2023 (2) TMI 851 - AT - Income Tax

Assessment proceedings in name of a non-existing entity - notice to company predecessor post amalgamation - HELD THAT - AO was specifically informed of the fact of merger of the assessee. AO was specifically informed, upon his own questionnaire, about the date of merger and the fact that the successor company - Inspite of the aforesaid facts being in the knowledge of the AO and the specific directions of the ld DRP as reproduced above, the AO preferred to pass the assessment order upon the predecessor of appellant which no longer existed and upon the PAN account of the predecessor of the appellant. Catena of judgments cited by the ld AR firmly hold that the assessment orders passed on non existing entities are void - See MARUTI SUZUKI INDIA LIMITED 2019 (7) TMI 1449 - SUPREME COURT - Moreover in the case in hand when ld DRP had given a specific direction. Failure of the ld AO to follow the same and also makes the assessment order not sustainable. Decided in favour of assessee.

Summary

Issues:
Appeals against the order of the ld AO for Assessment Year 2018-19 and 2019-20, Stay applications in ITA No. 1872 & 1873/Del/2022, Dispute regarding receipts from Indian customers, Passing of final order by ld AO on a non-existing entity, Grounds on merits submitted by the appellant, Failure of ld AO to comply with directions of ld DRP, Legal arguments and judgments cited by both parties, Consideration of rectification powers and assessment order validity.

Analysis:
The appeals were filed against the ld AO's order for Assessment Years 2018-19 and 2019-20, with stay applications in ITA No. 1872 & 1873/Del/2022. The dispute centered around receipts from Indian customers for online journals and subscription licenses. The appellant, a US company, argued that these receipts were not taxable in India under the India-USA DTAA. The ld AO passed the final order on a non-existing entity despite being informed of the merger with another company.

The appellant contended that the assessment order was void ab initio due to being passed on a non-existing entity, citing various judgments in support. The ld DR defended the orders, suggesting rectification as a remedy. However, the bench opined that challenging the assessment order itself was a more efficacious remedy. The ld AO was informed of the merger, but still passed the order on the predecessor entity, which was no longer in existence.

Citing the Supreme Court judgment in PCIT v. Maruti Suzuki India Ltd., the bench emphasized that assessment orders on non-existing entities are void. The failure of the ld AO to follow the specific direction from the ld DRP rendered the assessment order unsustainable. Consequently, the ground raised by the appellant was allowed, leading to the allowance of both appeals. The stay applications were deemed infructuous and dismissed.

In conclusion, the judgment highlighted the importance of legal principles and consistency in tax litigation. The assessment order passed on a non-existing entity was declared void, emphasizing the significance of following specific directions and ensuring the validity of assessment orders.