2018 (5) TMI 708 - AT - Income Tax

Assessments framed u/s 153A - assessment in the name of non-existent amalgamating company - Held that - No hesitation in holding that the framing of assessments against a non- existing entity/person goes to the very root of the matter and is a jurisdictional defect as there cannot be any assessment against a dead person . Accordingly, the impugned assessments are bad in law and are liable to be quashed being void ab initio. We observe that the facts of the present case are quite similar to the facts of the case in Spice Entertainment (2011 (8) TMI 544 - DELHI HIGH COURT) wherein their Lordships have held that framing of assessment against non-existent entity/person goes to the root of the validity of the assessment which is not a procedural irregularity curable u/s 292B or under any other provision of the Act but it is a jurisdictional defect because there cannot be framing of any assessment order against a dead person or entity which is non-existent on the date of framing/passing assessment order - assessments in the name of nonexistent amalgamating company being jurisdictional defect are not sustainable and, therefore, we quash the same. - Decided in favour of assessee.

Summary

Issues:
Validity of assessments framed under section 153A of the Income Tax Act based on the existence of the company at the time of search.

Analysis:
The case involved appeals by the department for assessment years 2005-06 to 2009-10 and cross-appeals by the assessee for the same years. The main legal ground raised by the assessee was that assessments under section 153A were invalid as they were framed on a company that no longer existed at the time of search. Both parties agreed to address this issue first before discussing other grounds. The Assessing Officer was informed about the merger of the assessee with another company post the search date, and the company ceased to exist as a separate entity from 1.4.2009. The department argued that the notices were valid as the amalgamation was effective from the assessment year 2010-11 onwards. The CIT DR contended that the successor company existed at the time of search, and the assessments were not made on a non-existing entity. The Tribunal referred to a similar case judgment by the Delhi High Court and held that assessments against a non-existing entity were void ab initio, constituting a jurisdictional defect. Therefore, the assessments made on the non-existing entity were quashed.

The Tribunal found that since the assessments were void, the additions made by the Assessing Officer became academic. Consequently, the department's appeals were dismissed, and the Assessing Officer was given the liberty to take appropriate action on the correct entity within the prescribed time limit. The appeals of the assessee were allowed, and the assessments in the name of the non-existing amalgamating company were deemed unsustainable due to the jurisdictional defect. The decision was pronounced on 8th May 2018 by the Tribunal.