2023 (5) TMI 1044 - AT - Income Tax

Validity of the draft assessment order issued in the name of non-existent entity - amalgamation - TP adjustment - arm s-length price u/s 92CA - Final assessment order issued in the name of correct assessee - assessee had filed a formal intimation before the DCIT, Transfer Pricing intimating that AIPL has been converted into LLP - HELD THAT - Fact of conversion of AIPL into LLP was intimated to both the AO and the TPO much before passing of their respective orders, yet both the TPO and the AO passed the Transfer Pricing Order and the draft assessment order in the name of a non-existent entity. The view of the Courts and Tribunals on this issue is unanimous that once the draft assessment order and Transfer pricing order itself are bad in law, having been passed in the name of a non-existent entity, then the final assessment order based on the above orders is void ab initio as well. In view of the above settled position of law, we are of the view that the final assessment order sought to be appeal against is void and hence liable to be set aside. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order issued in the name of a non-existent entity.
2. Transfer Pricing Adjustments.
3. Corporate Tax Additions.
4. Penalty proceedings under section 270A.

Summary:

Validity of the order issued in the name of a non-existent entity:
The appellant argued that the Transfer Pricing Order and the Draft Assessment Order were issued to a non-existent entity, 'Allscripts (India) Private Limited' (AIPL), which had been converted into a Limited Liability Partnership (LLP) before the orders were passed. The Tribunal referenced several judicial precedents, including FedEx Express Transportation v. DCIT and Siemens Ltd. v. DCIT, which held that orders passed in the name of non-existent entities are void ab initio. The Tribunal noted that the fact of conversion had been formally communicated to the Assessing Officer and the TPO before the orders were passed. Consequently, the Tribunal held that the final assessment order was void and set it aside.

Transfer Pricing Adjustments:
The appellant contested the addition of INR 16,85,57,066/- to the total income, arguing that the international transaction related to software development services was at arm's length price. The appellant also challenged the rejection of functionally comparable companies and the application of certain filters by the TPO. However, since the Tribunal adjudicated the issue of jurisdiction in favor of the appellant, it did not address these grounds.

Corporate Tax Additions:
The appellant disputed the rate of depreciation applied to computer software and the disallowance of depreciation claimed in the return of income. The appellant also contested the denial of a deduction under section 80G of the Act and the computation of interest under sections 234B and 234D. These grounds were not adjudicated due to the resolution of the jurisdictional issue.

Penalty proceedings under section 270A:
The appellant requested the Tribunal to direct the Assessing Officer to drop the penalty proceedings under section 270A. This ground was also not adjudicated as the appeal was allowed on the jurisdictional ground.

Conclusion:
The Tribunal allowed the appeal on the basis that the final assessment order was void due to being issued in the name of a non-existent entity. Consequently, other grounds of appeal were not adjudicated. The order was pronounced on 08-05-2023.