2017 (12) TMI 1347 - AT - Income Tax

Revision u/s 263 - assessment against non existent company - Held that - In the case on hand the assessment was completed on the non-existent company which ceased to exist w.e.f. 17.4.2013 upon approval of scheme of amalgamation by the Jurisdictional High Court of Bombay with RCL. Thus, the assessment framed in the case of EMML is null and void and hence revisionary proceedings u/s 263 of the Act by the PCIT and consequent the order passed u/s 263 of the Act is also invalid

Summary

Issues Involved:
1. Jurisdiction of PCIT under Section 263 of the Income Tax Act.
2. Validity of assessment order on a non-existent entity.
3. Examination of service charges and related expenditures.
4. Verification of events in earlier years affecting the assessment.
5. Examination of transactions and interest expenses.

Issue-wise Detailed Analysis:

1. Jurisdiction of PCIT under Section 263 of the Income Tax Act:
The primary issue raised by the assessee was the invocation of Section 263 by the PCIT on the grounds that the assessment order was erroneous and prejudicial to the interest of the revenue. The assessee argued that the PCIT erred in exercising revisionary jurisdiction on a non-existent company, making the revision order illegal and void-ab-initio. The Tribunal referred to the assessee’s own case in the preceding year, where it was held that no revision proceedings under Section 263 could be initiated on an assessment order passed on a non-existent company.

2. Validity of Assessment Order on a Non-Existent Entity:
The facts revealed that the assessment was framed on M/s Emerging Money Mall Ltd. (EMML), which had merged with Reliance Capital Ltd. (RCL) effective from 17-04-2013. Despite this, the assessment order was passed in the name of EMML on 31-03-2015, which was non-existent. The Tribunal noted that the Hon’ble Bombay High Court had approved the amalgamation, and thus, the assessment in the name of EMML was null and void. The Tribunal cited the decision in Spice Infotainment Ltd. vs. CIT, where it was held that an assessment made on a non-existent entity is invalid and cannot be revised under Section 263.

3. Examination of Service Charges and Related Expenditures:
The PCIT held that the AO failed to examine the nature of services rendered by the assessee concerning the receipt of service charges and the nexus between the income offered and the expenditure claimed. The Tribunal, however, did not delve into this issue in detail, as it had already quashed the revision order on jurisdictional grounds.

4. Verification of Events in Earlier Years Affecting the Assessment:
The PCIT contended that the AO did not verify events such as changes in shareholding patterns, investments in shares, and disclosures of related parties by RCL while framing the assessment order. The Tribunal again refrained from addressing this issue in detail due to the quashing of the revision order on jurisdictional grounds.

5. Examination of Transactions and Interest Expenses:
The PCIT pointed out that the AO did not examine the transaction of purchase and sale of shares of Reliance Infrastructure Finance Pvt. Ltd. (RIFPL) and the correct amount of interest expenses related to the purchase of these shares. However, the Tribunal did not need to address this issue further, as the jurisdictional issue had already been resolved in favor of the assessee.

Conclusion:
The Tribunal concluded that the assessment order passed in the name of a non-existent entity (EMML) was null and void. Consequently, the revisionary proceedings under Section 263 of the Act by the PCIT were also invalid. The Tribunal quashed the revision order and allowed the appeal of the assessee on jurisdictional grounds, rendering the examination of other issues unnecessary. The order was pronounced in the open court on 21st December 2017.