2022 (2) TMI 483 - AT - Income Tax

Assessment order made in the name of non-existent company - Scheme of amalgamation completed - HELD THAT - When a query was put to ld. counsel, Shri Sridhar fairly agreed that the CIT(A) has not adjudicated this issue on jurisdiction specifically raised before him. He conceded that matter can be referred back to the file of the CIT(A) to adjudicate this issue. He argued that first CIT(A) will adjudicate this jurisdictional issue and then he will decide merits also afresh. DR has not seriously conceded the above averments of the ld. counsel. In view of the decision of CIT(A) that the issue of assessment on non-existent company is not adjudicated and has confession given by both the sides, we are setting aside the order of CIT(A) and remand the matter back to his file for fresh adjudication, first on the issue of jurisdiction i.e., assessment on non-existent company and second after that on merits. In term of the above, the order of CIT(A) is set aside and the matter remanded back to his file. Appeal filed by the assessee is allowed for statistical purpose.

Issues Involved:
1. Validity of the assessment made in the name of a non-existent company.
2. Jurisdictional error due to the issuance of notice u/s. 143(2) to a non-existent company.
3. Applicability of Section 292B of the Income Tax Act, 1961.
4. Compliance with the provisions of Section 170 concerning succession to business.

Detailed Analysis:

1. Validity of the Assessment Made in the Name of a Non-Existent Company:

The primary issue in this appeal is whether the assessment made in the name of a non-existent company, M/s. Meridian Industries Limited, is valid. The assessee argued that the assessment is invalid as the company had already amalgamated with M/s. Precot Mills Limited to form Precot Meridian Limited, effective from 01.04.2006, as per the Hon'ble High Court of Madras' order dated 01.09.2006. Despite the amalgamation, the Assessing Officer (AO) issued the notice u/s. 143(2) and framed the assessment order in the name of the non-existent company, which the assessee contends is against the principles of law.

2. Jurisdictional Error Due to the Issuance of Notice u/s. 143(2) to a Non-Existent Company:

The assessee highlighted that the AO issued the notice u/s. 143(2) dated 26.10.2007 and framed the original assessment order dated 30.12.2008 in the name of Meridian Industries Limited, which had already ceased to exist. This was brought to the AO's notice through a letter dated 01.11.2006, but the AO failed to consider this fact. The assessee argued that this constitutes a jurisdictional error, as the AO assumed jurisdiction over a non-existent entity, rendering the assessment invalid.

3. Applicability of Section 292B of the Income Tax Act, 1961:

The Commissioner of Income Tax (Appeals) [CIT(A)] initially upheld the assessment order, invoking Section 292B of the Act, which states that no assessment shall be invalid merely due to any mistake, defect, or omission if it is in substance and effect in conformity with the intent and purpose of the Act. The CIT(A) considered the issuance of notice and framing of the assessment in the name of the non-existent company as a technical mistake curable under Section 292B. However, the assessee contended that this was not a mere technical defect but a substantive illegality, as upheld by the Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki Ltd., where it was held that such an error is a jurisdictional error and not a procedural violation.

4. Compliance with the Provisions of Section 170 Concerning Succession to Business:

The assessee also referred to Section 170, which deals with succession to business otherwise than on death. The Hon'ble Supreme Court in the Maruti Suzuki case emphasized the necessity to adhere to Section 170 when dealing with succession due to amalgamation. The assessee argued that the AO's failure to issue the notice and frame the assessment in the name of the amalgamated entity (Precot Meridian Limited) violated the provisions of Section 170, further invalidating the assessment.

Conclusion:

The Tribunal noted that the CIT(A) did not adjudicate the issue of the assessment being made in the name of a non-existent company. The Tribunal set aside the order of the CIT(A) and remanded the matter back for fresh adjudication, first on the jurisdictional issue of the assessment on the non-existent company and then on the merits. The Tribunal emphasized the need to address the jurisdictional error before considering the merits of the case, in line with the principles laid down by the Hon'ble Supreme Court in the Maruti Suzuki case.

Order:

The appeal filed by the assessee was allowed for statistical purposes, and the matter was remanded back to the CIT(A) for fresh adjudication. The order was pronounced in the court on 31st January 2022 at Chennai.

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