2020 (9) TMI 279 - AT - Income Tax

Assessment on a non-existing entity - Scheme of amalgamation - change in name - assessee submits that in identical circumstances ITAT in assessee s own case has quashed assessment hence the same should be duly followed - HELD THAT - Upon careful consideration we find that honourable Supreme Court in the case of Honda CIEL 2007 (11) TMI 8 - SUPREME COURT has held that non-consideration of the order of the ITAT in assessee s own case can render the order of another bench of the ITAT containing mistake apparent from record. Since the above said order of the ITAT in assessee s own case has not been reversed by the honourable High Court we duly follow the aforesaid order and hold that since the facts are identical the assessee succeeds on addition ground following the aforesaid ratio. Accordingly the assessment is treated as null and void.

Issues Involved:
1. Transfer pricing adjustment in relation to the provision of software development services.
2. Denial of claim of depreciation on goodwill.
3. Denial of deduction of provisions paid/written back.
4. Denial of deduction of excess provisions for earlier years written back.
5. Denial of deduction of project risk expenses written back.
6. Denial of deduction of preliminary expenses.
7. Delay in payment of employee's ESIC contribution.
8. Credit of self-assessment tax.
9. Initiation of penalty proceedings.

Detailed Analysis:

1. Transfer Pricing Adjustment:
The appellant challenged the adjustment of ?6,01,99,278 related to the international transaction for software development services. The Dispute Resolution Panel (DRP) upheld the Assessing Officer (AO) and Transfer Pricing Officer (TPO)'s actions in rejecting the appellant's TP documentation, including dissimilar companies in the comparability analysis, excluding similar companies, not granting working capital adjustment, and incorrectly computing the profit level indicator of certain comparables. The appellant sought the deletion of the TP adjustment and treatment of the transaction as at arm's length.

2. Depreciation on Goodwill:
The appellant contested the disallowance of depreciation on goodwill amounting to ?2,00,50,209. The DRP confirmed the AO's action on the grounds that the genuineness of the goodwill and the allowance of depreciation in preceding years were not established. The appellant requested the allowance of the depreciation claim.

3. Deduction of Provisions Paid/Written Back:
The appellant disputed the disallowance of ?8,51,09,147 for provisions paid/written back, arguing that no documentary evidence was provided. The DRP upheld the AO's decision. The appellant sought the deduction of these provisions.

4. Deduction of Excess Provisions for Earlier Years Written Back:
The appellant challenged the disallowance of ?5,87,78,387 for excess provisions written back, citing a lack of documentary evidence. The DRP confirmed the AO's action. The appellant requested the deduction of these excess provisions.

5. Deduction of Project Risk Expenses Written Back:
The appellant contested the disallowance of ?70,35,549 for project risk expenses written back, arguing that no documentary evidence was provided. The DRP upheld the AO's decision. The appellant sought the deduction of these project risk expenses.

6. Deduction of Preliminary Expenses:
The appellant disputed the disallowance of ?1,96,333 for preliminary expenses under Section 350 of the Act, arguing that the expenses did not fall within the ambit of Section 350. The DRP confirmed the AO's action. The appellant requested the allowance of the preliminary expenses deduction.

7. Delay in Payment of Employee's ESIC Contribution:
The appellant challenged the disallowance of ?12,88,054 for delayed payment of employee's ESIC contribution, arguing that the payment was made after the due date prescribed under Section 36(i)(va) of the Act. The DRP upheld the AO's decision. The appellant sought the deduction of the ESIC contribution.

8. Credit of Self-Assessment Tax:
The appellant contested the denial of credit for self-assessment tax amounting to ?2,62,19,000. The appellant requested the allowance of the self-assessment tax credit.

9. Initiation of Penalty Proceedings:
The appellant challenged the initiation of penalty proceedings under Section 271(1) of the Act for various additions/disallowances. The appellant requested the AO not to initiate penalty proceedings.

Additional Ground - Assessment on Non-Existent Entity:
The appellant raised an additional ground, arguing that the assessment was framed on a non-existent entity, rendering it void ab initio. The ITAT referred to its previous order, where it quashed the assessment for A.Y. 2011-12 under similar circumstances. The ITAT concluded that the AO passed the assessment order in the name of a non-existent entity, despite being informed of the merger approved by the Bombay High Court. Citing the Supreme Court's decision in PCIT vs. Maruthi Suzuki India Ltd., the ITAT held that the assessment framed on a non-existent entity is void ab initio. Consequently, the assessment was quashed, and the merits of the other grounds were deemed infructuous.

Conclusion:
The appeal was partly allowed, with the assessment order being quashed on the additional ground of jurisdiction. The merits of the other grounds were not adjudicated as they were rendered infructuous by the quashing of the assessment order.

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