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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Tara Vitasta Ganju, JJ.
Commissioner of Income Tax – Appellant
Versus
Sony Mobile Communications Ind Pvt. Ltd. (Now Merged With Sony India Pvt. Ltd.) – Respondent
ITA 115 of 2019
Decided On : 02-02-2023
Income Tax - Assessment Order - Section 143(2) - 143(3) - 144C - Maruti Suzuki India Ltd., (2019) 416 ITR 613 (SC) - [Section 143(2), Section 143(3), Section 144C] - The court considered whether the assessment order framed against a company, which was not in existence, was legal and valid against the amalgamated company. The court held that the assessment framed by the Assessing Officer on a non-existent company is a nullity in the eyes of law and void, and the provisions of section 292B cannot rescue the department. The additional ground raised by the assessee was allowed. The court distinguished the judgment in Maruti Suzuki based on the facts of the case and held that the mistake cannot be corrected under Section 292B of the Act.
Fact of the Case:
The appeal concerned the assessment order dated 22.12.2014 under Section 143(3) read with Section 144C of the Income Tax Act, 1961, framed against a company that was not in existence, and its validity against the amalgamated company.
Finding of the Court:
The court found that the assessment order framed against a non-existent company is a nullity in the eyes of law and void, and the provisions of section 292B cannot rescue the department. The additional ground raised by the assessee was allowed, and the various other grounds raised by the assessee in appeal were not adjudicated being academic in nature.
Issues: The issues involved whether the assessment order framed against a non-existent company was legal and valid against the amalgamated company, and whether the mistake could be corrected under Section 292B of the Act.
Ratio Decidendi: The court held that the assessment framed by the Assessing Officer on a non-existent company is a nullity in the eyes of law and void, and the provisions of section 292B cannot rescue the department. The mistake could not be corrected under Section 292B of the Act.
Final Decision: The appeal was disposed of in favor of the respondent/assessee, and the impugned order was sustained.
JUDGMENT
[Physical Hearing/Hybrid Hearing (as per request)]
Rajiv Shakdher, J. (Oral)
1. This appeal is directed against the order dated 06.07.2018 passed by the Income Tax Appellate Tribunal [in short "Tribunal"] concerning Assessment Year (AY) 2010-2011.
2. This appeal has a chequered history, inasmuch as it has been placed before us, on account of a difference of opinion in the coordinate bench which was constituted at the relevant point in time. It is evident from a perusal of the order dated 18.05.2021, passed by a bench comprising Hon'ble Mr Justice Rajiv Sahai Endlaw [as he then was] and Hon'ble Mr Justice Sanjeev Narula, that two issues were being considered when the said order was passed:
(i) First, as to whether the Tribunal had rightly entertained the additional ground raised before it? The additional ground concerned the jurisdiction of the AO in having the assessment order framed against a company, which was not in existence.
(ii) Second, whether this was a case, in which a substantial question of law arose, having regard to the judgment rendered by the Supreme Court in Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Ltd., (2019) 416 ITR 613 (SC).
2.1. Insofar as the first issue is concerned, both learned judges were of the view, that the Tribunal had correctly entertained the additional ground raised before it which concerned facets involving jurisdiction. This is apparent from a perusal of paragraph 18 and 22 of the order dated 18.05.2021.
3. It is in these circumstances, that the matter was then listed before the roster bench, on 27.07.2021. By the time the order dated 27.07.2021 was passed, the roster for Direct Taxes got changed.
3.1. On 27.07.2021, the roster bench which thereafter dealt with Direct Tax framed the following question of law:
"a) Whether notice under Section 143(2) of the Income Tax Act, 1961 having been issued in the name of erstwhile existing company, would the assessment order be legal and valid against the amalgamated company?
4. The facts, which are necessary for deciding the question of law, as framed, are captured by the Tribunal in the impugned order. Broadly, the facts necessary for adjudication are the following:
(i) The earlier avatar of the respondent/assessee was a company, going by the name Sony Ericsson Mobile Communications (India) Private Limited.
(ii) The Income Tax return concerning the aforementioned assessment year was filed by Sony Ericsson Mobile Communications (India) Private Limited.
(iii) The name of the company i.e., Sony Ericsson Mobile Communications (India) Private Limited was changed to Sony Mobile Communications (India) Private Limited [in short "erstwhile company"], with effect from 18.04.2012.
5. Pursuant to a scheme of amalgamation sanctioned by this Court via judgment dated 23.07.2013, the erstwhile company merged into Sony India Pvt. Ltd. i.e., the respondent/assessee. As per the scheme of amalgamation, the merger took place with effect from 01.04.2013.
6. The record shows, that on 06.12.2013, a communication was addressed to the appellant/revenue, informing it about the factum of merger. This communication was accompanied by the scheme of amalgamation, as sanctioned by this Court.
6.1. Importantly, in the interregnum i.e., when the erstwhile company was in existence, a notice under Section 143(2) of the Income Tax Act [in short "Act"] was issued on 29.08.2011. This Assessing Officer (AO), on, 02.05.2012, followed this with a questionnaire issued under Section 142(1) of the Act, which was served, once again, on the erstwhile company, albeit after the change in name had been effected, insofar as the erstwhile company was concerned.
7. The record also shows (and this is something concerning which there is no dispute), that the AO referred the matter to the Transfer Pricing Officer (TPO) with regard to the determination of Arm's Length Price (ALP) involving the international transaction said to have been undertaken by the respondent/asse
Assessments made under Section 153A against non-existent entities are void ab initio, confirming jurisdictional deficiencies invalidate the assessment process.
An assessment notice issued against a non-existing entity post-amalgamation is void ab initio, reinforcing the principle that an amalgamated company ceases to exist legally.
Assessment orders based on non-existent entities are void and not merely procedural irregularities; jurisdictional issues must be addressed to ensure tax law consistency.
Proceedings against a dissolved company are void and cannot be sustained under the Central Goods and Services Tax Act.
Amalgamation of company – An assessment can always be made and is supposed to be made on Transferee Company taking into account income of both Transferor and Transferee Company.
Assessment orders against non-existing entities post-amalgamation are void ab initio, necessitating assessments in the name of the amalgamated company.
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