Draft assessment order in name of non-existent entity under section 144C invalidates DRP directions and final assessment as void

Decision addresses validity of a draft assessment issued in the name of an entity that had ceased to exist and the scope of the special assessment procedure under section 144C; it reasons that a draft assessment issued in the name of a non-existent entity is a nullity, void ab initio, and therefore the draft cannot constitute the jurisdictional foundation required to invoke the special procedure, with the consequence that Dispute Resolution Panel directions and any final assessment issued derivatively are vitiated and unsustainable; succession of entities or subsequent participation does not cure the jurisdictional defect.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether an additional jurisdictional ground alleging invalidity of the draft assessment order, on the basis that it was issued in the name of a non-existent (amalgamated/dissolved) entity, could be admitted at the appellate stage along with additional documentary evidence.

(ii) Whether issuance of a draft assessment order under section 144C read with section 143(3) in the name of an entity that had ceased to exist renders the draft order non est and consequently vitiates the DRP directions and the final assessment order, even if the final order is passed in the name of the successor entity.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Admission of additional jurisdictional ground and additional evidence

Legal framework: The Tribunal considered that a pure question of law going to the root of jurisdiction can be raised at any stage, and examined the request for additional documentary evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963.

Interpretation and reasoning: The additional ground challenged the very jurisdiction to frame the assessment because the draft order-the initiating step under the special procedure-was alleged to have been issued to a non-existent person. The proposed additional evidence (court approval of amalgamation, intimations to the Assessing Officer, regulatory approval, and statutory filings) was documentary, sourced from statutory/judicial records, and directly relevant to the jurisdictional objection. The Tribunal found these documents corroborative of facts borne out from record and necessary for effective adjudication.

Conclusion: The additional ground and the additional evidence were admitted as they were central to determining jurisdiction and did not require fresh factual investigation beyond undisputed documentary material.

Issue (ii): Effect of draft assessment order issued in the name of a non-existent entity under section 144C

Legal framework: The Court examined the nature of section 144C as a special, distinct, self-contained assessment code for eligible assessees, where a legally valid draft assessment order is the jurisdictional trigger enabling objections before the DRP and empowering binding directions.

Interpretation and reasoning: On admitted facts, the amalgamation had an appointed date prior to issuance of the draft assessment order; the amalgamating entity stood dissolved without winding up; and the Assessing Officer had been specifically intimated before the draft order was issued. The Tribunal held that the draft assessment order is not merely tentative; it is a substantive statutory act forming the foundation of the DRP process and the final order. Jurisdiction under section 144C must be validly assumed at inception by issuing the draft order to a juridically existing and identifiable eligible assessee. If the named entity does not exist in law on that date, the draft order is non est and the defect is jurisdictional, not procedural. The Tribunal further held that such a foundational defect cannot be cured by subsequent participation, by DRP directions, or by issuance of the final order in the successor's name; the DRP directions and final order are derivative and consequential upon a valid draft order.

Conclusion: Since the draft assessment order was issued in the name of an entity that had ceased to exist, it was a nullity and void ab initio. The absence of a valid draft order vitiated the entire chain of proceedings; therefore, the DRP directions and final assessment order were held unsustainable and the assessment was quashed in its entirety. All other merits grounds were left open as academic.

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