Corporate Mergers and Tax Assessment: Navigating Legal Entity Changes and rectification u/s 292B

Deciphering Legal Judgments: A Comprehensive Analysis of Judgment

Reported as:

2025 (1) TMI 912 - DELHI HIGH COURT

Introduction

This case concerns an appeal before the Delhi High Court regarding the validity of an assessment order issued in the name of a non-existent entity following a corporate merger. The case primarily deals with whether such a mistake can be rectified under the Income Tax Act, 1961.

Key Legal Issues

1. Whether an inadvertent mistake by the Transfer Pricing Officer (TPO) in not mentioning the correct entity name is a curable mistake under the Income Tax Act, particularly in light of the Supreme Court's decision in Sky Light Hospitality LLP vs. ACIT - 2018 (4) TMI 529 - SC ORDER.

Detailed Issue-wise Analysis

Background Facts:

- Vedanta Limited became the resultant entity after M/s Cairn India Limited amalgamated with it effective from April 1, 2017 - The TPO passed an order u/s 92CA(3) on October 29, 2018, in the name of Cairn (which had ceased to exist) - The assessee had informed the TPO about the amalgamation in December 2017 - The TPO attempted to rectify the mistake through an order dated December 12, 2018

Legal Arguments:

1. Revenue's Position: - The mistake was rectifiable and could be sustained based on the Sky Light Hospitality case - The error was merely clerical and could be corrected u/s 292B.

2. Assessee's Position: - The order suffered from a patent and fatal mistake not rectifiable u/s 154 or 292B - The case was governed by the principles laid down in International Hospital Limited v. DCIT Circle - 2024 (9) TMI 1631 - DELHI HIGH COURT

Key Holdings and Reasoning

The Court held:

1. Fundamental Error: - The order was made in the name of a non-existent entity despite prior disclosure of merger - This constituted a fundamental error that couldn't be rectified u/s 154 or saved by Section 292B

2. Distinction from Sky Light Case: - Unlike Sky Light, this wasn't a case where merger information was suppressed - The facts were materially different from Sky Light where the assessee's conduct had influenced the decision

3. Scope of Section 154: - Section 154's power is restricted to inadvertent or unintentional errors - The Revenue failed to establish that the original assessment was intended for Vedanta

Conclusion

The Court dismissed the appeal, holding that the error in issuing an order in the name of a non-existent entity was a fundamental flaw that couldn't be rectified. This judgment reinforces the principle that jurisdictional errors cannot be cured through rectification provisions.

Full Text:

2025 (1) TMI 912 - DELHI HIGH COURT