2020 (6) TMI 367 - AT - Income Tax

Assessment Order Void for Non-Existent Company; Delay Justified Due to Pandemic

Diversey India Hygiene Private Ltd Versus Dy Commissioner of Income Tax International Taxation Circle 2 (2) (1), Mumbai

The Tribunal held that the assessment order conducted in the name of a non-existent amalgamating company was void ab initio and set aside the assessment. ... Assessment in the name of a non-existent amalgamating company and under a non existent PAN - HELD THAT:- We are in considered agreement with the views so expressed by the coordinate bench, in the light of Maruti Suzuki [2010 (7) TMI 84 - DELHI HIGH COURT]. These observations are in the context of the revision proceedings but the principle remains the same, i.e. an entity, which does not exist any longer, cannot be subjected to being framed assessment on. In the present case, assessee, on which assessment is framed and the PAN number used for the said purpose, did not exist in the eyes of law. To this extent, the issue is squarely covered in favour of the assessee. There can be minor variation on the facts of each case, but these minor variations, without having substantive issue on the main facts, donot really matter. The principle laid down in the judicial precedents clearly applies on these facts.We hold that the assessment on a non-existent entity was bad in law. We accordingly set aside the same. Issues Involved:1. Validity of the assessment order passed in the name of a non-existent amalgamating company.2. Procedural compliance regarding the pronouncement of the order beyond the stipulated 90 days.Detailed Analysis:Issue 1: Validity of the Assessment OrderThe primary grievance raised by the appellant was that the assessment was conducted in the name of a non-existent amalgamating company, Diversey India Private Limited, using an invalid PAN number. The appellant argued that this assessment should be considered void ab initio and struck down as bad in law.The Tribunal noted that the Assessing Officer (AO) was aware of the merger and the new entity, Diversey India Hygiene Pvt Ltd, yet proceeded with the assessment in the name of the non-existent company. The Tribunal cited the Hon’ble Supreme Court’s judgment in PCIT Vs Maruti Suzuki India Ltd, which established that an assessment framed in the name of a non-existent entity is void ab initio. The Tribunal also referenced a coordinate bench decision in Snowhill Agencies Pvt Ltd Vs PCIT, which dealt with a similar issue.The Tribunal emphasized that once a company ceases to exist legally and its PAN number is invalid, no assessment can be framed in its name. The Tribunal reiterated that such an assessment is not merely a procedural defect but a jurisdictional defect, rendering the assessment order null and void.The Tribunal concluded that the assessment on a non-existent entity was bad in law and set aside the assessment order. Consequently, all other grievances raised by the assessee were rendered infructuous and dismissed.Issue 2: Procedural Compliance Regarding Pronouncement of OrderThe Tribunal addressed the procedural issue of pronouncing the order beyond the stipulated 90 days from the conclusion of the hearing. Rule 34(5) of the Income Tax Appellate Tribunal Rules, 1963, generally requires orders to be pronounced within 90 days, but allows for exceptions in extraordinary circumstances.The Tribunal acknowledged the unprecedented situation caused by the COVID-19 pandemic, which led to nationwide lockdowns and severe restrictions on judicial functioning. The Tribunal referred to orders from the Hon’ble Supreme Court and Hon’ble Bombay High Court, which extended limitations and acknowledged the extraordinary circumstances.The Tribunal reasoned that the lockdown period should be excluded from the 90-day time limit for pronouncement of orders, emphasizing that the law should be interpreted pragmatically, considering ground realities. The Tribunal concluded that the delay in pronouncement due to the lockdown was justified and in compliance with the spirit of Rule 34(5).Conclusion:The appeal was allowed, and the assessment order passed in the name of the non-existent amalgamating company was set aside. The procedural delay in pronouncement of the order was justified due to the extraordinary circumstances of the COVID-19 pandemic. The order was pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.