2016 (10) TMI 1148 - AT - Income Tax

Appeal allowed, revision order quashed under Income Tax Act; assessment void ab initio.

The Tribunal allowed the appeal, quashing the revision order by the Principal CIT under section 263 of the Income Tax Act, as the assessment order passed ... Revision u/s 263 of a non-existent company - Held that:- We find that pursuant to scheme of merger approved by Hon’ble Bombay High Court the assessment order should not have been passed in the name of the company which has ceased to exist w.e.f. 17/04/2013. We also find that the Principal CIT himself was of the opinion that the assessment order issued in the name of EMML was not the correct status in whose name the assessment order was required to be passed after the merger of the assessee company i.e. EMML ceased to exist form 17.04.2013 by the time assessment order was passed in case of EMML i.e. 29.10.2013. In the given facts, we are of the view that the assessment order passed by ITO, Ward- 5(3)(1) dated 29/10/201 in the name of EMML is bad-in-law. The consequence of an order which is bad-in-law is that the order is not something that is not good legally, in other words, it is illegal, invalid from outset and ab-initio void. In other words, the said order does not exist. The fact that the assessment order dated 29-10-2013 passed by the AO in the name of EMML is no order at all in law, the question of revision u/s 263 of the Act of that order which is non-existent is not permitted. We find that Section 263 of the Act permits the CIT to pass an order enhancing or modifying the assessment or cancelling the assessment and directing fresh assessment. These required an order to be in existence albeit illegal order is an order not in existence and therefore is not an order at all and cannot be revised, because under Civil Procedure Code an order against a dead person is a nullity. Accordingly, we quash the revision order passed by the Principal CIT u/s 263 of the Act on jurisdictional issue itself. Issues Involved:1. Legality of the Principal CIT's order under section 263 of the Income Tax Act, 1961, revising the assessment of a non-existent company.2. Jurisdictional validity of the Principal CIT's order under section 263 of the Income Tax Act, 1961.3. Applicability of section 292BB of the Income Tax Act, 1961, in the context of the assessment order passed in the name of a non-existent company.Detailed Analysis:1. Legality of the Principal CIT's Order under Section 263:The first issue concerns whether the Principal CIT's order under section 263 of the Income Tax Act, 1961, revising the assessment of a non-existent company, is legal. The assessee argued that the assessment order dated 29-10-2013 was passed in the name of Emerging Money Mall Ltd. (EMML), which had ceased to exist due to its merger with Reliance Capital Ltd. (RCL) effective from 31-03-2013, as sanctioned by the Hon’ble High Court of Bombay. The Principal CIT issued a show-cause notice under section 263 on 07-04-2015, proposing to set aside the assessment order on the grounds that it was erroneous and prejudicial to the interest of the revenue. However, the Principal CIT himself observed that the assessment order was bad in law as it was passed in the name of a non-existent company. The Tribunal found that the assessment order passed by the ITO in the name of EMML was illegal, invalid from the outset, and ab initio void, as it was passed in the name of a company that had ceased to exist.2. Jurisdictional Validity of the Principal CIT's Order under Section 263:The second issue is the jurisdictional validity of the Principal CIT's order under section 263. The Tribunal referred to the Hon’ble Delhi High Court judgment in the case of Spice Infotainment Ltd. Vs. CIT, which held that an assessment made against a non-existent amalgamating company is invalid and liable to be struck down. The Tribunal noted that the Principal CIT had issued two show-cause notices, one on 07-04-2015 and another on 17-02-2016, both pointing out that the assessment order was passed in the name of a non-existent company. The Tribunal concluded that since the assessment order dated 29-10-2013 was passed in the name of a non-existent company, it was not an order at all in law. Consequently, the revision under section 263 of the Act of that non-existent order was not permitted. The Tribunal quashed the revision order passed by the Principal CIT on the jurisdictional issue itself.3. Applicability of Section 292BB:The third issue is the applicability of section 292BB of the Income Tax Act, 1961, which deals with the validity of notices, assessments, etc., despite certain procedural defects. The Tribunal referred to several judgments, including CIT vs. Norton Motors and CIT vs. Harjinder Kaur, which clarified that section 292BB cannot cure jurisdictional defects such as issuing an assessment order in the name of a non-existent entity. The Tribunal held that the framing of an assessment against a non-existent entity/person is not a procedural irregularity but a jurisdictional defect, which cannot be cured by invoking section 292BB.Conclusion:The Tribunal allowed the appeal of the assessee, quashing the revision order passed by the Principal CIT under section 263 of the Act on jurisdictional grounds. The Tribunal did not address other issues raised on merits, as the jurisdictional issue itself was sufficient to decide the appeal in favor of the assessee. The assessment order dated 29-10-2013 passed in the name of EMML was declared invalid and non-existent in law.