2023 (12) TMI 1121 - AT - Income Tax

Assessment order passed on an non- existent entity - status of assessee - Pvt Ltd. Company or LLP - appellant company has been converted from the existing private limited company into a Limited Liability Partnership ('LLP') in accordance with the provisions of Limited Liability Partnership Act - say of the ld. DR that the facts of the present case is neither of amalgamation nor of merger/demerger, but a simple case of change in the status of the assessee from a private limited company to a limited liability partnership, therefore, assessment cannot be quashed as the status of the assessee continued for the year under consideration. HELD THAT - The undisputed fact is that the status of the assessee changed from private limited company to a limited liability partnership on 22.04.2019. It is also not in dispute that immediately the assessee informed not only the jurisdictional Assessing Officer but also the PCIT. Also undisputed fact that subsequent to the change of status, all the notices were replied by the assessee in the name of LLP. Therefore, it can be stated that the change of status was brought to the knowledge of the Assessing Officer in all possible ways. Yet, the Assessing Officer chose to frame the final assessment order in the name of a no-existent entity. The ratio laid down by the Hon'ble Supreme Court in the case of Maruti Suzuki Ltd 2019 (7) TMI 1449 - SUPREME COURT squarely applies and has been rightly followed by the NFAC. In the case of Mahagun Realtors 2022 (4) TMI 347 - SUPREME COURT , no intimation about merger was brought to the notice of the Assessing Officer and the return filed after amalgamation was still in the name of the amalgamated company and fact of amalgamation was not disclosed in the business/organization column and the assessment order indicated the name of both the amalgamation and the amalgamating company and during the assessment proceedings, the assessee made the Assessing Officer believe that the amalgamating company was still in existence. All these facts before the Hon'ble Supreme Court are in favour of the assessee which facts are completely absent in the case in hand. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A).

Summary

Issues:
1. Validity of assessment order passed in the name of a non-existent entity.
2. Addition on account of ESOP expenditure and delay in depositing the employees Provident Fund.

Issue 1: Validity of assessment order passed in the name of a non-existent entity

The appeal by the Revenue challenged the order of the NFAC quashing the assessment order as invalid. The Revenue contended that the assessment order was passed on a non-existent entity, Ameriprise India Pvt Ltd, which had been converted into Ameriprise India LLP. The NFAC held that the assessment order framed in the name of a non-existent entity was against the law and liable to be quashed. The NFAC noted that the appellant had duly disclosed the conversion of the company into LLP to all concerned, including the Assessing Officer. The NFAC relied on decisions of the Hon'ble Supreme Court and the Delhi High Court to quash the assessment order, emphasizing that assessment on a non-existent entity is void and not curable under the law. The NFAC allowed the appeal on this ground, leading to the dismissal of other grounds raised by the appellant.

Issue 2: Addition on account of ESOP expenditure and delay in depositing the employees Provident Fund

The assessment order was challenged before the ld. CIT(A) on the ground that it was framed in the name of a non-existent entity, Ameriprise India Pvt Ltd. The Revenue argued that the case was not of amalgamation but a change in the status of the assessee from a private limited company to a limited liability partnership. The Revenue relied on the decision of the Hon'ble Supreme Court in the case of Mahagun Realtors. However, the ld. counsel for the assessee cited the decision of the Hon'ble Delhi High Court in the case of Sony Mobile Communications India Pvt Ltd to distinguish the facts. The Tribunal considered that the change in status from a private limited company to an LLP was duly informed to the Assessing Officer and PCIT. Despite this, the final assessment order was framed in the name of a non-existent entity. The Tribunal found that the facts of the case aligned with the principles laid down by the Hon'ble Supreme Court in Maruti Suzuki Ltd. The Tribunal concluded that the decision in Mahagun Realtors was distinguishable on the facts of the present case, leading to the dismissal of the Revenue's appeal.

This judgment by the Appellate Tribunal ITAT Delhi addressed the issues of the validity of an assessment order passed in the name of a non-existent entity and the related challenges regarding ESOP expenditure and Provident Fund delay. The Tribunal upheld the NFAC's decision to quash the assessment order due to the entity conversion issue, citing relevant legal precedents. The Tribunal also differentiated the case from the Mahagun Realtors judgment, ultimately dismissing the Revenue's appeal.