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2025 (1) TMI 912 - HC - Income TaxRectification of mistake - order being framed in the name of a non-existent entity/entity merged - inadvertent mistake committed by the TPO as well as AO in not mentioning the name of the entity correctly - respondent-assessee, M/s Vedanta Limited Vedanta is the resultant entity which came into existence consequent to M/s Cairn India Limited Cairn amalgamating with it HELD THAT - We had found that the decision of Maruti Suzuki 2019 (7) TMI 1449 - SUPREME COURT had while enunciating the legal position with respect to an order being framed in the name of a non-existent entity had unequivocally held as being a fatal flaw which could neither be corrected nor rectified. It had held in explicit terms that such an order cannot be salvaged by taking recourse to Section 292B of the Act. We had also noticed the peculiar facts which obtained in Sky Light 2018 (4) TMI 529 - SC ORDER and which alone had led to the Supreme Court upholding the assessment made, albeit in the name of an entity which had ceased to exist. In the facts of the present case, we find that there was a valid disclosure made by the respondent-assessee and the AO being duly apprised of the factum of merger. Despite the above, it chose to make the draft assessment order in the name of a party which no longer existed on that date. This was, therefore, not a case where the factum of merger had either been suppressed or where the respondent had held out that Cairn still existed and could be proceeded against. It was the conduct of the assessee in Sky Light 2018 (2) TMI 1093 - DELHI HIGH COURT which had convinced the Supreme Court to observe that the mistake would not render the order of assessment invalid and that it could be saved under Section 292B of the Act. The facts of the present case are clearly not akin to what prevailed in Sky Light. Regard must also be had to the fact that Section 154 enables an authority under the Act to rectify and correct an accidental slip or omission. It pertains to a power to rectify a mistake apparent from the record. Section 292B seeks to save orders which may suffer from similar mistakes provided they be otherwise compliant with the letter and spirit of the Act. However, and as the Supreme Court explained in Maruti Suzuki, the making of an order of assessment which is inherently flawed or suffering from a patent illegality, and which would include a case where the order is drawn in the name of a non-existent entity, cannot be saved or rescued. The power conferred by Section 154 would stand restricted to an inadvertent or unintentional error. The appellant has woefully failed to establish that the order of assessment as originally framed was intended to be in respect of the affairs of Vedanta, the respondent herein, or made cognizant of the factum of merger. We also bear in mind the indubitable fact that the AO proceeded to draw the order of assessment using the expression formerly known as . The appellant thus failed to acknowledge the merger even at this stage. The usage of the expression formerly known as is indicative of them presuming that the amalgamation was akin to a change to the fa ade of a legal entity as opposed to a fundamental alteration and the merger giving rise to a new being. It was these facts which had weighed upon us when we had amended the question of law on which the appeal was admitted. We thus find no merit in the argument that the challenge would be liable to be answered in light of Sky Light. Bearing in mind the fundamental error which beset the order of the TPO, the said decision would clearly not salvage the inherent and patent error which beset the order passed by the TPO. Absent any intent to assess the resultant entity, the order could neither have been rectified nor would it be saved by Section 292 B of the Act. Decided against revenue. 1. ISSUES PRESENTED and CONSIDERED The core legal question considered in this judgment is: Whether the inadvertent mistake committed by the Transfer Pricing Officer (TPO) in not mentioning the name of the entity correctly is a curable mistake under the Income Tax Act, 1961, specifically rectifiable in light of the decision rendered by the Supreme Court in the case of Sky Light Hospitality LLP vs. ACIT? 2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The primary legal provisions considered include Section 154 and Section 292B of the Income Tax Act, 1961. Section 154 pertains to the rectification of mistakes apparent from the record, while Section 292B addresses the validity of proceedings despite mistakes, defects, or omissions if they are in substance and effect in conformity with the Act. The precedents examined include:
Court's Interpretation and Reasoning The court examined whether the mistake of naming a non-existent entity could be rectified under Section 154 or saved under Section 292B. It noted that the Supreme Court in Maruti Suzuki had clarified that such mistakes are substantive and not merely procedural, thus not curable under Section 292B. The court distinguished the facts of the current case from those in Sky Light, where the error was deemed clerical and rectifiable. Key Evidence and Findings The court found that the respondent-assessee had duly informed the TPO of the amalgamation, yet the TPO proceeded with the order in the name of a non-existent entity. The draft assessment order also failed to recognize the merger, using the term "formerly known as" instead of acknowledging the new entity. Application of Law to Facts The court applied the legal principles from Maruti Suzuki and found that the error in naming a non-existent entity was substantive and not rectifiable under Section 154 or Section 292B. The court emphasized that the merger was a fundamental change, not a mere name change, and thus the assessment should have been in the name of the new entity. Treatment of Competing Arguments The appellant argued that the mistake was rectifiable under Section 154 and Section 292B, similar to Sky Light. However, the court rejected this argument, noting that the facts of the current case did not align with those in Sky Light, where there was substantial evidence that the notice was intended for the successor entity. The court found that the appellant failed to demonstrate any intent to assess the resultant entity, Vedanta. Conclusions The court concluded that the error in naming a non-existent entity was not a mere clerical error and could not be rectified under Section 154 or saved under Section 292B. The appeal was dismissed, and the question was answered in the negative against the Commissioner. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning "In view of the aforesaid, the position in law appears to be well-settled that a notice or proceedings drawn against a dissolved company or one which no longer exists in law would invalidate proceedings beyond repair." "Absent any intent to assess the resultant entity, the order could neither have been rectified nor would it be saved by Section 292B of the Act." Core Principles Established
Final Determinations on Each Issue The court determined that the error in naming a non-existent entity was substantive and not rectifiable. The appeal was dismissed, upholding the Tribunal's decision that the assessment order was invalid due to the naming error.
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