.2012 was filed before the Assessing Officer, during the course of assessment proceedings, informing the order of the Hon'ble High Court dated 12.10.2011. However, the Assessing Officer issued notices u/s 143(2) and 142(1) of the Act along with questionna .....

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noted facts, we clearly observe that the facts of the present case are quite similar to the facts of the case of Spice (supra), wherein their lordships have held that framing of assessment against non-existent entity/person goes to the root of the validity of the assessment which is not a procedural irregularity curable u/s 292B of the Act or under any other provision of the Act but it is a jurisdictional defect because there cannot be framing of any assessment order against a dead person or en .....

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