2018 (1) TMI 286 - AT - Income Tax

Reopening of assessment - assessment was framed on the non-existing company - scheme of amalgamation - Held that - the assessment was framed by the AO on the non-existent amalgamated company not on the amalgamating company therefore the assessment framed was void ab initio and the same was rightly quashed by the ld. CIT(A) - Decided against revenue

Summary

Issues Involved:
1. Validity of assessment framed on a non-existing company.
2. Legal consequences of amalgamation on assessment proceedings.
3. Applicability of Section 292B of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Assessment Framed on a Non-Existing Company:
The primary issue in this appeal was whether the assessment framed on a non-existing company, due to its amalgamation, was valid. The facts revealed that a search and seizure operation was conducted, and an assessment order was passed adding ?3,00,00,000 to the income of the assessee company. However, the assessee company had already amalgamated with another company, M/s Hydel Constructions Pvt. Ltd., as per the order of the Hon'ble Delhi High Court dated 17.03.2008. The assessee informed the AO about the amalgamation, but the AO proceeded with the assessment on the non-existing company. The CIT(A) annulled the assessment, holding it to be a nullity, as the company was non-existent at the time of assessment.

2. Legal Consequences of Amalgamation on Assessment Proceedings:
The Tribunal examined whether the assessment could be considered valid when conducted on an entity that had ceased to exist due to amalgamation. It was noted that the amalgamation was effective from 01.04.2012, and the assessment order was passed on 03.03.2015. The Tribunal referenced several precedents, including the case of Maruti Suzuki India Ltd. vs. DCIT, where it was held that an assessment order passed on a non-existent entity due to amalgamation is void ab initio. The Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. v. CIT also held that an assessment framed in the name of a non-existent entity is not a procedural irregularity but a jurisdictional defect, rendering the assessment void.

3. Applicability of Section 292B of the Income Tax Act, 1961:
The Tribunal considered whether the defect in the assessment could be cured under Section 292B, which allows for rectification of procedural errors. However, it was concluded that framing an assessment on a non-existent entity is a jurisdictional defect and not merely a procedural irregularity. The Hon'ble Delhi High Court in Spice Infotainment Ltd. v. CIT emphasized that such an assessment is void and cannot be cured by Section 292B. The Tribunal reiterated this position, stating that participation by the amalgamated company in the assessment proceedings does not validate the assessment against a non-existent entity.

Conclusion:
The Tribunal dismissed the department's appeal, affirming the CIT(A)'s decision to annul the assessment framed on the non-existing company. The assessment was deemed void ab initio due to the jurisdictional defect of being conducted on a company that had ceased to exist due to amalgamation. The Tribunal's decision was consistent with the legal precedents that an assessment on a non-existent entity is invalid and cannot be rectified under Section 292B.