2022 (8) TMI 729 - AT - Income Tax

Validity of assessment - notice u/s 143(2) issued to a non-existing company - Notice issued to amalgamating company - HELD THAT - We find that the mandatory notice u/s 143(2) of the Act was issued by the AO on 07.08.2013 to a non-existing company i.e. M/s. MCCPL on the date of issue of notice. Therefore, all consequential action become null in the eyes of law. We note that on this legal issue, the Ld. CIT(A) has rightly taken note of the decision of the Hon ble Supreme Court in the case of PCIT Vs. M/s. Maruti Suzuki India Limited 2019 (7) TMI 1449 - SUPREME COURT wherein their Lordship have observed regarding invalid notice u/s 143(2) that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approval scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation - Decided against revenue.

Summary

Issues:
1. Validity of assessment order due to non-issuance of notice u/s 143(2) of the Income Tax Act to the correct entity post-merger.
2. Jurisdictional defect in framing scrutiny assessment without serving a valid notice to the amalgamated company.

Analysis:
1. The appeal by the revenue challenges the Ld. CIT(A)'s decision regarding the issuance of a notice u/s 143(2) of the Income Tax Act to a non-existing company post-merger. The Ld. CIT(A) held that the assessment order was invalid as the notice was sent to the wrong entity, which was no longer in existence. The revenue contended that all subsequent actions were null and void due to the incorrect notice. The Ld. CIT(A) based the decision on the information provided to the AO regarding the merger, emphasizing that the assessment against a non-existing entity is a jurisdictional defect. The revenue disputed this legal issue, leading to the appeal.

2. The case involved the merger of M/s. MCCPL with M/s. Siemens Ltd., effective from 1st October 2011, as per the Bombay High Court order dated 17.08.2012. Despite being informed of this merger, the AO issued a notice u/s 143(2) to the non-existing entity, M/s. MCCPL, on 07.08.2013. The Ld. CIT(A) found in favor of the assessee, citing legal principles and court judgments that emphasized the importance of correct jurisdictional notices post-merger. The Ld. CIT(A) highlighted the Supreme Court's ruling in a similar case and concluded that the assessment order against a non-existing entity is void ab initio. The revenue challenged this decision, leading to the appeal before the tribunal.

3. The tribunal noted that the AO was duly informed of the merger between M/s. MCCPL and M/s. Siemens Ltd. before issuing the notice u/s 143(2) to the wrong entity. Despite acknowledging the merger in the assessment order, the AO's actions were deemed legally flawed due to the incorrect notice. The tribunal upheld the Ld. CIT(A)'s decision, emphasizing the legal principle that jurisdictional defects in assessments against non-existing entities are fundamental and render the assessment void ab initio. The tribunal dismissed the revenue's appeal, affirming the importance of issuing correct notices post-merger to ensure valid assessments.

This detailed analysis showcases the legal intricacies involved in the judgment, focusing on the validity of the assessment order and the jurisdictional defects arising from incorrect notices post-merger.