Transfer Pricing Order and Draft Assessment Order passed in non-existent entity's name are void ab-initio under section 144C(1)

ITAT Mumbai held that Transfer Pricing Order and Draft Assessment Order passed in the name of a non-existent entity are void ab-initio. Following precedents from Fedex Express Transportation and Boeing India cases, the tribunal ruled that assessment orders framed under section 144C(1) in the name of non-existent entities are legally invalid, making all subsequent proceedings non-existent in law. The Final Assessment Order was set aside and assessee's appeal was allowed.

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Issues Involved:

1. Validity of the Transfer Pricing Order and Draft Assessment Order passed in the name of a non-existent entity.
2. Legal implications of passing assessment orders in the name of a non-existent entity.
3. Admissibility of additional grounds raised by the appellant.

Detailed Analysis:

1. Validity of the Transfer Pricing Order and Draft Assessment Order:

The primary issue in this case was whether the Transfer Pricing Order dated 31.10.2017 and the Draft Assessment Order dated 29.12.2017, both issued in the name of Covidien Healthcare India Private Limited (CHPL), a non-existent entity due to its merger with India Medtronic Private Limited (IMPL), were valid. The appellant contended that these orders were void-ab-initio as they were issued to an entity that had ceased to exist post-merger, as approved by the National Company Law Tribunal (NCLT) on 10.08.2017. The tribunal agreed with this contention, referencing the sequence of events that highlighted the amalgamation and the subsequent communications to tax authorities. The tribunal relied on precedents, including the cases of Fedex Express Transportation and Supply Chain Services (India) Private Limited and BOEING India Private Limited, which established that orders passed in the name of a non-existent entity are invalid and render subsequent proceedings void.

2. Legal Implications of Passing Assessment Orders in the Name of a Non-Existent Entity:

The tribunal examined the legal consequences of issuing assessment orders to a non-existent entity. It was argued that the Transfer Pricing and Draft Assessment Orders were invalid as they were not issued in compliance with the legal requirement that assessments must be made on the existing legal entity. The tribunal cited the judgment of the Hon'ble Bombay High Court in International Air Transport Association, which mandates that a draft assessment order must precede the final assessment order for eligible assessees, thereby conferring specific rights to challenge the draft order. The tribunal concluded that the absence of a valid draft order in the name of the existing entity (IMPL) invalidated the entire assessment process, making the final assessment order null and void.

3. Admissibility of Additional Grounds Raised by the Appellant:

The appellant raised an additional ground (Ground No. 23) challenging the validity of the Transfer Pricing Order on the basis that it was issued to a non-existent entity. The tribunal admitted this additional ground, noting that it was legal in nature and did not require examination of new facts. The tribunal referenced the Supreme Court judgment in National Thermal Power Co. Ltd. vs. CIT, which allows for the admission of legal grounds at any stage of proceedings. Consequently, the tribunal considered this ground and found merit in the appellant's argument, leading to the quashing of the final assessment order.

Conclusion:

The tribunal held that the Transfer Pricing Order and Draft Assessment Order, issued in the name of a non-existent entity, were void-ab-initio. Consequently, all subsequent proceedings, including the Final Assessment Order dated 31.10.2018, were declared null and void. The appeal was allowed, and all other grounds raised by the appellant were deemed infructuous.

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