2016 (6) TMI 1456 - AT - Income Tax

Assessment passed upon a non-existing person - HELD THAT - As framing of the assessment order upon a non-existing person was a jurisdictional defect and not merely a curable procedural defect, and thus nullity in the eyes of law. See SPICE ENFOTAINMENT LTD. 2011 (8) TMI 544 - DELHI HIGH COURT In view of all these facts as have brought before us and the judgments brought before us and in the absence of any contrary judgment having been brought before us, we find that impugned assessment order is nullity in the eyes of law and the same is herby quashed, and thus additional grounds raised by the assessee are allowed.

Issues Involved:
1. Validity of the assessment order passed on a non-existing entity due to amalgamation.
2. Disallowance of expenses of Rs. 4,77,381.
3. Treatment of Interest Income of Rs. 49,77,989 as a capital receipt.
4. Disallowance of Rs. 2,58,827 out of Legal & Professional Fees.
5. Disallowance of Rs. 1,30,300 out of Salaries.
6. Disallowance of Rs. 88,254 out of Miscellaneous Expenses.

Issue-wise Detailed Analysis:

1. Validity of the assessment order passed on a non-existing entity due to amalgamation:
The primary issue raised by the assessee was the validity of the assessment order passed in the name of M/s. Genesys Worldeye Limited (GWL), which had been amalgamated with M/s. Genesys International Corporation Limited (GICL) and ceased to exist as a legal entity before the assessment order was passed. The Tribunal noted that the assessment order was indeed passed after the amalgamation date, making GWL a non-existent entity at the time of the order. The Tribunal emphasized that an assessment order passed on a non-existent entity is null and void, akin to passing an order on a deceased person. This was supported by precedents from the Hon’ble Delhi High Court in Spice Entertainment Ltd. and CIT vs. Dimension Apparels Pvt. Ltd. The Tribunal concluded that the assessment order was a jurisdictional defect and not a mere procedural error, thus rendering it null and void. Consequently, the additional grounds raised by the assessee were allowed, and the assessment order was quashed.

2. Disallowance of expenses of Rs. 4,77,381:
The assessee contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in dismissing the ground of appeal regarding the disallowance of expenses amounting to Rs. 4,77,381. However, since the Tribunal quashed the assessment order on jurisdictional grounds, this issue was rendered infructuous and was not adjudicated on merits.

3. Treatment of Interest Income of Rs. 49,77,989 as a capital receipt:
The assessee argued that the CIT(A) should have directed the Assessing Officer (AO) to treat the Interest Income of Rs. 49,77,989 as a capital receipt, which should be adjusted against the expenditure capitalized during the setting up of the new unit. This interest was earned before the commencement of business. However, due to the quashing of the assessment order, this ground was also treated as infructuous and was not examined on merits.

4. Disallowance of Rs. 2,58,827 out of Legal & Professional Fees:
The CIT(A) upheld the AO's disallowance of Rs. 2,58,827 out of Legal & Professional Fees. The assessee challenged this disallowance, but given the Tribunal's decision to quash the assessment order, this issue was not addressed on its merits and was treated as infructuous.

5. Disallowance of Rs. 1,30,300 out of Salaries:
The assessee contested the disallowance of Rs. 1,30,300 out of Salaries upheld by the CIT(A). However, with the quashing of the assessment order, this ground was not examined on merits and was deemed infructuous.

6. Disallowance of Rs. 88,254 out of Miscellaneous Expenses:
The CIT(A) upheld the AO's disallowance of Rs. 88,254 out of Miscellaneous Expenses. The assessee's appeal on this issue was rendered infructuous due to the Tribunal's decision to quash the assessment order on jurisdictional grounds.

Conclusion:
The Tribunal quashed the assessment order on the ground that it was passed on a non-existent entity due to the amalgamation of GWL with GICL, rendering the order null and void. Consequently, all other grounds raised by the assessee were treated as infructuous and not adjudicated on merits. The appeal filed by the assessee was partly allowed.

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