Issue of notice in the name of a non-existing entity is null and void.

This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)- 38, New Delhi dated 01.11.2017 pertaining to assessment year 2013-14.

2. The assessee has raised seven substantive grounds of appeal. Vide Ground No. 1 alongwith its sub-grounds, the assessee has challenged the jurisdiction of the Assessing Officer stating that the AO has wrongly assumed jurisdiction and further erred in framing assessment on an entity in whose name jurisdiction was assumed which did not exist. Vide the other grounds, the assessee has challenged the disallowances made in the assessment order.

3. The brief facts of the case are that the assessee is engaged in the business of trading of shares and building material items. The return of income for the year under consideration was filed on 10.09.2013 declaring loss of Rs. 1,49,48,864/-. The return was selected for scrutiny and accordingly, statutory notice was issued u/s 143(2) (of Income Tax Act, 1961) [hereinafter referred to as 'the Act' for short] and served upon the assessee. The returned loss was assessed at an income of Rs. 3,71,51,126/- vide order dated 07.03.2016 framed u/s 143(3) (of Income Tax Act, 1961).

4. The assessee vehemently agitated the matter before the CIT(A) and contended that the assessment has been framed in the name of a non est person. It was brought to the notice of the CIT(A) that vide order dated 27.08.2014, the Hon'ble High Court of Delhi has sanctioned the Scheme of Amalgamation and the assessee had amalgamated with M/s Sucon India Ltd. It was vehemently argued by the ld. AR that the assessment order thus became a nullity since the assessee company was not in existence on the date when assessment was framed u/s 143(3) (of Income Tax Act, 1961).

5. After considering the facts and submissions relating to the challenge of the jurisdiction of the AO, the CIT(A) held as under:

“5.3 I have carefully perused the assessment order, the submissions of appellant on this issue and the facts and evidence on record on grounds of appeal 2, 3 and 4 which re adjudicated together. The submissions of appellant is that Ld. Assessing Officer has passed the impugned assessment order on the appellant by assuming jurisdiction on an entity which did not exist in the course of completing such assessment. In fact perusal of the assessment order reveals that the appellant nowhere in the course of assessment proceedings intimated the assessing officer that there had been any amalgamation in this company and that appellant company did not exist either when the return was filed electronically on 10.09.2013, or when notice u/s 143(2) (of Income Tax Act, 1961) dated 05.09.2014 was issued or even after when notice u/s 143(1) (of Income Tax Act, 1961) was issued and Shri K.C. Garg, CA and Authorized Representative of the assessee company attended before the assessing officer and filed part details. The assessment order was passed u/s 143(3) (of Income Tax Act, 1961) op. 07.03.2016 in the name of appellant i.e. M/s Rudraksha Agencies Company Ltd. with address 370 Near Shiv Mandir, Main Market, Badarpur, Delhi-1 10044. Nowhere m the submissions filed by the AR of the assessee before the assessing officer was there any mention, of merger of Assessee Company with any other company. Even the part submission filed by the advocate of appellant on 10.10.2017 in the course of appeal proceedings does not mention either the date of amalgamation or the order of ROC or High Court ratifying the so called amalgamation. Merely relying on case laws without furnishing the relevant facts does not entitle the appellant to any relief. The very fact that the appellant through its AR attended before the assessing officer in the course of assessment proceedings and never mentioned the fact of merger before the assessing officer implies that the actions of assessing officer are covered by the provisions of section 292BB (of Income Tax Act, 1961).”

6. Before us, the ld. AR once again stated that the assessment has been framed in the name of a non est person and the CIT(A) has grossly erred in not annulling the assessment order. The ld. AR drew our attention to the order of the Hon'ble High Court of Delhi approving the Scheme of Amalgamation and various judicial decisions wherein the Hon'ble High Courts have held that assessment framed on a non- existent person is void ab initio.

7. Per contra, the ld. DR strongly supported the order of the authorities below.

8. We have heard the rival submissions and have given thoughtful consideration to the orders of the authorities below and with the assistance of the ld. Counsel for the assessee, we have considered the relevant documentary evidences brought on record in the form of paper book in the light of Rule 18(6) of the ITAT Rules, 1962. It is true that vide order dated 22.08.2014, the Hon'ble High Court of Delhi has sanctioned the Scheme of Amalgamation in respect of 8 transferors companies in which the assessee company is also a party as transferor company No. 4. This order of the Hon'ble High Court is exhibited at pages 8 to 17 of the assessee’s paper book. In the said order of the Hon'ble High Court, at clause No. 13, the Hon'ble High Court mentions that:

“The Regional Director states that despite notice, the Income tax authorities have not raised any objection with regard to the scheme.”

9. Exhibit 7 is copy of letter filed by the assessee with the office of the Deputy Commissioner, Income tax, Circle 21(2) dated 17.06.2015 by which the assessee has brought to the notice of the Deputy Commissioner that the assessee company has since merged with M/s Sucon India Ltd and copy of the order of the Hon'ble High Court and form No. INC-28 were filed alongwith.

10. We find that the first notice u/s 143(2) (of Income Tax Act, 1961) was served on the assessee on 05.09.2014 whereas the assessee company already amalgamated in M/s Sucon India Ltd as per the order of the Hon'ble Jurisdictional High Court of Delhi dated 22.08.2014.

11. The findings of the CIT(A) that the actions of the AO are covered by the provisions of section 292B (of Income Tax Act, 1961) do not hold any water as the Hon'ble Jurisdictional High Court of Delhi in the case of M/s Spice Infotainment Ltd Vs. CIT reported in 247 CTR 500 [DEL] has held that:

“Once it is found that assessment is framed in the name of non- existing entity, it does not remain a procedural irregularity of ht nature which could be cured by invoking the provisions of section 292V (of Income Tax Act, 1961).”

12. The Hon'ble High Court further held that 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.

13. The Co-ordinate Bench of the Tribunal in the case of M/s Images Credit and Portfolio [P] Ltd in ITA Nos. 5301 to 5306 and ITA No. 5418/DEL/2013 dated 19.12.2014 on identical set of facts has held as under:

“6.2. The ratio of the above decision would be squarely applicable to the case of the assessee because the facts are identical. In the above mentioned case notice under Section 143(2) (of Income Tax Act, 1961) was sent to the company which was not in existence on the date of the issue of notice. Similarly in the case of the assessee notice under Section 153C (of Income Tax Act, 1961) was issued in the name of M/s Image Credit and Portfolio Pvt. Ltd. on 10th September,2010 when this company was not in existence.

Therefore, the ratio of the decision of Hon’ble Jurisdictional High Court in the case of M/s Spice Entertainment Ltd. (supra) would be squarely applicable to the issue of notice under Section 153C (of Income Tax Act, 1961) in the case of the assessee. Whether the assessee intimated about the amalgamation before the issue of notice under Section 153C (of Income Tax Act, 1961) or not would not be relevant for deciding the issue of validity of the notice under Section 153C (of Income Tax Act, 1961). Whether 6 the assessee intimated or not the fact remains that M/s Images Credit and Portfolio (P) Ltd. ceased to exist after the approval of amalgamation by the Hon’ble Jurisdictional High Court i.e. 25th day of May,2010. Whether it is in the knowledge of the Revenue or not any notice issued in the name of a non existent person is a nullity. Therefore, we hold that the issue of notice under Section 153C (of Income Tax Act, 1961) on 10th September,2010 was void. It may be pointed out that on 19th November,2010 the assessee intimated to the Assessing Officer with regard to amalgamation of the assessee company with M/s Sainath Associates Pvt. Ltd. and also furnished a copy of the order of the Hon’ble Jurisdictional High Court. At that time the Assessing Officer could have issued the notice under Section 153C (of Income Tax Act, 1961) in the name of the transferor company i.e. M/s Sainath Associates Pvt. Ltd.

However, the Assessing Officer instead of issuing notice in the name of transferor company chose to complete the assessment in the name of the assessee by simply mentioning in the Cause Title of the assessment order the fact of amalgamation. Considering the totality of the above facts and respectfully following the decision of Hon’ble Jurisdictional High Court in the case of M/s Spice Entertainment Ltd. we hold that the issue of notice under Section 153C (of Income Tax Act, 1961) in the name of M/s Image Credit and Portfolio Pvt.Ltd. on 10th September,2010 is void. Accordingly the same is quashed. Once the notice issued under Section 153C (of Income Tax Act, 1961) has been quashed the assessment completed in pursuance to such notice also cannot survive and the same is also quashed.”

14. On a thoughtful consideration of the facts of the case in hand and in the light of the judicial decisions discussed hereinabove, we have no hesitation to hold that the assessment has been framed on a non-existing entity and, therefore, the assessment order has to be quashed. We order accordingly and set aside the findings of the CIT(A) by quashing the assessment order.

15. Since the assessment order has been held to be a nullity, we do not find it necessary to dwell into the merits of the case. Accordingly, the grounds raised by the assessee are allowed.

16. In the result, the appeal of the assessee in ITA No. 670/DEL/2018 is allowed.

The order is pronounced in the open court on 02.05.2018.

Sd/- Sd/-

[SUDHANSHU SRIVASTAVA] [N.K. BILLAIYA]

JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 02nd May, 2018