Assessments made in the name of nonexistent entities are immediately void
Fact and issue of the case
Briefly, the facts of the case are that the assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of providing Information Technology Enabled Services (ITES) to Barclays Bank PIc, United Kingdom (BBPLC) and its affiliates. The return of income for the assessment year 2014-15 was filed on 25.11.2014 declaring total income of Rs.1,13,02,89,902/- after claiming deduction u/s 10AA of the Income Tax Act, 1961 (‘the Act’). The appellant company also reported international transactions entered with its AEs.
On noticing the international transactions, the Assessing Officer referred the matter to the Transfer Pricing Officer (‘TPO’) for the purpose of benchmarking the international transactions. The TPO vide order dated 30.10.2017 suggested the TP adjustment of Rs.95,88,72,618/-.
On receipt of the TPO’s order, the Assessing Officer passed a draft assessment order dated 30.12.2017 making disallowance of the excess deduction of claimed u/s 10AA of the Act.
On receipt of the draft assessment order, the appellant had not chosen to file objection before the DRP and the final assessment order dated 20.03.2018 was passed by the Assessing Officer after making disallowance the excess deduction claimed u/s 10AA amounting to Rs.8,92,33,721/-.
Being aggrieved by the final assessment order, an appeal was filed before the ld. CIT(A) contending inter alia that the assessment order passed is null and void, as the assessment was made on nonexisting entity inter alia challenged the addition made above, and also challenging the very validity of the assessment on the ground that the assessment order was passed in the name of non-existing company i.e. M/s. Barclays Shared Services Pvt. Ltd. in respect of Barclays Global Service Centre Pvt. Ltd.. The CIT(A) had dismissed the said ground i.e. challenging the very validity of the assessment on the ground that when the notice u/s 143(2) was issued, the amalgamating company was very much in existence. However, the ld. CIT(A) partly granted relief in respect of addition made by the Assessing Officer.
Being aggrieved by that part of the order of the ld. CIT(A), which is against the Revenue, the Revenue is in appeal before us in ITA No.46/PUN/2021. The assessee company filed a Cross Objection being aggrieved by the decision of the ld. CIT(A) confirming the validity of the assessment made in the name of amalgamating company i.e. M/s. Barclays Shared Services Pvt. Ltd., which was a non-existing entity.
First, we shall take up the Cross Objection bearing C.O. No.08/PUN/2021, which goes to the very root of the jurisdiction of the Assessing Officer. The factual background of the case is as under :-
The assessee company M/s. Barclays Shared Services Pvt. Ltd. (amalgamating company) was amalgamated with Barclays Technology Centre India Pvt. Ltd. vide order of the Hon’ble National Company Law Tribunal (‘NCLT’) dated 02.11.2017 formerly known as M/s. Barclays Shared Services Pvt. Ltd. now presently known as Barclays Global Service Centre Pvt. Ltd.. The appointed date for amalgamation was 01st April, 2017. However, the Scheme was approved by the Hon’ble NCLT on 02.11.2017 but, became effective only on filing the prescribed Form INC-28 along with prescribed fee before the Registrar of the Company before April, 2017. The return of income was filed in the name of amalgamating company, as the process of amalgamation was not completed. During the course of assessment proceedings under consideration, the assessee company had brought to notice of the Assessing Officer that the factum of amalgamation vide letter dated 15.12.2017 along with copies of the amalgamation scheme dated 26.12.2017 placed at page no.1199 of Paper Book. In-spite of this, the Assessing Officer passed the assessment order in the name of amalgamating company.
Observation of the court
On the similar lines, there are decisions of Karnataka High Court in the case of eMudhra Ltd. vs. ACIT, 15 ITR-OL 249 (Kar.) and Gayatri Microns Ltd. vs. ACIT, 424 ITR 288 (Guj.). However, a contrary view was taken by the Hon’ble Madras High Court in the case of Oasys Green Tech Pvt. Ltd. vs. ITO 426 ITR 124 (Mad.).
Subsequently, even the Hon’ble Supreme Court in the case of PCIT vs. Mahagun Realtors (P.) Ltd., 443 ITR 194 (SC) considering the conduct of the assessee that no intimation by the assessee regarding the amalgamation of the company and the original return of income was not even revised, though the time was available after the amalgamation and the assessee company had fully held it itself as an assessee before all forums, held that the assessment made in the name of amalgamating company is valid in law. On perusal of the decision of the Hon’ble Supreme Court in the case of Mahagun Realtors (P) Ltd. (supra), it can be discerned that the decision was rendered based on the conduct of the assessee before all the forums. The Hon’ble Supreme Court itself had observed vide para 33 of the said decision that the facts in the cases of Maruti Suzuki India Ltd., Spice Enfotainment Ltd. referred supra were distinguishable. What weighed with Hon’ble Supreme Court in arriving at the conclusion reached is that the assessee had deliberately mislead the Department by not informing the Assessing Officer as well as the CIT(A) the factum of amalgamation. Thus, it is clear that the decision in the Mahagun Realtors (P.) Ltd. (supra) was rendered in the peculiar facts of that case. The Hon’ble Supreme Court had not expressly overruled its earlier decision, rendered in the case of Maruti Suzuki India Ltd. (supra) (A decision rendered by Bench of three Judges). The Hon’ble Supreme Court had not laid down a proposition that even if the factum of amalgamation was brought to the notice of the AO, still an assessment can be made in the name of the amalgamating company. In our considered opinion, this decision is not an authority of proposition, that an assessment can be made in the name of non-existing entity, even though the Assessing Officer was put on notice of factum of amalgamation.
In the light of above discussion, we are of the considered opinion that the decision of the Hon’ble Supreme Court in the case of Mahagun Realtors (P.) Ltd. (supra) cannot be interpreted to mean that even in the case where the factum of amalgamation was put to the notice of AO, still the assessment made in the name of amalgamating company i.e. non-existing company is valid in law.
The fact situation of the present case squarely falls within fact situation of the cases of Maruti Suzuki India Ltd., Spice Enfotainment Ltd. referred supra and the decision of the Hon’ble Bombay High Court in the case of Alok Knit Exports Ltd. vs. DCIT, 446 ITR 748 (Bom.) and Teleperformance Global Services Pvt. Ltd. vs. ACIT, 435 ITR 725 (Bom.).
Therefore, we have no hesitation to hold that the assessment order passed by the Assessing Officer in the name of non-existing entity is null and void ab initio. Accordingly, we hereby quash the assessment order.
In the result, the Cross Objection filed by the assessee stands allowed.
Now, we shall take up the appeal of the Revenue in ITA No.46/PUN/2021. Since the assessment order is quashed, the appeal of the Revenue becomes infructuous and hence the same is dismissed. Thus, the appeal filed by the Revenue stands dismissed.
To sum up, the Cross Objection filed by the assessee stands allowed and the appeal filed by the Revenue stands dismissed. Order pronounced on this 02nd day of January, 2022.
Read the full order from hereD-gst-1
The tribunal has ruled in favour of the assessee and dismiss the appeal.