TMI Blog2019 (6) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... see, therefore, there was no justifiable reason for disallowing the aforesaid commission expenditure. Accordingly, we vacate the disallowance of commission expenditure made by the A.O. The Ground of appeal No. 2 is allowed. - ITA No. 8793/Mum/2011 - - - Dated:- 19-6-2019 - Shri Ravish Sood, Judicial Member And Shri N.K.Pradhan, Accountant Member For the Appellant : Shri J.D. Mistry Ms. Ja smine Amalsadwala, A.Rs For the Respondent : Shri Awungshi Gimson, D.R. ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the Assessing Officer (for short A.O‟) under Sec. 153A/143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (for short I-T Act‟), dated 31.10.2011. The assessee being aggrieved with the order passed by the A.O has raised before us the following grounds of appeal: This Appeal is against the Order u/s.143(3)/153A r.w.s.144C(13) of the Act dated October 31, 2011, of the Deputy Commissioner of Income Tax, Central Range 7, OSD II, Mumbai, in pursuance of the directions of the Hon‟ble Dispute Resolution Panel II, Mumbai (DRP) and relates to the Assessment Year 2005-2006. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised. Apart there from, the assessee has also assailed the validity of the assessment order passed by the A.O under Sec. 153A/143(3) r.w.s. 144C(13) by raising the following additional ground of appeal‟: The Assessing Officer and the learned Dispute Resolution Panel erred in passing the assessment order under Sec. 143(3) and the Directions under Sec. 144C(5) of the Act respectively on a non-existent entity. The action of the Assessing Officer and the learned Dispute Resolution Panel is therefore bad in law and requires to be quashed. 2. We shall first advert to the admissibility of the additional ground of appeal‟ raised by the assessee before us. As is discernible from the aforesaid ground raised by the assessee before us, we find that the validity of the assessment framed by the A.O and, the directions issued by the Dispute Resolution Panel-1, Mumbai (for short DRP‟) has been assailed before us, on the ground, that as the same has been passed on a non-existent entity, therefore, the same are bad in law and requires to be quashed. The ld. Departmental representative (for short D.R‟) objected to the application filed by the assessee for admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Ltd., i.e the transferor. 5. The assessee in response to the notice issued under Sec. 153A filed its return of income on 14.10.2008, declaring its total income at ₹ 12,36,75,606/- as per the normal provisions of the I.T Act. The A.O while framing the assessment made a reference to the Transfer Pricing Officer (for short TPO‟) under Sec. 92CA(1) of the I-T Act. The TPO vide his order passed under Sec. 92CA(3), dated 26.10.2010 proposed certain adjustments viz. (i) adjustment towards Arms Length Price‟ (for short ALP‟) of the corporate guarantee given by the assessee for the benefit of its Associate Enterprise (for short AE‟) viz. Tech Pacific (India) Exports Pte. Ltd. (for short TPIEPL‟): ₹ 44,02,635/-; and (ii) adjustment towards mark-up @ 1% as regards value addition in respect of reimbursement of expenses: ₹ 79,613/-. Accordingly, the TPO proposed an upward adjustment of ₹ 44,82,248/-. 6. The A.O after receiving the order passed by the TPO under Sec. 92CA(3), dated 26.10.2010 passed a draft assessment order under Sec. 153A/143(3) r.w.s. 144C(1), dated 30.12.2010. The A.O while passing the aforesaid order inter al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O; and (v) that, the details along with the PAN numbers of the dealers to whom commission in excess of ₹ 1 lac was paid were furnished by the assessee in the course of the DRP proceedings. Accordingly, in the totality of the facts and circumstances of the case, it was observed by the DRP, that there was no scope to make any adhoc disallowance of the commission expenditure, as was so done by the A.O. However, at the same time, the DRP directed the assessee to furnish with the A.O within a weeks time from the date of its order the confirmations from all the parties to whom commission of ₹ 1 lac and above was paid during the year. Accordingly, the DRP on the basis of his aforesaid observations directed the A.O to disallow the commission expenditure of ₹ 1 lac and above, in respect of which no confirmation was furnished by the assessee. 8. The A.O after receiving the order passed by the DRP under Sec. 144C(5), dated 23.09.2011 passed the assessment order under Sec.153A/143(3) r.w.s 144C(13), dated 31.10.2011. On the basis of the directions of the DRP, the A.O inter alia carried out certain disallowances viz. (i) disallowance of 5% of staff welfare expenses : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23;); (ii) the order of the Hon‟ble High Court of Bombay, dated 10.03.2006 (Page 1 of APB‟); (iii) receipt of Ministry of Corporate Affaires‟, dated 22.10.2008; and (iv) fresh certificate of incorporation that was issued consequent to change of the name of the assessee to M/s Tech Pacific (India) Ltd., dated 13.05.2009. It was further submitted by the ld. A.R, that the DCIT (OSD-II), Central Range-7, Mumbai was the A.O of the amalgamated company viz. M/s Tech Pacific (India) Ltd.. On the basis of the aforesaid facts, it was submitted by the ld. A.R, that both the assessment order passed by the A.O and the order passed by the DRP under Sec.144C(5), dated 23.09.2011 were passed in the name of a wrong entity viz. M/s Ingram Micro India Pvt. Ltd. It was submitted by the ld. A.R, that the assessee in its objections filed with the DRP had specifically brought it to its notice, that based on the scheme of amalgamation sanctioned by the Hon‟ble High Courts of Bombay and Karnataka, the assessee company had amalgamated into Tech Pacific (India) Pvt. Ltd. w.e.f 01.01.2005. The ld. A.R submitted, that despite having been put to notice, the DRP had passed the order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained and was liable to be struck down. The ld. A.R further placed his contentions as regards the merits of the case. The ld. A.R took us through a reply dated 27.10.2010 that was filed by the assessee with the A.O, wherein the complete details of the parties to whom commission expenses in excess of the amount of ₹ 1 lac was paid during the year were furnished [(Page 123) of the assesses Paper book‟ (for short APB‟)]. It was submitted by the ld. A.R, that the assessee had furnished the complete names along with the respective addresses of the aforementioned parties, pursuant whereto in case of any doubts, it was open for the A.O to have made necessary verifications. Apart there from, it was claimed by the ld. A.R, that the fact that tax at source was deducted from the aforesaid commission expenses further substantiated the veracity of the said expense. It was submitted by the ld. A.R, that the PAN numbers of the aforesaid parties were also furnished by the assessee with the DRP during the course of the proceedings before him. On the basis of the aforesaid facts, it was claimed by the ld. A.R that now when the complete details of the parties to whom commission w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. On merits, the ld. D.R relied on the orders of the lower authorities. It was submitted by him, that as the assessee had failed to substantiate the veracity of the commission expenses and also the staff welfare expenses, therefore, the lower authorities had rightly carried out the disallowance of the said expenses. 11. The ld. A.R rebutting the contentions advanced by the counsel for the revenue submitted, that it was an admitted fact that the A.O/DRP were well aware of the amalgamation process. It was also submitted by him, that the fact that the scheme of amalgamation was sanctioned by the Hon‟ble High Court‟s of Bombay and Karnataka, based on which the assessee company was amalgamated into Tech Pacific (India) ltd. w.e.f 01.01.2005, was duly brought to the notice of the A.O/DRP by the assessee. As regards the contention advanced by the ld. D.R, that the final assessment order under Sec. 153A/143(3) r.w.s 144C(13), dated 31.10.2011 was correctly passed by the A.O in the hands of the right entity viz. M/s Ingram Micro India Ltd. , it was submitted by the ld. A.R that the said contention was factually incorrect. It was submitted by the ld. A.R that the PA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Pvt. Ltd. had pursuant to the scheme of amalgamation sanctioned by the Hon‟ble High Courts of Bombay and Karnataka, amalgamated into Tech Pacific (India) Ltd. w.e.f 01.01.2005. 13. We shall in the backdrop of the aforesaid facts, now proceed with to adjudicate the validity of the assessment framed by the A.O, vide his order passed under Sec.153A/143(3) r.w.s. 144C(13), dated 31.10.2011 in the name of the amalgamating assessee company viz. Ingram Micro India Pvt. ltd., which admittedly was non-existent on the date of passing of the aforesaid order. Before proceeding further, we may herein observe, that as per the facts discernible from the records and, culled out by us hereinabove, there can be no escape from the fact that the A.O much prior to the framing of the assessment was put to notice by the assessee, that based on the scheme of amalgamation sanctioned by the Hon‟ble High Courts of Bombay and Karnataka, the assessee company viz. Ingram Micro India Pvt. Ltd. was amalgamated into Tech Pacific (India) Ltd. w.e.f 01.01.2005. Interestingly, we find that despite the fact that the TPO on a reference made by the A.O under Sec. 92CA(1), had passed his order under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Tribunal in para- 14 of its order extracted above. Having regard this consequence provided in law, in number of cases, the Supreme Court held that assessment upon a dissolved company is impermissible as there is no provision in Income-Tax to make an assessment thereupon. In the case of Saraswati Industrial Syndicate Ltd. Vs. CIT, 186 ITR 278 the legal position is explained in the following terms: The question is whether on the amalgamation of the Indian Sugar Company with the appellant Company, the Indian Sugar Company continued to have its entity and was alive for the purposes of Section 41(l) of the Act. The amalgamation of the two companies was effected under the order of the High Court in proceedings under Section 391 read with Section 394 of the Companies Act. The Saraswat i Indust r ial Syndicate, the t rans free Company was a subsidiary of the Indian Sugar Company, namely, the transferor Company. Under the scheme of amalgamation the Indian Sugar Company stood dissolved on 29th October, 1962 and it ceased to be in existence thereafter. Though the scheme provided that the transferee Company the Saraswat i Indust r ial Syndicate Ltd. undertook to meet any l iabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and was not curable under Sec.292B. Adopting a similar view, the Hon ble High Court of Karnataka in the case of CIT, Central Circle, Banglore Vs. Intel Technology India (P) Ltd. (2016) 380 ITR 272 (Kar), had observed, that assessment in the name of a company which had amalgamated with another company would be null and void. Further, it was observed by the Hon‟ble High Court that framing of an assessment in the name of a non-existent entity was not a procedural irregularity which could be cured under Sec.292B. Also, the Hon ble High Court of Gujarat in Takshashila Realities (P) Ltd. Vs. DCIT, Circle-4(1) (2017) 77 taxman.com 160 (Guj), had observed, that once the scheme of amalgamation was sanctioned, the amalgamating company would not be in existence and therefore, re-assessment notice could not be issued against original amalgamating company for any prior year. Apart there from, the Hon‟ble High Court in its earlier judgment in the case of Khurana Engineering Ltd. Vs. DCIT (OSD)-1 (2014) 364 ITR 600 (Guj), had concluded, that assessment proceedings could not be resorted to in the case of an amalgamated company after the date of amalgamation. We also find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee company had amalgamated into Tech Pacific (India) Ltd. w.e.f 01.01.2005, which thereafter had w.e.f 13.05.2009 changed its name to Ingram Micro India Limited . Accordingly, in terms of our aforesaid observations and, the settled position of law, we are unable to persuade ourselves to uphold the assessment framed by the A.O in the hands of the assessee, i.e an entity which was non-existent as on the date of framing of such assessment and, thus quash the assessment framed by the A.O. The Additional ground of appeal raised by the assessee is allowed. 17. We though have quashed the assessment framed by the A.O, however, for the sake of completeness, we shall now advert to the contentions advanced by the assessee as regards the merits of the case. Briefly stated, the A.O in his draft assessment order passed under Sec.153A/143(3) r.w.s 144C(1), dated 30.12.2010, had inter alia proposed certain disallowances of expenses viz. (i) adhoc disallowance of ₹ 9,59,074/-i.e @10% of the aggregate of the staff welfare expenses ; and (ii) disallowance of the entire commission expenditure of ₹ 2,25,96,858/-. The DRP while disposing off the objections filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son, that the full details of the said expenses were not furnished by the assessee. Accordingly, it was observed by the A.O, that in the absence of supporting documentary evidence the veracity of the claim of such expenses was not open for verification. It is the claim of the ld. A.R, that the A.O while proposing the aforesaid disallowance had neither called upon the assessee to furnish any further details in support of the aforesaid claim of expenditure, nor afforded a sufficient opportunity of being heard to the assessee on the said aspect. In fact, it is submitted by the ld. A.R, that the aforesaid disallowance was proposed absolutely at the back of the assessee. The ld. D.R could not rebut the aforesaid contention so advanced by the counsel for the assessee. 19. We have perused the order passed by the A.O, and find, that he had proposed the aforesaid disallowance of staff welfare expenses, for the reason, that the assessee had failed to place on record supporting documentary evidence to substantiate the veracity of his aforesaid claim of expenditure. However, we find that there is no whisper in the order of the A.O that the assessee in the course of the assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid claim of expenditure raised by the assessee for multiple reasons viz. (i) that, the assessee had failed to furnish the confirmations from the concerned parties; (ii) that, the PAN Numbers of the parties were not furnished by the assessee; (iii) that, the assessee had failed to satisfy the nature of services rendered by the parties to the assessee ; (iv) that, no details regarding quantum of business procured by the said parties was furnished by the assessee; and (v) that, no details as to whether there was any written agreement between the assessee and the aforesaid parties on the basis of which commission was paid to them was provided by the assessee. Accordingly, the A.O not being satisfied with the aforesaid claim of commission expenditure raised by the assessee proposed to disallow the same in his draft assessment order passed under Sec. 153A/143(3) r.w.s 144C(1), dated 30.12.2010. On objections filed by the assessee, the DRP observed that there was no scope to make an adhoc disallowance of the commission expenditure, as was so done by the A.O. However, at the same time, the DRP directed the assessee to furnish with the A.O the confirmations from all the parties to whom com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the DRP was convinced that as the commission expenditure was wholly and exclusively incurred by the assessee for the purpose of its business, therefore, the same was not liable to be disallowed. However, the DRP after so concluding, had directed the assessee to file with the A.O the confirmations from the parties to whom commission of ₹ 1 lac and above was paid during the year, failing which the same was to be be disallowed by the A.O. We may herein observe, that the aforesaid observations of the DRP regarding the genuineness and allowability of the commission expenditure and, conclusion therein arrived at by him are not found to be befitting. In our considered view, the satisfaction recorded by the DRP that the commission expenditure was incurred by the assessee wholly and exclusively for the purpose of its business, was sufficient for allowing the assesses claim of the said expenditure. Be that as it may, we shall advert to the sustainability of the aforesaid disallowance made by the A.O/DRP on merits. As is discernible from the order of the DRP, the assessee in order to dispel any doubt as regards the authenticity of its claim of expenditure as regards commission exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urth Dimension Technologies P. Ltd. New #9, Old# 5 Srirangam Avenue, 53, Pantheon Road, Egmore, Chennai, 600 008. 131,876 6,803 Frontier Business Systems Pvt. ltd. 18/10, Cunnigham Road, Banglore-560 052 1,185,539 60,897 Global Systems SCO-3021-22, Sector 22-D, Chandigarh, 160024 129,587 7,127 Infonet Solutions 8E, Dhandapani Street, 2 Floor, T. Nagar, Chennai- 600 017 168,432 8,715 Interface Connectronics Pvt. ltd. 54/1, Sarder Patrappa Road, Bangalore 560 002 329,798 17,242 Lalani Computer Systems 59, Janmaboomi Marg, 2 Floor, Fort, Mumbai-400 001 110, 773 6,093 Mega Trends Ltd. 102, Mahalingapuram Main Road, Chennai- 600034 162,648 8,458 Micro World ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,718 Wysetek Systems Technologists P. Ltd. 6-7, Udyog Mandir, Off Pitambar, Lane Mahim, Mumbai- 400 016 142, 334 7,295 As can be gathered from the aforesaid information that was furnished by the assessee, we find, that the complete details of the parties to whom commission of ₹ 1 lac and above was paid during the year, along with their respective addresses, amount of commission paid and, the TDS on the said respective payments was furnished by the assessee with the A.O. At this stage, we may herein observe, that the payments made by the assessee to the abovementioned parties for the period ended 31.12.2004, pertained to a period of about 7 years ago in context of the date of passing of the assessment order by the A.O under Sec. 153A/143(3) r.w.s. 144C(13), dated 31.10.2011. Accordingly, we find force in the contention advanced by the ld. A.R, that keeping in view the aforesaid substantial time gap of 7 years, it was practically not possible on its part to have obtained the confirmations of the said parties. In our considered view, now when the assessee had furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forementioned case, one of the ground which had weighed in the minds of the A.O while disallowing the assesses claim of commission expenditure, was that the summons issued under Sec.131 to the agents after expiry of a period of 4 years from the date when the transactions were entered by the assessee with them, were returned back by the postal authorities with the remarks not known‟. On the basis of the aforesaid facts, it was observed by the revenue authorities that the assessee had failed to discharge the onus as regards establishing the identity of the agents to whom the commission was paid. On appeal, it was observed by the Hon‟ble High Court, that in the backdrop of the evidence placed on record by the assessee, it would be unreasonable to hold that the assessee had failed to establish the identity of the commission agents, for the reason, that the said persons were not found available at their respective addresses after an expiry of a period of 4 years from the date of the transactions under consideration. Now, in the case before us, it is an admitted factual position, as is discernible from the order of the DRP and, had not been assailed by the revenue before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O is directed to make necessary verifications and, in case the aforesaid claim of the assessee is found to be in order, then a consequential effect to the same shall be given. The Ground of appeal No. 4 is allowed for statistical purposes. 23. Insofar the Ground of appeal No. 5 to 7 are concerned, the assessee has assailed the charging of interest under Sec. 234A(3), 234B and 234C of the I.T Act. As we have already quashed the assessment framed by the A.O under Sec. 153A/143(3) r.w.s 144C(13), dated 31.10.2011, therefore, the said grounds of appeal having been rendered as infructuous, are therefore dismissed. 24. The appeal filed by the assessee is disposed off in terms of our aforesaid observations. Before parting, we may herein observe, that though we have quashed the assessment framed by the A.O under Sec. 153A/143(3) r.w.s 144C(13), dated 31.10.2011 on the ground of lack for jurisdiction itself, however, our observations recorded in context of the merits involved in the present appeal are only for the sake of completeness and, in order to avoid multiplicity of litigation at any stage. 25. The appeal of the assessee is allowed in terms of our aforesaid observations. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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