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TMI Blog2018 (4) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional defect and is not merely a technical defect which could not be cured by the provisions of Section 292B. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 07/12/2017, has raised additional grounds of appeal which read as follows:- 13. The Learned AO has erred in passing the final assessment order in respect of Assessment Year 2010-11 on a non-existent entity i.e.Synovate India Pvt.Ltd. which has been merged with IPSOS Research Pvt. Ltd with effect from 1st April,2012 vide order of the Hon'ble Bombay High Court dated 3rd May,2013. Hence the said final assessment order is bad in law and deserves to be quashed. 14. The assessment order is bad in law having been passed by an officer having no jurisdiction over the assessee. Since additional grounds raised by the assessee are legal grounds and do not require appreciation of new facts, the same are taken on record in terms of judgment of Hon'ble Court rendered in Jute Corporation of India Ltd. Vs. CIT [187 ITR 688] and National Thermal Power Co. Ltd. Vs. CIT [229 ITR 383]. 3.1 Facts in brief are that the assessee being resident corporate assessee engaged in the field of market research was assessed u/s 143(3) pursuant to directions of Ld. DRP vide final assessment order dated 12/01/2015 passed by Ld. Additional Commissioner of Income-tax-11(2), Mumbai wherein the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancing, accounting, legal and personal matters, communication, branding and public affairs etc. The group companies nominated SMSL to aggregate the full costs of the said resources and then share / allocate these costs amongst the group companies on continuing basis. Besides actual cost, the assessee has paid a mark-up of 6% to SMSL during the impugned AY, which is claimed by the assessee to be at Arm's Length in terms of an external comparability study performed by Ceteris, US LLC in 2007. 3.4 The main thrust of Ld. TPO was on verification of factum of receipt of actual services by the assessee against the payments made to its AE. Since the assessee failed to file any evidences to substantiate the receipt of service, Ld. TPO concluded the matter by making following observations:- The assessee has failed to demonstrate that it has received services. It has further failed to demonstrate the incurrence of cost by the AE as well as its allocation among the various group entities. In this view of the matter, there could neither be any cost contribution or payment for such service to the AE. Further, as no expenditure would have been incurred, there is no necessity to apply a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us. 5.1 The Ld. Authorized Counsel for Assessee [AR], taking us through the documents placed in the paper-book reiterated the stand by placing reliance on several judicial pronouncements rendered on similar factual matrix and submitted that the impugned additions were not justified since the payments made by assessee were duly supported by various agreements / documents / emails etc. and the assessee derived huge benefits in terms of Shared Resources Allocation Agreement. 5.2 At the same time, the final assessment order has been assailed on legal grounds by drawing our attention to the fact that the final assessment has been made on an entity, which was not in existence at the time of passing of the final order, which vitiates the entire proceedings itself in terms of certain judgment of Hon'ble apex Court coupled with several other judicial pronouncements and therefore, the same is liable to be set aside. In this regard, reliance has been placed on following judicial pronouncements:- (i) CIT Vs. Spice Infotainment Ltd & Others [Civil Appeal No. 285 of 2014 Supreme Court] (ii) Spice Infotainment Ltd Vs CIT [ITA No. 475-476 of 2011 Delhi High Court] (iii) PCIT Vs. Sap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 381 Calcutta High Court 06/06/2016] (iii) Subhlakshmi Vanijya (P) Ltd. Vs. CIT [60 Taxmnan.com 60 Kolkata Tribunal 30/07/2015] (iv) Maruti Suzuki India Ltd. Vs. DCIT [72 Taxmann.com 164 Delhi Tribunal 21/07/2016] (v) Jitendra Chandralal Navlani Vs Union of India [80 Taxmann.com 107 Bombay High Court 08/06/2016] 6.1 We have carefully considered the rival contentions and perused relevant material on record. At the outset, it is noted that the assessee, by way of additional ground of appeal, has raised a pertinent legal ground which goes to the root of the matter and questions the very validity of the assessment proceedings itself and therefore, the same is taken up first. 6.2 To appreciate the issue in correct perspective, the details of various orders passed by lower authorities are tabulated below:- No. Nature of Order Dated Authority Passed in the name of 1. Draft Assessment order-AO 26/03/2014 Additional commissioner of Income Tax-8(3) M/s. Synovate India Pvt. Ltd. 2. Order u/s 92 CA(3)-TPO 21/01/2014 Additional commissioner of Income Tax-Transfer Pricing II(1) M/s. Synovate India Pvt. Ltd. 3. Directions u/s 144C(5)-DRP 16/12/2014 Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to Ld. TPO where the assessee, at para-2 has clearly mentioned that 'we have merged with Ipsos Research Pvt. Ltd. with effect from 03rd September, 2013 vide order of Bombay High Court dated 03rd May, 2013'. The said reply has been given on the letter head of the new company and the letter has been signed as Authorised Signatory of new entity i.e. IPSOS Research Pvt. Ltd. The letter dated 02/06/2014 has been written by Deputy Commissioner of Income Tax 8(3) regarding recovery of demand for AY 2008-09 and the same is addressed to 'The Principal Officer, M/s Synovate India Pvt. Ltd. (Since merged with IPSOS Research Pvt. Ltd.). The letter dated 10/07/2014 by Income Tax Officer (HQ) regarding application of stay of demand for AY 2008-09 is similarly addressed. The letter dated 05/01/2015 by Joint Commissioner of Income Tax (Transfer Pricing)-2(3) regarding Transfer Pricing Proceedings for AY 2011-12 is also similarly addressed. All these evidences lend certain strength to the argument of Ld. AR that the stated fact was well within the knowledge of revenue and the same has also been recognized by way of various correspondences. Last, but not the least, upon perusal of assessment tab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrar of Companies. 8. A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. This position is even accepted by the Tribunal in para-14 of its order extracted above. Having regard to this consequence provided in law, in number of cases, the Supreme Court held that assessment upon a dissolved company is impermissible 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 transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the grounds stated therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. Smith (Plant Hire) Ltd. Vs. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342 (CA) that "once a company is dissolved it becomes a non-existent party and therefore no action can be brought in its name. Thus an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the mandate of Section 140 of the Act. The Court was of the opinion that such a return cannot be treated as return even a return filed by the assessee and this inherent defect could not be cured inspite of the deeming effect of Section 292B of the Act. Therefore, the return was absolutely invalid and assessment could not be made on an invalid return. In the process, the Court observed as under:- "Having given our thoughtful consideration to the submission advanced by the learned Counsel for the appellant, we are 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O to first substitute the name of the appellant in place of M/s Spice and then issue notice to the appellant. However, such a course of action can be taken by the AO only if it is still permissible as per law and has not become time barred. The ratio of aforesaid judgment has subsequently been followed by the same court in its various subsequent judgments including PCIT Vs. Maruti Suzuki India Ltd. [397 ITR 681] where the Hon'ble court has further observed as under:- 12. Even thereafter the Revenue has repeatedly brought the said issue before this Court in a large number of cases where, in more or less identical circumstances, the AO had passed the assessment order in the name of the entity that had ceased to exist as on the date of the assessment order. In many of these cases, as in the present case, the AO, after mentioning the name of the Amalgamating Company as the Assessee, mentioned below it the name of the Amalgamated Company. Illustratively the cases are: (i) CIT v Micra India (P.) Ltd. [2015] 231 Taxman 809/57 taxmann.com 163 (Del); (ii) CIT v. Micron Steels (P.) Ltd. [2015] 372 ITR 386/233 Taxman 120/59 taxmann.com 470 (Del) (iii) CIT v. Dimension Apparels (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there can be no estoppel in law." Vived Marketing Servicing Pvt. Ltd., (supra) had also reached the same conclusion.' 16. The legal position having been made abundantly clear in the above decisions, the Court has no hesitation in answering the question framed in the negative, i.e. in favour of the Assessee and against the Revenue. Similar view has been expressed by Hon'ble Bombay High Court in the case of Jitendra Chandralal Navlani v. UOI [2016 386 ITR 288] in the following manner:- 'On receipt of the reopening notice, the Chartered Accountant of the erstwhile M/s. Addler Security Systems Pvt. Ltd., had originally accepted the some but immediately thereafter by letter dated 5th May, 2015 pointed out that the company M/s. Addier Security Systems Pvt. Ltd. is no longer in existence as it has been dissolved. Consequent thereto, the Assessing Officer has also issued a notice under Section 142(1) of the Act to one of the petitioner who was the Director of erstwhile M/s. Addler Security Systems Pvt. Ltd. (since dissolved). In response, the Director of the erstwhile M/s. Addler Security Systems Pvt. Ltd., pointed out that the company has already been dissolved and it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Tribunal is relevant:- 7. We have carefully considered the rival submissions. The crux of the controversy in the present appeal revolves around the validity of the action of the Assessing Officer in finalizing the assessment order on 19.12.2008 in the name of ITICL, a company which was non-existent as on that date, since it stood amalgamated with IHL w.e.f. 1.4.2007 and stood dissolved and struck-off from the records of the Registrar of Companies on 5.2.2008 consequent to the scheme of amalgamation approved by the Hon'ble Bombay High Court on 14.12.2007. 8. In the case of Spice Infotainment Ltd. (supra), the facts were that a return was filed for Assessment Year 2002-03 on 30.10.2002 by M/s. Spice Corp Ltd., i.e., the amalgamating company. Subsequently, vide order dated 11.2.2004 passed by the Hon'ble High Court, the said company stood amalgamated with M/s. MCorp Private Ltd., i.e., the amalgamated company w.e.f. 1.7.2003. The return so filed was picked up for scrutiny assessment vide notice u/s. 143(2) of the Act dated 18.10.2003 in the name of M/s. Spice Corp Ltd., i.e., the amalgamating company. In the course of assessment proceedings, the factum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar conclusion. In the case before the Hon'ble Karnataka High Court, one M/s. SSS Ltd. stood amalgamated with Intel Technology India Pvt. Ltd. w.e.f. 1.4.2004; prior to that, it filed a return of income on 28.11.2003 for Assessment Year 2003-04 and an assessment order was passed on 27.3.2006 in the name of the predecessor amalgamating company, i.e., M/s. SSS Ltd. This assessment order was sought to be challenged on the ground that as on 27.3.2006, i.e., the date of passing of assessment order, the said concern had ceased to exist upon its amalgamation with the successor company. In this factual background, the Hon'ble Karnataka High Court, following the judgement of the Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. (supra), answered the following questions of law in favour of the assessee and against the Revenue. "(1) Whether the Tribunal was correct in holding that the order passed by the Assessing Officer on M/s Software & Silicon Systems India Pvt. Ltd., after being intimated about the merger with M/s Intel Technology India Pvt. Ltd., was without jurisdiction against the said company and null and void ? (2) Whether the Tribunal was correct in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Ltd. (supra) reveals that a similar position was canvassed by the Revenue, but the Hon'ble High Court held that the assessment order passed in the name of the erstwhile company was void and such a defect cannot be treated as a procedural defect. In our considered opinion, the stand of the Revenue as well as the CIT(A) on this aspect is clearly untenable having regard to the aforesaid discussion. 13. In the result, we set-aside the action of the Assessing Officer in framing the assessment against ITICL on 19.12.2008 as the said company was non-existent as it stood amalgamated with IHL w.e.f. 1.4.2007, following the scheme of amalgamation approved by the Hon'ble Bombay High Court on 14.12.2007 To the similar effect is the decision of the Mumbai Tribunal in the case of Ambuja Cements Rajasthan (supra). The Hon'ble Bombay High Court in the case of Jitendra Chandralal Navlani & Anr. (surpa) also upholds the proposition that no assessment can be made in respect of non-existent entity. In fact, the judgment of the Hon'ble Bombay High Court also brings out that framing of assessment in respect of a non-existent entity goes to the root of the jurisdiction of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee since we have already noted that the fact of amalgamation was well within the knowledge of revenue. 7. Respectfully following the catena of judgment in assessee's favor, we are inclined to hold that the final assessment order dated 12/01/2015 passed in the name of non-existing entity having jurisdictional defect could not be sustained and therefore, liable to be quashed. We order accordingly. 8. Since, we have quashed assessment on legal ground as aforesaid, the adjudication of other grounds raised in assessee's appeal becomes merely academic in nature and we see no fruitful reason to delve into the same and therefore, not considered by us. 9. The assessee's appeal stands allowed in terms of our above order. ITA No. 1517/Mum/2016 AY 2011-12 10.1 In this year, the assessee, in similar fashion, has been saddled with quantum additions of ₹ 7.83 crores on account of Transfer Pricing adjustment and disallowance u/s 40(a)(i) vide final assessment order dated 28/01/2016. Aggrieved, the assessee is before us with similar grounds of appeal as well as additional grounds of appeal. 10.2 The details of Assessment Order passed in this year could be tabul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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