2021 (2) TMI 858 - AT - Income Tax

Assessment against non-existent company - amalgamating company, assessee in this case, has ceased to exist by virtue of the approved scheme of amalgamation - HELD THAT - When the amalgamating company, assessee in this case, has ceased to exist by virtue of the approved scheme of amalgamation w.e.f. 31.03.2010 by the order passed by the Hon ble Delhi High Court, AO was not within his jurisdiction to frame the assessment in the name of non-existent company, consequently assessment orders dated 27.03.2015, 30.03.2015 30.03.2015 for Assessment Years 2008-09, 2009-10 2010-11 respectively are liable to be quashed being not sustainable in the eyes of law, hence finding no illegality or perversity in the impugned orders passed by the ld. CIT (A) in the aforesaid appeals quashing the assessment orders passed by the AO, present appeals filed by the Revenue are hereby dismissed.

Summary

Issues involved:
1. Validity of assessment orders post amalgamation of companies.

Analysis:
The judgment by the Appellate Tribunal ITAT Delhi dealt with the validity of assessment orders passed post the amalgamation of companies. The appellant, M/s. Sarla Fabrics Pvt. Ltd. (now amalgamated with Shahi Exports Pvt. Ltd.), challenged the orders passed by the Commissioner of Income-tax (Appeals) for the Assessment Years 2008-09, 2009-10 & 2010-11. The central issue revolved around the quashing of assessment orders due to the non-existence of the assessee company at the time of search post its merger. The Tribunal consolidated the appeals to avoid repetitive discussions.

The facts revealed that a search operation under section 132 of the Income-tax Act, 1961 was conducted on Shahi Exports Group, leading to the discovery of unaccounted interest income by the assessee. The Assessing Officer completed assessments for the relevant years, which were later challenged by the assessee before the Commissioner of Income-tax (Appeals) and subsequently before the Tribunal.

The crux of the matter was the non-existence of the assessee company, M/s. Sarla Fabrics Pvt. Ltd., post its amalgamation with Shahi Exports Pvt. Ltd. on 31.03.2010. The Tribunal noted that the assessment orders framed in the name of the non-existent entity were legally unsustainable. The Revenue contended that assessments should be in the name of the assessee, but the Tribunal upheld the quashing of the assessment orders by the Commissioner of Income-tax (Appeals).

Citing legal precedents, including judgments by the Hon'ble Delhi High Court and the Hon'ble Apex Court, the Tribunal emphasized that assessments against non-existing entities are jurisdictional defects, not procedural irregularities. The Tribunal highlighted that the amalgamation scheme addresses all consequences of the erstwhile company, leading to the assessments against the non-existent entity being null and void.

In conclusion, the Tribunal dismissed the appeals filed by the Revenue, affirming the quashing of the assessment orders by the Commissioner of Income-tax (Appeals). The judgment reiterated the legal principle that assessments against non-existent entities post amalgamation are not sustainable in the eyes of the law, emphasizing the importance of jurisdictional correctness in assessment proceedings.