2020 (9) TMI 151 - AT - Income Tax

Tribunal quashes assessments on non-existent entity for multiple years, revenue appeals dismissed, assessee cross objections allowed.

The Tribunal upheld the CIT(A)'s decision to quash the assessments for the years 2008-09, 2010-11, and 2011-12, as they were conducted on a non-existent ... Assessment u/s 153A - assessment against a non-existing entity/person - HELD THAT:- The framing of an assessment against a non-existing entity/person goes to the root of the matter, which is not a procedural irregularity, but a jurisdictional defect as there cannot be any assessment against a dead person. A similar view has been expressed by the Hon’ble Karnataka High Court in the case of Intel Technology India Pvt. Ltd. [2015 (5) TMI 614 - KARNATAKA HIGH COURT] where it was held that framing of an assessment on a non-existing entity or a person is not a procedural irregularity but a jurisdictional defect, which cannot be cured by invoking the provisions of section 292B of the Act. In this case, there is no doubt of whatsoever with regard to the fact that the firm M/s. R.R. Gold Palace was not existent at the time of search and even at the time of framing assessment u/s 143(3) r.w.s. 153A of the Act. The assessee has informed the A.O. the fact of non-existence of the firm by way of a letter dated 14.8.2014 when the A.O. issued notice u/s 153A of the Act in the name of the assessee for filing return of income and opposed issuance of notice on non-existing entity. Although the assessee has filed return in response to notice issued u/s 153A of the Act, but such return has been filed under protest in order to comply with statutory provisions of the Act. Therefore, we are of the considered view that the firm was not in existence and was ceased to exist on the date of search and mere holding a PAN does not alter the legal position that the firm was not in existence and accordingly, the assessment framed u/s 143(3) r.w.s. 153A of the Act is void and ab initio. CIT(A) after considering the relevant facts has rightly quashed assessment order passed by the A.O. as null and void. We do not find any error or infirmity in the order of the CIT(A) and hence, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the revenue. Issues Involved:1. Validity of search and assessment on a non-existent entity.2. Jurisdiction of the Assessing Officer (AO) in issuing notice under Section 153A.3. Applicability of Section 170 of the Income Tax Act, 1961.4. Relevance of judicial precedents cited by the assessee.Issue-wise Detailed Analysis:1. Validity of Search and Assessment on a Non-Existent Entity:The primary issue was whether the search action under Section 132 and the subsequent assessment under Section 153A on a non-existent entity, M/s. R.R. Gold Palace (a partnership firm converted into a private limited company), were valid. The Tribunal noted that the partnership firm ceased to exist on 25.10.2011, and the search was conducted on 08.02.2013. The CIT(A) observed that framing an assessment on a non-existent entity is a jurisdictional defect, rendering the assessment void ab initio. The Tribunal upheld this view, citing judicial precedents like Spice Infotainment Ltd. vs. CIT and Intel Technology India Pvt. Ltd., which held that assessments on non-existent entities are invalid and cannot be cured by Section 292B of the Act.2. Jurisdiction of the Assessing Officer in Issuing Notice under Section 153A:The revenue contended that the assessee could not question the AO's jurisdiction in issuing the notice under Section 153A, as per Section 124(3) of the Act. However, the Tribunal found that since the firm was non-existent at the time of the search and the issue of notice, the assessment was void. The CIT(A) highlighted that the search warrant and notice were issued in the name of a non-existent firm, making the assessment null and void.3. Applicability of Section 170 of the Income Tax Act, 1961:The revenue argued that the provisions of Section 170, which deal with the succession of business, were applicable. However, the Tribunal noted that the search and notice were issued in the name of the dissolved firm, not the successor company. The CIT(A) and the Tribunal concluded that the assessment on a non-existent entity could not be validated by invoking Section 170.4. Relevance of Judicial Precedents Cited by the Assessee:The CIT(A) and the Tribunal relied on several judicial precedents to support their decision. These included:- Spice Infotainment Ltd. vs. CIT: Held that assessments on non-existent entities are void.- Intel Technology India Pvt. Ltd.: Confirmed that assessments on non-existent entities are jurisdictional defects.- Nahar Enterprises vs. DCIT: Applied the same principle to a partnership firm converted into a company, holding that search and assessment on a non-existent entity are invalid.The Tribunal found these precedents relevant and binding, leading to the conclusion that the assessment orders in question were null and void.Conclusion:The Tribunal upheld the CIT(A)'s decision to quash the assessments for the assessment years 2008-09, 2010-11, and 2011-12, as the search and subsequent assessments were conducted on a non-existent entity. The appeals filed by the revenue were dismissed, and the cross objections filed by the assessee were allowed. The Tribunal reiterated that assessments on non-existent entities are jurisdictional defects and cannot be cured by procedural provisions.