2021 (4) TMI 550 - HC - Income Tax

Assessment against amalgamating company - assessment order passed in the name of non-existing entity - scheme of amalgamation - HELD THAT - The Supreme Court in the case of Maruti Suzuki 2019 (7) TMI 1449 - SUPREME COURT had considered that income, which was subject to be charged to tax for the assessment year 2012-13 was the income of erstwhile entity prior to amalgamation. Transferee had assumed liabilities of transferor company, including that of tax. The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under Section 143(2) of the Act was issued on 26.9.2013, the scheme of amalgamation had been approved by the high court with effect from 1.4.2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292 (b) of the Act. The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. Vs. CIT 1990 (9) TMI 1 - SUPREME COURT The Supreme Court has also referred to decision of Delhi high court in the case of CIT Vs. Spice Enfotainment Ltd 2011 (8) TMI 544 - DELHI HIGH COURT and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B. Petitioner lead us to consider that petitioner has made out a case for reliefs and it would be appropriate to allow petition in terms of prayer clause (a).

Issues Involved:
1. Propriety, legality, and validity of the notice dated 30th March, 2019 issued under section 148 of the Income Tax Act, 1961.
2. Validity of the assessment order dated 31st December, 2019 passed under section 144 read with section 147 of the Income Tax Act, 1961.
3. Jurisdictional issues regarding the issuance of the notice and the assessment order.
4. Breach of principles of natural justice.
5. Applicability of the legal principle concerning assessment orders against non-existing entities.

Issue-wise Detailed Analysis:

1. Propriety, Legality, and Validity of the Notice Dated 30th March, 2019:
The petitioner challenged the notice dated 30th March, 2019 issued under section 148 of the Income Tax Act, 1961, arguing that it was issued to a non-existing entity, M/s. Tecnovate Esolutions Pvt. Ltd. (TSPL), which had ceased to exist post-amalgamation with M/s. Intelenet Global Services Pvt. Ltd. effective from 1st April, 2010. The petitioner contended that the notice was issued based on a misconception and was an inadvertent error.

2. Validity of the Assessment Order Dated 31st December, 2019:
The assessment order dated 31st December, 2019 was passed under section 144 read with section 147 of the Income Tax Act, 1961, computing the total income at ?14,50,95,452/- in the name of TSPL. The petitioner argued that the order was passed without considering the replies and objections raised by the petitioner, and it was issued in the name of a non-existing entity, making it void ab initio.

3. Jurisdictional Issues:
The petitioner argued that the impugned notice and order were issued without jurisdiction as the proceedings should have been initiated by the officer having jurisdiction over the petitioner (i.e., respondent No. 3) and not respondent No. 1. The petitioner emphasized that post-amalgamation, any proceedings could only be initiated against the existing entity, Teleperformance Global Services Pvt. Ltd. (TGSPL).

4. Breach of Principles of Natural Justice:
The petitioner contended that they were not afforded any opportunity of hearing, and the notice dated 4th December, 2019 was neither served on the petitioner nor uploaded on the e-portal. This constituted a breach of the principles of natural justice.

5. Applicability of Legal Principle Concerning Assessment Orders Against Non-Existing Entities:
The petitioner relied on the Supreme Court's decision in Principal Commissioner of Income Tax, New Delhi Vs. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC), which held that an assessment order passed in the name of a non-existing entity is a substantive illegality. The Supreme Court had observed that such an order is not a procedural violation and cannot be cured under section 292B of the Act. The petitioner also referred to other decisions, including CIT Vs. Spice Enfotainment Ltd. and CIT Vs. Micron Steels (P) Ltd., which supported the contention that assessment orders against non-existing entities are void.

Conclusion:
The court found merit in the petitioner’s arguments and held that the notice dated 30th March, 2019 and the assessment order dated 31st December, 2019 were issued without jurisdiction and were void ab initio as they were issued in the name of a non-existing entity. The court also acknowledged the breach of principles of natural justice and the jurisdictional issues raised by the petitioner. Consequently, the petition was allowed, and the impugned notice and assessment order were quashed and set aside. The rule was made absolute in terms of prayer clause (a), and the writ petition was disposed of accordingly.

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