2015 (9) TMI 235 - HC - Income Tax

Validity of assessment u/s 153A framed on a non-existent entity - ITAT referring to the decision of CIT v. Vived Marketing Services Pvt. Ltd. (2009 (9) TMI 917 - Delhi high court) which held that an assessment could not be validly framed on a non-existent entity - Held that - Recently this Court in CIT v. Images Credit and Portfolio Pvt. Ltd (2015 (9) TMI 234 - DELHI HIGH COURT) held that proceedings under Section 153C could not be initiated against an entity that had ceased to exist at the relevant time. Similarly in Spice Enfotainment Ltd. v. CIT (2011 (8) TMI 544 - DELHI HIGH COURT) it was held by this Court that the defect of passing an assessment order in respect of an entity that had ceased to exist on the date of such order, could not be treated as a mere procedural defect. The mere fact that the Respondent communicated to the AO, prior to the Assessment order and subsequent notice, in its name without disclosing the fact of amalgamation with OPPL, will not cure the fundamental defect of the assessment having been framed against an entity that had ceased to exist in the eye of law. - Thus the impugned common order of the ITAT does not call for interference - Decided against revenue.

Summary

Issues:
1. Validity of proceedings under Section 153A against a merged entity.
2. Rejection of plea by Assessing Officer and Commissioner of Income Tax (Appeals).
3. Reference to relevant case laws by the Income Tax Appellate Tribunal (ITAT).
4. Applicability of legal principles regarding assessment of non-existent entities.
5. Interpretation of law in cases of amalgamation and ceasing of existence.

Analysis:
The judgment pertains to appeals by the Revenue against an order of the Income Tax Appellate Tribunal (ITAT) for various Assessment Years (AYs) related to a textile business. The Respondent, engaged in fabricating cloth and textiles, underwent a merger with another entity. The issue revolved around the validity of proceedings under Section 153A initiated post-merger. The Respondent contended that the initiation of proceedings under Section 153A after the merger was unlawful.

The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) rejected the Respondent's plea, emphasizing that the return of income filed did not mention the merger with the other entity. The ITAT, in its order, referenced a previous decision of the Court regarding assessments on non-existent entities. Further, the Court cited recent judgments highlighting that proceedings cannot be initiated against entities that have ceased to exist at the relevant time.

The Court emphasized that the fundamental defect of framing an assessment against a non-existent entity cannot be cured by subsequent communication about the merger. Relying on legal principles and precedents, the Court upheld the ITAT's decision, stating that no substantial question of law arose, and consequently dismissed the appeals. The judgment underscores the importance of legal compliance in assessments, especially in cases involving mergers and ceasing of entities.