2019 (4) TMI 671 - AT - Income Tax

Passing of order of assessment in non existing company - UTV Tele Talkies Limited was merged with its ultimate holding company namely UTV Software Communications Ltd. w.e.f. 01.04.2013 - AO has admitted in his remand report that he had knowledge of the fact the assessee company got merged with its ultimate holding company - Additional Ground of appeal - HELD THAT - Communications filed by the assessee along with evidences are speaking loudly that the assessee discharged its burden while failure to bring on record successor in interest during assessment proceedings was on the part of the Revenue. The AO in its assessment order vide para 4.2 and 4.3.1 has admitted to having knowledge offactum of merger of UTV Tele Talkies Limited with its ultimate holding company UTV Software Communications Limited , which is reiterated by the AO in his remand report filed on the direction of learned CIT(A) during appellate proceedings. The AO has not conducted any prima facie enquiry as is contemplated u/s 170 of the 1961 Act read with Order 22 Rule 10 of CPC to bring on record successor in interest, despite several intimations given by the assessee to the AO as to the amalgamation of UTV Tele Talkies Limited with its ultimate holding company UTV Software Communications Limited during assessment proceedings. The non conducting of prima-facie enquiry by the AO to bring on record successor in interest as is contemplated u/s 170 read with Order 22 Rule 10 of CPC and framing of an assessment on a non existent entity is fatal keeping in view factual matrix of the case as discussed by us in preceding para s of this order. In the instant case based on factual matrix before us, we are afraid that an assessment order passed by the AO dated 01.02.2016 u/s 143(3) of the 1961 Act is suffering from a legal infirmity as an assessment is framed by the AO against a non existent entity despite being informed vide several communications and a complete failure by the AO to bring on record successor in interest, thus in our considered view assessment order dated 01.02.2016 passed by the AO u/s 143(3) is not sustainable in the eyes of the law liable to be quashed as even provisions of Section 292B of the 1961 Act cannot save it from being quashed as this is a jurisdictional legal infirmity which goes to the root of the matter - assessment order quashed

Issues Involved:
1. Validity of the assessment order passed on a non-existent entity.
2. Disallowance of ?23,41,000/- for the cost of production of an abandoned TV serial.
3. Addition of ?95,511/- pertaining to Cenvat credit of service tax.
4. Disallowance of ?15,02,716/- on an assumption of personal expenses.
5. Addition of ?45,15,489/- as unreconciled amount of Form 26AS.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Passed on a Non-Existent Entity:
The primary issue was whether the assessment order dated 01.02.2016, passed by the AO under section 143(3) of the Income-tax Act, 1961, was valid, given that it was issued to a non-existent entity, 'UTV Tele Talkies Limited,' which had merged with 'UTV Software Communications Limited' effective from 01.04.2013. The Tribunal noted that the merger was sanctioned by the Bombay High Court on 11.04.2014, and the AO was duly informed of this merger through several communications. Despite this, the AO did not conduct an enquiry under section 170 of the Act read with Order 22 Rule 10 of CPC to bring on record the successor-in-interest. The Tribunal held that the assessment framed on a non-existent entity was a jurisdictional defect that could not be cured under section 292B of the Act. The assessment order was quashed as it was not sustainable in law.

2. Disallowance of ?23,41,000/- for the Cost of Production of an Abandoned TV Serial:
This issue became academic as the Tribunal quashed the assessment order on the primary jurisdictional issue. The AO had disallowed the cost of production of the abandoned TV serial 'Anandam,' arguing that the write-off was premature and the going concern could have completed the production.

3. Addition of ?95,511/- Pertaining to Cenvat Credit of Service Tax:
Similarly, this issue was rendered academic. The AO had added back the Cenvat credit of service tax under section 145A of the Act, which the assessee contended was inapplicable as the service tax credit on input services was not related to the purchase or sale of goods.

4. Disallowance of ?15,02,716/- on an Assumption of Personal Expenses:
This issue also became academic. The AO had disallowed an ad-hoc amount assuming an element of personal expenses, which the assessee contested.

5. Addition of ?45,15,489/- as Unreconciled Amount of Form 26AS:
This issue was similarly rendered academic. The AO had added an unreconciled amount from Form 26AS to the income of the assessee, which was contested by the assessee.

Conclusion:
The Tribunal allowed the appeal of the assessee by quashing the assessment order dated 01.02.2016 on the ground that it was passed on a non-existent entity, which was a jurisdictional defect. Consequently, the other grounds of appeal became academic and did not require adjudication. The appeal was allowed in favor of the assessee.

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