2022 (8) TMI 729 - AT - Income Tax

Tribunal affirms CIT(A) decision in assessment order validity case post-merger.

The tribunal upheld the decision of the Ld. CIT(A) in a case concerning the validity of an assessment order issued post-merger. The appeal by the revenue ... Invalidity of notice issued under section 143(2) when addressed to an amalgamating/non existing entity - assessment under section 143(3) void for lack of jurisdiction consequent to invalid notice - effect of an approved scheme of amalgamation on the legal existence of the amalgamating company - jurisdictional defect as distinct from procedural irregularityInvalidity of notice issued under section 143(2) when addressed to an amalgamating/non existing entity - assessment under section 143(3) void for lack of jurisdiction consequent to invalid notice - effect of an approved scheme of amalgamation on the legal existence of the amalgamating company - Whether issuance of the mandatory notice under section 143(2) in the name of the amalgamating company which had ceased to exist rendered the subsequent scrutiny assessment under section 143(3) void. - HELD THAT: - The Tribunal found on the facts that the successor company had informed the Assessing Officer of the amalgamation by letter dated 17.09.2012 and the assessment record itself acknowledged the merger. Notwithstanding that knowledge, the AO issued the mandatory notice under section 143(2) on 07.08.2013 in the name of the amalgamating company which, by the approved scheme of amalgamation, had ceased to exist. Applying the legal principle that an amalgamating entity ceases to exist upon approval of the scheme and relying on the Supreme Court's observation in PCIT v. Maruti Suzuki India Ltd. that jurisdiction cannot be invoked on the basis of a non existing entity, the Tribunal held that the jurisdictional notice was invalid. Because the notice was a mandatory precondition to validly exercise jurisdiction under section 143(3), the subsequent assessment framed in the name of the non existing entity was a nullity and went to the root of jurisdiction rather than being a mere procedural irregularity. The Tribunal upheld the CIT(A)'s conclusion allowing the assessee's ground and treated the assessment as void ab initio. [Paras 7, 8]Notice under section 143(2) issued to the non existing amalgamating company was invalid and the consequent assessment under section 143(3) is void for want of jurisdiction; revenue's appeal dismissed.Final Conclusion: The Tribunal upheld the CIT(A)'s finding that the mandatory notice under section 143(2) was issued to a non existing amalgamating company despite prior notice of amalgamation, rendering the scrutiny assessment void; the revenue's appeal is dismissed. Issues:1. Validity of assessment order due to non-issuance of notice u/s 143(2) of the Income Tax Act to the correct entity post-merger.2. Jurisdictional defect in framing scrutiny assessment without serving a valid notice to the amalgamated company.Analysis:1. The appeal by the revenue challenges the Ld. CIT(A)'s decision regarding the issuance of a notice u/s 143(2) of the Income Tax Act to a non-existing company post-merger. The Ld. CIT(A) held that the assessment order was invalid as the notice was sent to the wrong entity, which was no longer in existence. The revenue contended that all subsequent actions were null and void due to the incorrect notice. The Ld. CIT(A) based the decision on the information provided to the AO regarding the merger, emphasizing that the assessment against a non-existing entity is a jurisdictional defect. The revenue disputed this legal issue, leading to the appeal.2. The case involved the merger of M/s. MCCPL with M/s. Siemens Ltd., effective from 1st October 2011, as per the Bombay High Court order dated 17.08.2012. Despite being informed of this merger, the AO issued a notice u/s 143(2) to the non-existing entity, M/s. MCCPL, on 07.08.2013. The Ld. CIT(A) found in favor of the assessee, citing legal principles and court judgments that emphasized the importance of correct jurisdictional notices post-merger. The Ld. CIT(A) highlighted the Supreme Court's ruling in a similar case and concluded that the assessment order against a non-existing entity is void ab initio. The revenue challenged this decision, leading to the appeal before the tribunal.3. The tribunal noted that the AO was duly informed of the merger between M/s. MCCPL and M/s. Siemens Ltd. before issuing the notice u/s 143(2) to the wrong entity. Despite acknowledging the merger in the assessment order, the AO's actions were deemed legally flawed due to the incorrect notice. The tribunal upheld the Ld. CIT(A)'s decision, emphasizing the legal principle that jurisdictional defects in assessments against non-existing entities are fundamental and render the assessment void ab initio. The tribunal dismissed the revenue's appeal, affirming the importance of issuing correct notices post-merger to ensure valid assessments.This detailed analysis showcases the legal intricacies involved in the judgment, focusing on the validity of the assessment order and the jurisdictional defects arising from incorrect notices post-merger.