Assessment framed in the name of company dissolved by amalgamation not a procedural defect but void. Provisions of section 292B not applicable-High court
ABCAUS Case Law Citation:
ABCAUS 2064 (2017) (09) HC
The Grievance:
The Revenue was aggrieved by the order of the ITAT holding that assessment order passed by the Assessing Officer (‘AO’) was null and void as it had framed in the name of the amalgamating company.
The Substantial Question of Law framed for determination:
The High Court, while admitting the appeal had framed the following question of law:
“Did the ITAT misapply the provisions of Section 170(2) of the Income Tax Act in the circumstances of the case, while concluding that the assessment order was not tenable for having been framed in the name of the non-existent company.”
Assessment Year : 2011-12
Important Case Laws Cited/relied upon by the parties:
Kuldeep Kumar Dubey v. Ramesh Chandra Goyal (2015) 3 SCC 525
Saraswati Industrial Syndicate Ltd. v. CIT [1990] 186 ITR 278 (SC)
Spice Infotainment Ltd. v. CIT (2011) 247 CTR (Del) 500
Brief Facts of the Case:
On 28th November 2011 Suzuki Powertrain India Ltd. (‘SPIL’) filed its return. The return was processed under Section 143(1) of the Income Tax Act, 1961 (‘Act’) and then picked up for scrutiny. Notices under Section 143(2) of the Act were issued.
On 29th January 2013, the High Court passed an order in Company Petition approving the Scheme of Amalgamation (‘Scheme’) by which SPIL (Amalgamating Company) was amalgamated with Maruti Suzuki India Ltd. (‘MSIL’) (Amalgamated Company) with effect from 1st April 2012 (the ‘appointed date’).
The Scheme inter alia provided that,
“all the liabilities and duties on the entire undertaking of the Petitioner/Amalgamating Company be transferred without further act or deed to the Petitioner/Amalgamated Company and accordingly the same shall pursuant to Section 394 (2) of the Companies Act, 1956 be transferred to and become the liabilities of the Petitioner/Amalgamated Company.
Thereafter, MSIL represented SPIL in the assessment proceedings.
Later on, the AO passed the assessment order under Section 143(3) read with Section 144C(1) of the Act in which the name and address of the amalgamating company (SPIL)
MSIL filed an appeal before the ITAT where one of the grounds urged was that the assessment order was without jurisdiction inasmuch as it had been passed in the name of an entity that ceased to exist on the date of the assessment order.
The ITAT accepted the above plea of the MSIL and set aside the assessment order.
Contention of the appellant Revenue:
It was urged that the error, if at all, was a mere mis-description of the party in the assessment order and nothing more. This could not result in the assessment order itself being set aside.
It was pointed out that below the name of the Amalgamating Company, the AO had duly mentioned that it had since been amalgamated with MSIL.
It was further submitted that the record of the assessment proceedings showed that MSIL participated in it fully and raised no objection as to the continuation of the proceedings on the ground of lack of jurisdiction. On the strength of Section 292B of the Act it was contended that the assessee was precluded from questioning the assessment order on the ground that it was passed in the name of a non-existent entity.
Contentions of the Respondent assessee.
Relying on various judgments, it was contended that in all the cases, an identical question had been answered in favour of the Assessee and against the Revenue.
It was pointed out that for the purposes of Section 170(2) of the Act, two assessment orders will have to be passed: one in the name of MSIL itself for the AY in question and the other again in the name of MSIL indicating that the said assessment order is being passed under Section 170(2) of the Act in respect of its tax liability as successor in interest of the Amalgamating company.
Observations made by the High Court:
The High Court observed that in the case of Spice Infotainment, two questions framed by the High Court were as under:
“(i) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the action of the Assessing Officer in framing assessment in the name of “Spice Corp Ltd”, after the said entity stood dissolved consequent upon its amalgamation with Mcorp Private Limited w.e.f. 01.07.2003, was a mere “procedural defect”?
(ii) whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that in view of the provisions of section 292B of the Act, the assessment, having in substance and effect, been framed on the amalgamated company which could not be regarded as null and void?”
Both the aforesaid questions were answered in favour of the Assessee and against the Revenue.
The High Court observed that even thereafter the Revenue had repeatedly brought the said issue before the 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.
It was noted that in many of those 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.
Defect of passing the assessment order in the name of an non-existent entity is mere irregularity?
It was observed that regarding the above question, the Court had already answered it in the case of Dimensions Apparels where the Court rejected the Revenues contention as Section 170(2) applies only where the predecessor could not be found.
Acquiescence under Section 292B
Regarding the submission that under Section 292B of the Act, the successor-in interest is precluded from raising an objection if it has participated in the assessment proceedings, the Court noted, was negated in the case of Spice Infotainment where it was held that once it was found that the assessment was framed in the name of a non-existent entity it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292-B of the Act.
Held:
Question of Law framed was answered in the negative, i.e. in favour of the assessee and against the Revenue.
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