2023 (3) TMI 1584 - AT - Income Tax

Assessment orders under section 143(3) and 144C(3) against non-existing entities are null and void ab initio

JCIT (OSD) I/c DCIT-13 (2) (2), Mumbai Versus M/s Culver Max Entertainment Pvt. Ltd.

ITAT Mumbai held that assessment orders passed under section 143(3) read with section 144C(3) against non-existing entities are null and void ab initio ... Validity of order u/s 143(3) r.w.s. 144C(3) passed on non-existing entity - 'jurisdictional defect' OR 'procedural defect' - Whether a curable defect u/s 292B? - HELD THAT:- As decided in assessee's own case [2022 (9) TMI 1669 - ITAT MUMBAI] and Maruti Suzuki India Ltd.[2019 (7) TMI 1449 - SUPREME COURT] Assessment made in the name of a non-existing entity is without jurisdiction, hence null and void ab initio. As such type of order suffers from 'jurisdictional defect' and not from 'procedural defect', hence same can't be cured even by section 292B, even if, the assessee has participated in the assessment proceedings. Appeal of the Revenue is dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Appellate Tribunal (AT) in this appeal by Revenue against the order of the Commissioner of Income Tax (Appeals) (CIT(A)) for Assessment Year (A.Y.) 2013-14 are as follows:(a) Whether the assessment order passed under section 143(3) read with section 144C(3) of the Income Tax Act, 1961 (the Act) in the name of an entity that had ceased to exist due to amalgamation is valid or is liable to be quashed for lack of jurisdictionRs.(b) Whether the decision of the Apex Court in the case of Maruti Suzuki India Ltd. (reported in 416 ITR 613) is applicable and binding on the facts of the present case, especially when the assessee company was in existence at the time of issuance of notice under section 143(2) of the ActRs.(c) Whether the procedural violation alleged due to passing of assessment order in the name of a non-existing entity can be cured under section 292B of the Act, particularly when the assessee had informed the Assessing Officer (AO) about the amalgamation during the assessment proceedings and participated in the processRs.(d) Whether the assessment order passed in the name of the amalgamated entity is a jurisdictional defect or merely a procedural irregularityRs.2. ISSUE-WISE DETAILED ANALYSISIssue (a): Validity of assessment order passed in the name of a non-existing entity post-amalgamationRelevant legal framework and precedents: The Income Tax Act, 1961 governs the assessment proceedings. Section 143(3) empowers the AO to complete assessment after scrutiny. Section 144C(3) relates to the procedure for passing assessment orders after the Dispute Resolution Panel (DRP) directions. Section 292B deals with the rectification of mistakes apparent from the record. The apex court decision in PCIT vs. Maruti Suzuki India Ltd. (416 ITR 613) is a pivotal precedent wherein it was held that an assessment order passed against a non-existing entity is without jurisdiction and therefore void ab initio.Court's interpretation and reasoning: The Tribunal noted that the assessment order was passed in the name of M/s. SPE Networks India Inc. (SPENI), which had ceased to exist following amalgamation with Sony Pictures Networks India Pvt. Ltd. (SPNI). The assessee had informed the AO about the merger effective from 1st April 2015, well before the assessment order was passed on 20.02.2017. Despite this, the AO passed the assessment order in the name of the non-existing entity SPENI.The Tribunal followed the binding precedent of the Apex Court in Maruti Suzuki India Ltd. and the coordinate bench decision in the assessee's own case for A.Y. 2012-13, which held that an assessment order passed in the name of a non-existing entity suffers from jurisdictional defect and is null and void ab initio.Key evidence and findings: The assessee's letters dated 02.01.2017 and 27.01.2017 informed the AO and Transfer Pricing Officer (TPO) about the amalgamation and requested that the assessment order be passed in the name of SPNI, the amalgamated entity. The Department did not dispute these facts.Application of law to facts: Since the AO passed the order in the name of an entity that had ceased to exist, the order was held to be without jurisdiction. The Tribunal emphasized that jurisdictional defect cannot be cured by subsequent participation or procedural regularization.Treatment of competing arguments: The Revenue contended that the assessee was in existence at the time of issuance of notice under section 143(2) and that the Maruti Suzuki decision was distinguishable on facts. The Tribunal rejected this, holding that the jurisdictional defect arises from passing the order in the name of a non-existing entity, regardless of the existence of the entity at the notice stage.Conclusions: The assessment order passed in the name of the non-existing entity SPENI is void ab initio due to jurisdictional defect.Issue (b): Applicability of Maruti Suzuki India Ltd. decision where the assessee was in existence at the time of notice issuanceRelevant legal framework and precedents: The Maruti Suzuki India Ltd. case dealt with the issue of jurisdiction where the AO issued notice under section 143(2) after the amalgamating entity had ceased to exist. The court held that such an assessment order is without jurisdiction.Court's interpretation and reasoning: The Tribunal distinguished the facts from Maruti Suzuki to the extent that in the present case, the assessee was in existence at the time of issuance of notice under section 143(2). However, it held that this distinction does not alter the principle that an assessment order passed in the name of a non-existing entity is void.Key evidence and findings: The Tribunal observed that the amalgamation was effective from 1st April 2015, and the assessment order was passed on 20.02.2017 in the name of the amalgamated entity. The existence of the entity at the notice stage does not confer jurisdiction to pass an order in the name of a non-existing entity.Application of law to facts: The Tribunal applied the principle from Maruti Suzuki that jurisdiction depends on the entity against whom the assessment order is passed, not merely on the existence at the notice stage.Treatment of competing arguments: The Revenue's argument that the assessee's existence at the notice stage validates the order was rejected as it ignores the jurisdictional requirement at the time of passing the order.Conclusions: The Maruti Suzuki principle applies, and the assessment order passed in the name of a non-existing entity is without jurisdiction, notwithstanding the entity's existence at the notice stage.Issue (c): Whether procedural violation due to passing order in the name of non-existing entity can be cured under section 292B of the ActRelevant legal framework and precedents: Section 292B allows rectification of mistakes apparent from the record. The question is whether passing the assessment order in the name of a non-existing entity is a procedural irregularity that can be cured under this provision.Court's interpretation and reasoning: The Tribunal held that the defect in passing the order in the name of a non-existing entity is a jurisdictional defect, not a mere procedural irregularity. Therefore, section 292B cannot cure such