TaxTMI 
TaxTMI 
2018 (1) TMI 140
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....ee filed its return of income on 30.10.2014 declaring an income of Rs. 4,59,586. During the assessment proceedings u/s 143(3) of the Act, the AO noticed that the assessee has entered into an international transaction with its AE. Since the amount of international transaction was in excess of Rs. 5.00 crores, he made a reference to the TPO u/s 92CA of the Act for determination of the Arms' Length Price (ALP) who proposed an adjustment of Rs. 2,00,59,479. In accordance with the TPO's order, the AO passed the assessment order, against which the assessee preferred an appeal to the CIT (A). The CIT (A) confirmed the order of the AO and the assessee is in second appeal before us. 3. We find that concise grounds of appeal are filed along with the revised Form No.36. On 3.4.2017. Vide letter dated 20.11.2017, the assessee has also filed additional grounds of appeal (i) challenging the validity of the assessment on the ground that the assessment was made on a company which was not in existence on the date of the assessment order, as "Tele Atlas India Pvt Ltd (TATPL)" had merged with M/s. Infotech Enterprises Ltd on 1.10.2005 and the exclusion of (a) Hinduja TMT Ltd; and (b) Datamatics Te....
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....the amalgamating company which is no longer in existence and therefore, the assessment order itself is void. In support of this contention, he placed reliance upon the decisions of the Hon'ble Delhi High Court in the case of (i) M/s. Spice Enfotainment Ltd (2012) 247 CTR (Del.)500; (ii) CIT vs. Micra India (P) Ltd reported in (2015) 57 Taxmann.com 163(Delhi) and (iii) Pr. CIT vs. Maruti Suzuki India Ltd reported in (2017) 397 ITR 681 (Del.). He further relied upon the decision of the Hon'ble Supreme Court of India dated 2.11.2017 wherein the civil appeals of the Revenue against the above orders of the Hon'ble Delhi High Court have been dismissed by the Hon'ble Supreme Court of India. Thus, according to the learned Counsel for the assessee, following the above decisions, the assessment order has to be held to be void ab initio. 8. The learned DR, however, submitted that the assessee has participated during both the assessment and appellate proceedings and by virtue of section 292B of the Act, the assessment cannot held to be invalid, particularly since the return of income was filed by the amalgamating company only. 9. Having regard to the rival contentions and....
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....when it filed the returns in respect of two assessment years in questions. However, before the case could be selected for scrutiny and assessment proceedings could be initiated, M/s Spice got amalgamated with MCorp Pvt. Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Court which was dully sanctioned vide orders dated 11th February, 2004. With this amalgamation made effective from 1st July, 2003, M/s Spice ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, M/s Spice was also stood dissolved by specific order of this Court. With the dissolution of this company, its name was struck off from the rolls of Companies maintained by the Registrar of Companies. 8. A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. This position is even accepted by the T....
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....a 1539. Two companies may join to form a new Company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third Company or one is absorbed into one or blended with another, the amalgamating Company loses its entity." 9. The Court referred to its earlier judgment in General Radio and Appliances Co. Ltd. Vs. M.A. Khader (1986) 60 Comp Case 1013. In view of the aforesaid clinching position in law, it is difficult to digest the circuitous route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect. 10. Section 481 of the Companies Act provides for dissolution of the company. The Company Judge in the High Court can order dissolution of a company on the grounds stated therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. Smith (Plant Hire) Ltd. Vs. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342 (CA) that "once a company is dissolved it becomes a non-existent party and therefore no action ca....
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....her proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, Section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to Section 292B. 14. The issue again cropped up before the Court in CIT Vs. Harjinder Kaur (2009) 222 CTR 254 (P&H). That was a case where return in question filed by the assessee was neither signed by the assessee nor verified in terms of the mandate of Section 140 of the Act. The Court was of the opinion that such a return cannot be treated as return even a return filed by the assessee and this inherent defect could not be cured inspite of the deeming effect of Section 292B of the Act. Therefore, the return was absolut....
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....o of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of Section 292B of the Act are not applicable in such a case. The framing of 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‟. 17. The order of the Tribunal is, therefore, clearly unsustainable. We, thus, decide the questions of law in favour of the assessee and against the Revenue and allow these appeals. 18. We may, however, point out that the returns were filed by M/s Spice on the day when it was in existence it would be permissible to carry out the assessment on the basis of those returns after taking the proceedings afresh from the stage of issuance of notice under Section 143 (2) of the Act. In these circumstances, it would be incumbent upon the AO to first substitute the name of the appellant in place of M/s Spice and then issue notice to the appellant. However, such a course of action can be taken by the AO only if it is still permissible as per law and has not become time barred". 14. In the ca....
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....t was further held that Section 176 of the Act, which enacts provisions relating to discontinuation of business, does not apply to a case of amalgamation/dissolution. It was further held that Section 159 of the Act, which provides for tax liability to be attached to the legal representatives of a deceased person, is also inapplicable. The language of Section 159ex-facie applies to natural persons, and cannot be extended, through a legal fiction, to the dissolution of companies. 9. There is another aspect in these appeals, which is the applicability of Section 292B of the Act. Section 292B, inter alia, prescribes that proceedings etc. initiated cannot be deemed invalid "merely by reason of mistake, defect or omission" in any return of income, assessment or notice. The revenue had argued that this provision neutralizes procedural defects in jurisdiction. In these circumstances, it was submitted, having regard to the assessee's omission to urge the so-called illegality at the threshold, the Courtought to interfere with the order of the ITAT. This question, too, has been dealt with - in CIT v. Dimension Apparels Pvt. Ltd. reported in (2015) 370 ITR 288. In that case, after....
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....assessments were held to be void ab initio. But we find that the Hon'ble Delhi High Court in the case of Spice Enfotainment Ltd, while holding that the assessment in the name of non-existing company is not a procedural irregularity of the nature which could be cured by invoking the provisions of section 292B, has also taken note of the fact that in that case returns were filed by the amalgamating company on the day when it was in existence and therefore, it would be permissible to carry out the assessment on the basis of those returns after taking the proceedings afresh from the stage of issuance of notice u/s 143(2) of the Act. It was held that in such circumstances, it would be incumbent upon the AO to substitute the name of the assessee in place of the amalgamating company and then issue notice to the assessee, but such a course of action can be taken by the AO only if it is still permissible as per law and has not become time barred. 17. In the case before us, we find that the returns were filed by the amalgamating company and the notices u/s 143(2) & 142(1) were issued probably to the assessee prior to amalgamation, therefore the scrutiny assessments were validly initia....
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....the additional interest for the relevant period only instead of charging additional interest for the entire period of one year. Consequent to the said order, the TPO, vide order dated 31.3.2015, directed that the LIBOR +2% is to be calculated on the loan advanced and accordingly suggested adjustment of the differential amount. As regards the fee on corporate guarantee is concerned, the TPO suggested that the corporate guarantee fee @ 2% is to be retained. Pursuant thereto, the AO passed the consequential order raising a demand. Against this order, the assessee approached the DRP. The DRP, vide order dated 18.5.2016, opined that the order passed consequent to the directions issued by the ITAT, is not an order at the first instance and therefore, the DRP does not have jurisdiction and accordingly is not empowered to issue the direction on the issues arising from the said order. The DRP also noticed that the assessee has filed an appeal before the CIT (A) also which indicates that the assessee is pursuing the same remedy before different authorities and therefore, the objections are not sustainable. The DRP further observed that the assessee has to file objections within 30 days of re....
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....r choose to file an appeal before the CIT (A) and after the assessee exercises its option, the AO can pass the final assessment order in accordance with the directions of the DRP or the assessee can file an appeal before the CIT (A). As per section 144C of the Act, the AO first has to pass the draft assessment order and the choice is with the assessee either to approach the DRP or the CIT (A). Only if the assessee chooses to prefer an appeal before the CIT (A), can the AO pass the final assessment order. Similar facts had arisen in the case of JCB India Ltd (cited Supra) before the Hon'ble Delhi High Court and the Hon'ble High Court has held that even in the case of a remand by the Tribunal, the AO has to pass a draft assessment order and not the final assessment order. For the sake of ready reference and clarity, the relevant portion of the order is reproduced hereunder: "19. As already noted, the final assessment order of the AO stood vitiated not on account of mere irregularity but since it was an incurable illegality. Section 292B of the Act would not protect such an order. This has been explained by this Court in its decision dated 17th July 2015 passed in ITA....
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.... but also the corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) quashed the final order of the AO and the demand notice. Interestingly, even as regards the corrigendum issued, the Madras High Court held that it was beyond the time permissible for issuance of such corrigendum and, therefore, it could not be sustained in law. 14. Recently, this Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of India [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra), the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel, Chennai (supra) as well as the Bombay High Court in International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46, came to the same conclusion." In the decision of the Gujarat High Court in C-Sam (India) (supra), the Court negated the plea that non-compliance with the terms of Section 144C of the Act is merely an 'irregularity'. The Gujarat ....
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....ssing Officer before the Tribunal and take up all contentions. Nevertheless at the stage of assessment, he has no remedy against the directions issued by the DRP under sub-section (5). All these provisions amply demonstrate that the legislature desired to give an important opportunity to an assessee who is likely to be subjected to upward revision of income on the basis of, transfer pricing mechanism. Such opportunity cannot be taken away by treating it as purely procedural in nature." 23. In the present case, just as in Turner International (supra), it is submitted that, at the most, failure to pass a draft assessment order under Section 144C of the Act is a curable defect and that the Court should now delegate the parties to a stage as it was when the TPO issued a fresh order after the remand by the ITAT. 24. This very argument of the Revenue has been negated by the Court in Turner International (supra) where it was observed in paras 15 and 16 as under: "15. Mr. Dileep Shivpuri, learned counsel for the Revenue sought to contend that the failure to adhere to the mandatory requirement of issuing a draft assessment order under Section 144C (1) of the Act w....