2021 (2) TMI 1058 - HC - Income Tax

Assessment order passed against a non-existent company - company being amalgamated - HELD THAT - As per MARUTI SUZUKI INDIA LIMITED (SUCCESSOR OF SUZUKI POWERTRAIN INDIA LIMITED) case 2017 (9) TMI 387 - DELHI HIGH COURT in case the assessment orders are framed in the name of a non-existent company it does not mean a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292-B of the Income-tax Act. In the considered opinion of this Court, the legal proposition of law has already been crystallized and there could not have been any assessment order in respect of the respondent company as it was not in existence (amalgamating company). A similar view has been taken by a Co-ordinate Bench of this Court in the case of Commissioner of Income-tax, Central Circle, Bangalore vs. Intel Technology India (P) Ltd. 2015 (5) TMI 614 - KARNATAKA HIGH COURT As the legal position is abundantly clear in the light of the decisions referred to above, this Court has no hesitation in answering the questions framed in the negative i.e., in favour of the Assessee and against the Revenue.

Summary

Issues Involved:
1. Validity of assessment order passed in the name of a non-existent entity.
2. Applicability of Section 292B of the Income Tax Act to cure the procedural defect.
3. Jurisdictional defect due to the assessment of a merged entity.

Detailed Analysis:

1. Validity of Assessment Order Passed in the Name of a Non-Existent Entity:
The primary issue was whether the assessment order passed by the Income Tax Department against the respondent-assessee, which had merged with another company, was valid. The facts reveal that the respondent-assessee, involved in the development of computer software for the automobile industry, merged with Wipro Limited as per the scheme of amalgamation approved by the High Courts of Andhra Pradesh and Karnataka, effective from 01.04.2007. Despite this merger, notices and orders were issued in the name of the erstwhile company, Quantech Global Services Ltd. (QGSL), which had ceased to exist post-merger. The Tribunal, relying on the Delhi High Court’s decision in Spice Infotainment Ltd. Vs. CIT, held that the assessment order passed in the name of a non-existent entity was invalid. The Delhi High Court had established that an assessment upon a dissolved company is impermissible since it ceases to exist in the eyes of the law upon amalgamation.

2. Applicability of Section 292B of the Income Tax Act to Cure the Procedural Defect:
The second issue was whether the defect of passing an assessment order in the name of a non-existent entity could be cured under Section 292B of the Income Tax Act, which allows for the rectification of procedural defects. The Delhi High Court in Spice Infotainment Ltd. clarified that such a defect is not merely procedural but a jurisdictional defect, as there cannot be any assessment against a 'dead person.' The judgment emphasized that Section 292B cannot be invoked to cure a jurisdictional defect, thereby invalidating the assessment order.

3. Jurisdictional Defect Due to the Assessment of a Merged Entity:
The third issue addressed the jurisdictional defect arising from the assessment of an entity that had merged into another. The Tribunal's decision, supported by the Delhi High Court’s ruling, was that the assessment must be made on the successor company, i.e., Wipro Ltd., and not on the amalgamating company, QGSL. The Supreme Court in Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Limited, upheld this principle, stating that an assessment order against a non-existent entity is void and cannot be cured by mere participation in the proceedings by the amalgamated company.

Conclusion:
The Karnataka High Court dismissed the appeal filed by the Income Tax Department, affirming the Tribunal's decision that the assessment order passed in the name of a non-existent entity (QGSL) post-merger was invalid. The Court reiterated the legal position that such an order constitutes a jurisdictional defect, not a procedural irregularity, and thus cannot be rectified under Section 292B of the Income Tax Act. The judgment aligns with the precedent set by the Delhi High Court and upheld by the Supreme Court, ensuring consistency and certainty in tax litigation.