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TMI Blog2018 (1) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... e calculations, but it is for reconsidering the issue in accordance with the directions of the ITAT. Wherever, the AO/TPO exercise their discretion after verification, and pass an order, it is incumbent upon them to give the assessee an opportunity to present its case or to appeal against such orders. It is for this reason that the statues provide that the AO shall pass a draft assessment order against which the assessee can either choose to file its objection before the DRP or choose to file an appeal before the CIT (A) and after the assessee exercises its option, the AO can pass the final assessment order in accordance with the directions of the DRP or the assessee can file an appeal before the CIT (A). As per section 144C of the Act, the AO first has to pass the draft assessment order and the choice is with the assessee either to approach the DRP or the CIT (A). Only if the assessee chooses to prefer an appeal before the CIT (A), can the AO pass the final assessment order. Similar facts had arisen in the case of JCB India Ltd (2017 (9) TMI 673 - DELHI HIGH COURT) before the Hon'ble Delhi High Court and the Hon'ble High Court has held that even in the case of a remand by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has prayed for admission of additional grounds of appeal, i.e. (i) against the validity of the assessment; and (ii) exclusion of the above two companies from the list of comparables. 4. The learned Counsel for the assessee, Shri Vijay Mehta, submitted that the challenge against the validity of the assessment is a legal issue and therefore, prayed that the Tribunal may admit the same in view of the decision of the Hon'ble Supreme Court in the case of NTPC Ltd, reported in 229 ITR 383 (S.C). 5. The learned DR, however, opposed the admission of the additional ground stating that the assessee has participated both in the assessment proceedings before the AO as well as the appellate proceedings before the CIT (A) and therefore, challenge to the validity of the proceedings cannot be admitted now at this stage. He drew our attention to the provisions of section 292B of the Act to support his argument. 6. Having regard to the rival contentions and the material on record, we are satisfied that the validity of the assessment can be challenged at any time as it goes to the root of the matter and is a legal issue. With all the facts on record, it can be admitted at this stage als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act on 16.3.2005. Subsequently, on 4.5.2005, the case was selected for scrutiny and notices u/s 143(2) 142(1) were issued and the final assessment order dated 15.12.2006 was passed u/s 143(3) of the Act. In the cause title, the name of the amalgamating company is mentioned as the assessee. Thus, we find that while passing the assessment order, the AO was aware of the amalgamation of the assessee company with Infotech Enterprises Ltd and therefore, in the assessment order, the name of the assessee is mentioned as M/s. Tele Atlas India Pvt. Ltd (now amalgamated with Infotech Enterprises Ltd). The PAN No. AAACT-4446-Q is also of the amalgamating company only. 10. From the additional ground of appeal filed before us, we find that M/s. Tele Atlas Pvt. Ltd has merged with M/s. Infotech Enterprises Ltd on 1.10.2005 i.e. probably after issuance of notices u/s 143(2) and 142(1) of the Act. Further, from the Certificate of Incorporation pursuant to change of name, dated 5.5.2014, the name of M/s. Infotech Enterprises has been changed to Cyient Limited. 11. Further, we also find that in Form No.35 filed before the CIT (A), the assessee is mentioned as M/s. Tele Atlas India Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermissible as there is no provision in Income-Tax to make an assessment thereupon. In the case of Saraswati Industrial Syndicate Ltd. Vs. CIT, 186 ITR 278 the legal position is explained in the following terms: The question is whether on the amalgamation of the Indian Sugar Company with the appellant Company, the Indian Sugar Company continued to have its entity and was alive for the purposes of Section 41(1) of the Act. The amalgamation of the two companies was effected under the order of the High Court in proceedings under Section 391 read with Section 394 of the Companies Act. The Saraswati Industrial Syndicate, the trans free Company was a subsidiary of the Indian Sugar Company, namely, the transferor Company. Under the scheme of amalgamation the Indian Sugar Company stood dissolved on 29th October, 1962 and it ceased to be in existence thereafter. Though the scheme provided that the transferee Company the Saraswati Industrial Syndicate Ltd. undertook to meet any liability of the Indian Sugar Company which that Company incurred or it could incur, any liaiblity, before the dissolution or not thereafter. Generally, where only one Company is involved in change and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter had been dissolved . 11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exit w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said dead person‟. When notice under Section 143 (2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s Spice which was non existing entity on that day. In such proceedings and assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law. 12. Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act. Section 292B of the Act reads as under:- 292B. No return of income assessment, notice, summons or other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the view that the provisions of Section 292B of the 1961 Act do not authorize the AO to ignore a defect of a substantive nature and it is, therefore, that the aforesaid provision categorically records that a return would not be treated as invalid, if the same in substance and effect is in conformity with or according to the intent and purpose of this Act . Insofar as the return under reference is concerned, in terms of Section 140 of the 1961 Act, the same cannot be treated to be even a return filed by the respondent assessee, as the same does not even bear her signatures and had not even been verified by her. In the aforesaid view of the matter, it is not possible for us to accept that the return allegedly filed by the assessee was in substance and effect in conformity with or according to the intent and purpose of this Act. Thus viewed, it is not possible for us to accept the contention advanced by the learned Counsel for the appellant on the basis of Section 292B of the 1961 Act. The return under reference, which had been taken into consideration by the Revenue, was an absolutely invalid return as it had a glaring inherent defect which could not be cured in spite of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee on 8.09.2010. The assessee had challenged the proceedings before the AO itself, but the AO proceeded to complete the assessment in the name of the amalgamating company which order was set aside by the ITAT. On appeal by the Revenue, the Hon'ble High Court taking note of its decision in the case of Spice Enfotainment (Supra) has held as under: 6. In a case of amalgamation, the predecessor of the assessee (being a dissolved company) cannot be found . Consequently, Section 170(2) of the Act applies. This provision clarifies that where the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of the succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor. (Emphasis Supplied) 7. The revenue, however, urges that the assessment is justified because the liabilities of the amalgamating company accrue to the amalgamated (transferee) company. While that is true, the question here is which entity must the assessment be made on. The text of Section 170(2)makes it clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax authorities are nevertheless under an obligation to substitute the successor in place of the amalgamated company. Thus, such a defect cannot be treated as procedural defect . In any event, it is to be noted that the fact of amalgamation of the assessee with the transferee company had been intimated and disclosed in response to the notice under Section 153C on 22.11.2010. Accordingly, this ground, too, has no merit and is rejected. 10. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed. Instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; the order also mentioned the transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to the assessment being completed in the name of the transferee company. According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and complete the assessment proceedings. AO is directed accordingly. 18. As regards the grounds of appeal raised along with Form No.36 and the other additional grounds of appeal, at the time of hearing, the learned Counsel for the assessee submitted that if the two companies challenged by the assessee in its additional grounds of appeal are directed to be excluded from the final list of comparables, the original grounds raised with Form No.36 need no adjudication, since the assessee s margin would thereafter fall with + or _ 5% of the Arithmatic mean margin of the remaining comparable companies. He relied upon the decision of various Benches of this Tribunal for the relevant A.Ys for their exclusion. Since, we have set aside the matter to the file of the AO for reconsideration of the issues after transposing the name of the amalgamated company, we deem it fit and proper to remand this issue also the file of the AO/TPO for reconsideration after giving the assessee a fair opportunity of hearing. Therefore, assessee s appeal for A.Y 2004-05 is treated as partly allowed. ITA No.1053 1054/Hyd/2016 (A.Ys 2006-07 2007-08) 19. In these two years, brief facts are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us. The assessee has raised various grounds of appeal to state that the corporate guarantee was not an international transaction during the relevant A.Y. Further, it is also argued that even while passing the consequential order, the AO has to pass only a draft assessment order against which the assessee can raise its objections before the DRP or choose to file an appeal before the CIT (A) and only after the assessee exercises its options, can the AO pass the final assessment order and therefore, the said order is not sustainable. In support of this contention, the learned Counsel for the assessee has relied upon the judgment of the Hon'ble Delhi High Court in the case of JCB India Ltd vs. DCIT reported in 398 ITR 189 (Del.). 20. The learned DR, on the other hand, supported the order of the AO as well as the DRP. 21. Having regard to the rival contentions and the material on record, we find that the impugned order before us is the order passed by the AO consequent to the directions of the Tribunal. We have also gone through the order of the Tribunal and we find that the Tribunal has set aside the issue to the file of the TPO with a direction to reconsider the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings, provided the same are in substance and in effect in conformity with the intent of purposes of the Act. 20. The Court further observed that Section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. As the Court explained, the issue involved is not about a mistake in the said order but the power of the AO to pass the order. 21. In almost identical facts, in Turner International (supra), this Court held in favour of the Assessee on the ground that it was mandatory for the AO to have passed a draft assessment order under Section 144C of the Act prior to issuing the final assessment order. The following passages from said decision are relevant for the present purposes (Page 180 of 398 ITR): 11. The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of Section 144C(1) of the Act is no longer res intregra. There is a long series of decisions to which reference would be made presently. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before the Assessing Officer can make variations in the returned income of an eligible assessee, as noted, sub-section (1) of Section 144C lays down the procedure to be followed notwithstanding anything to the contrary contained in the Act. This non-obstante clause thus gives an overriding effect to the procedure 'notwithstanding anything to the contrary contained in the Act'. Sub-section (5) of Section 144C empowers the DRP to issue directions to the Assessing Officer to enable him to complete the assessment. Sub-section (10) of Section 144C makes, such directions binding on the Assessing Officer. As per Sub-Section 144C, the Assessing Officer is required to pass the order of assessment in terms of such directions without any further hearing being granted to the assessee. 7. The procedure laid down under Section 144C of the Act is thus of great importance. When an Assessing Officer proposes to make variations to the returned income declared by an eligible assesses he has to first pass a draft order, provide a copy thereof to the assessee and only thereupon the assessee could exercise his valuable right to raise objections before the DRP on any of the proposed variat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adhere to the mandatory requirement of Section 144C (1) of the Act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings. 25. For all of the aforementioned reasons, the Court finds no difficulty in holding that the impugned final assessment orders dated 30th March 2016 passed by the AO for AYs 2006-07, 2007-08 and 2008 -09 are without jurisdiction on account of the failure, by the AO, to first pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order. The Court also sets aside the orders of the TPO dated 30th March 2016 issued pursuant to the remand by the ITAT . 22. In view of the same, the consequential orders dated 29.5.2015 for both the A.Ys are set aside and the AO/TPO is directed to pass the draft assessment order in accordance with the directions of the Tribunal dated 16.01.2014. 23. Accordingly the ground of appeal No.3 is allowed and other grounds which are on the merits of the assessment orders are not adjudicated at this juncture. 24. In the result, assessee ..... 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