IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `I 'NEW DELHI
BEFORE SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
AND
SHRI O.P.KANT, ACCOUNTANT MEMBER
ITA NO. 1728/DEL/2014
ASSTT.YEAR: 2009-10
ITA NO. 1306/DEL/2015
ASSTT.YEAR: 2010-11
Sapient Consulting Limited, vs DCIT, Circle 7(1),
(Erstwhile Sapient Corporation Pvt. Ltd.), New Delhi.
Tower B, First Floor,
Building 8, United Infospace,
Sector 2,Dundahera,
Gurgaon, Haryana-122016
ITA NO. 981/DEL/2014
ASSTT.YEAR: 2009-10
DCIT, Circle 7(1), vs Sapient Consulting Ltd.,
New Delhi. Gurgaon, Haryana
(Appellant) (Respondent)
Appellant by: S/Shri Ajay Vohra, Sr. Adv. Neeraj Jain, Adv.
Sahil Mehta, Mrs. Nitya Gupta, CA
Respondent by: Ms Y. Kakkr, Sr. DR
Date of Hearing: 07.09.2015
Date of pronouncement: 23.11.2015
ORDER
PER C.M. GARG, JUDICIAL MEMBER
These appeals by the assessee and the revenue have been preferred
against the assessment orders passed u/s 143(3) r/w section 144C of the Act in
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
pursuance to the directions of the Dispute Resolution Panel-III, New Delhi (The
DRP) u/s 144C(5) of the Income Tax Act, 1961 (for short the Act) dated
19.12.2013 and 11.10.2014 for assessment year 2009-10 and 2010-11
respectively.
Additional grounds of the assessee in both the assessment years
2. The assessee has proposed following additional grounds in both the
assessment years:-
"1. That on the facts and circumstances of the case,
assessment order framed under section 143(3) read with
section 144C of the Income Tax Act, 1961 (`the Act') is
beyond jurisdiction, bad in law and void ab initio.
1.1 That on the facts and circumstances of the case, the
assessing officer has erred in framing the assessment on a
non-existent entity which was merged with Sapient
Consulting Pvt. Ltd. w.e.f. April 1, 2011"
3. We have heard the rival submissions and carefully perused the relevant
material placed on record before us. The ld. Senior counsel of the assessee
submitted that the assessment order dated 20.1.2014 u/s 143(3) r/w section
144C of the Act was passed in the name of Sapient Corporation Pvt. Ltd. (the
amalgamating company) which was non-existent entity on the date of passing
impugned said final assessment order since it was merged into Sapient
Consulting Pvt. Ltd. (the amalgamated company) vide Hon'ble Delhi High
Court order dated 12.10.2011 and 6.1.2012 and accordingly, the said order,
2
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
being void ab initio, is liable to be quashed. To support this contention, the ld.
Senior counsel has placed reliance on various orders/judgments of Hon'ble
Delhi High Court and Tribunals including judgement of Hon'ble Jurisdictional
Delhi High Court in the case of Spice Infotainment vs CIT (2012) 247 CTR
(Del) 500 and order of ITAT Delhi `D' Bench in I.T.A. No. 6452/Del/2013 for
assessment year 2006-07 (which was delivered by one of us viz. C.M. Garg,
JM) wherein the order of Hon'ble Delhi High Court in the case of Spice
Infotainment (supra) was followed while granting relief to the assessee.
Elaborating aforesaid facts of the case, the ld. Senior counsel of the assessee
placed request of the assessee for admission of additional grounds as
reproduced hereinabove in both assessment years i.e. assessment year 2009-10
and 2010-11 and submitted that in view of aforesaid position of law laid down
by various courts/Tribunals the appellant has raised said additional grounds of
appeal which raise a legal issue, not involving any fresh investigation into the
facts and based on the facts which are already placed on record. The ld. Senior
counsel placing reliance on the decision of Hon'ble Supreme Court in the
case of NTPC Ltd. Vs CIT 229 ITR 383 (S.C.) and pressing into service Rule
11 of ITAT Rules, 1963 the additional ground may kindly be admitted for
consideration and adjudication on merits.
4. Ld. Ld. DR, replying to the above, contended that when the assessee
participated assessment proceedings despite merger, then no legal objection or
3
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
contention can be raised in this regard in the subsequent appellate proceedings.
Ld. DR strongly objected to the admission of additional grounds.
5. Ld. Senior counsel also placed rejoinder and contended that on receipt of
the DRP/Assessing Officer final order, the assessee came to know about
illegality done by the authorities below wherein the assessment order was
passed against a non-existing entity i.e. amalgamating company.
6. On careful consideration of above rival submissions, we are of the
opinion that the assessee did not raise this legal contention during proceedings
before the authorities below and participated in the proceedings but now this
legal issue has been raised before us by way of additional ground which
requires no further investigation of fact and which pertains to a legal issue and
facts pertaining to this legal and factual issue are already on record which goes
to the root of the matter. Merely because the assessee did not raise this legal
objection before authorities below does not take away the legal right of the
assessee to raise the same before higher appellate forum. Hence, in view of
dicta laid down by Hon'ble Apex Court in the case of NTPC vs CIT (supra), the
additional ground being mixed issue of law and facts is admitted for
consideration and adjudication on merits.
4
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
Adjudication of additional ground no. 1 & 1.1
7. Apropos additional ground of the assessee, we have heard the rival
submissions and carefully perused the relevant material placed on record. Ld.
senior counsel of the appellant/assessee submitted that the appellant Sapient
Corporation Pvt. Ltd. (hereinafter referred to as `amalgamating company') was
incorporated on 9.3.2000 and was consistently being assessed in circle 7(1),
C.R. Building, New Delhi. On 13.11.2013, a new company in the name of
Sapient Consulting Pvt. Ltd. (hereinafter referred to as `amalgamated
company') was incorporated and the amalgamating company merged with new
amalgamated company under scheme of amalgamation u/s 391 and 394 of the
Companies Act 1956 in pursuance to order of Hon'ble Delhi High Court dated
12.10.2011 and 6.1.2012 w.e.f. the appointed date i.e. 1.4.2011. Ld. Senior
counsel further pointed out that in pursuance to aforesaid order, the appellant
company stood dissolved, without the process of winding up and copy of order
of Hon'ble High Court was also filed with the Registrar of Companies (ROC) on
18.11.2011. The learned counsel of the assessee contended that a letter was
filed before the Assessing Officer on 27.1.2012 intimating him merger of
assessee with amalgamating company. Learned counsel of the assessee fairly
submitted that the return was filed on 26.9.2009 by the amalgamating company
and the Assessing Officer issued notice u/s 143(2) of the Act on 18.8.2010
against the amalgamating company but after amalgamation w.e.f. 1.4.2011, the
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I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
Assessing Officer on 12.10.2012 issued notices against the assessee u/s 143(3)
and 142(1) against the amalgamating company and subsequently on 5.12.2012
& 13.2.2013, additional questionnaires were also issued to the amalgamating
company. The ld. Senior counsel vehemently contended that the Assessing
Officer passed draft assessment order u/s 144C of the Act on 22.3.2013 and the
final assessment order u/s 143(3) r/w section 144C of the Act was passed on
20.1.2014 in pursuance to the directions of the DRP dated 19.12.2013 in the
name of amalgamating company which was non-existent entity at the time of
issuing notices and passing impugned order of the DRP/Assessing Officer.
8. The ld. Senior counsel pointed out that the impugned final assessment
order u/s 143(3) r/w section 144C of the Act was passed in the name of
amalgamating company which was non-existent entity since it was merged with
amalgamated company in pursuance to order of Hon'ble Delhi High Court dated
12.10.2011 and 6.1.2012 and thus said order being void ab initio is liable to be
quashed in view of proposition laid down by Hon'ble Jurisdictional Delhi High
Court in the case of CIT vs Spice Infotainment Pvt. Ltd. (supra).
9. Replying to the afore noted submissions and contentions of the assessee,
the ld. Ld. DR contended that the orders/judgements as relied by the assessee
have been passed without considering the scheme of amalgamation, hence, ratio
of these orders/judgements are not applicable in the present case in hand.
Learned Departmental Representative also placed reliance on the judgment of
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I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
Hon'ble High Court of Delhi in the case of Yapi Kredi Bank (Deutschland)
vs Ashok k. Chauhan dated 17.1.2013 in FAO (OS) 511/2007, C.M. Appl
14878/2008 & 3645/2012 and submitted that the Hon'ble Jurisdictional High
Court, after referring to the dicta laid down by Hon'ble Supreme Court in the
case of Bhagwandass Chopra vs Untied Bank of India 1988 AIR 215 (S.C.),
has held that these proceedings will continue to operate against and also binding
on the transferee company or corporation in the same way in which they operate
against a person on whom any interest has devolved in any of the ways
mentioned in Rule 10 of order 22 of Civil Procedure Code 1908. Learned
Departmental Representative also placed reliance on following
orders/judgements:-
i) Guduthur Bros vs ITO 40 ITR 298 (S.C.)
ii) CIT vs Jagat Novel Exhibitors (P) Ltd. 356 ITR 559 (Del)
iii) Venad properties (P) Ltd. vs CIT 340- ITR 463
iv) Century Enka Ltd. vs DCIT 303 ITR (AT) 01 (Mumbai Tribunal)
v) Chatturam & Others vs CIT 15 ITR 302 (Federal Court)
10. On the basis of above noted orders/judgements, ld. Ld. DR further
elaborated his legal stand and submitted that in the case of Spice Infotainment
vs CIT (supra), the scheme of amalgamation as well as order of Hon'ble High
Court have not been considered. Learned Departmental Representative
submitted that if for the sake of argument, it is found that the assessment has
been framed against non-existing entity, then the same is rectifiable u/s 292B of
7
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
the Act and no prejudice has been caused to the assessee who participated in the
entire assessment proceedings and explained his stand before the Assessing
Officer. Ld. DR also submitted that the case laws relied by the ld. Senior
counsel of the assessee in the case of CIT vs Micro Steels (P) Ltd. 232
Taxmann 102 and order of ITAT Delhi in the case of ACIT vs Dimension
Apparels in I.T.A. No.571 to 576/D/12 dated 21.6.13 are not applicable in the
light of dicta laid down by Hon'ble High Court in the case of Yapi Kredi Bank
(supra). Learned Departmental Representative pressing into service proposition
laid down by ITAT Mumbai in the case of Century Enka Ltd. vs DCIT (supra),
submitted that the order in the name of non-existing entity was passed on
account of ignorance of the fact of amalgamation and for this reason, the
assessment could not be held to be invalid and the right course was to set aside
the assessment and restore the matter to the file of the Assessing Officer with a
direction to re-frame the assessment in the correct name of the assessee.
11. Learned counsel of the assessee placing rejoinder to the above contention
of the revenue has drawn our attention towards section 2(31) r/w section 4 of
the Act and submitted that as per section 4 of the Act, the charge of income tax
for any assessment year can be levied on a person and as per definition given in
section 2(31) (iii) of the Act, a person includes a company also. Learned
counsel of the assessee has further drawn our attention towards section 2(16) of
the Act and submitted that the meaning of amalgamation in relation to
8
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
companies means the merger of one or more companies with another company
or merger of two or more companies to form one company and the company or
companies which so merge being referred to as the amalgamating company or
companies and the company with which they merge or which is formed as a
result of merger as the amalgamated company formed as a result of merger as
the amalgamated company and from the date of merger the legal existence of
amalgamating company as a legal entity or person ceased to exist and order of
assessment passed against such non-existing entity or legal person cannot be
held as valid and the same should be annulled.
12. Ld. Senior counsel vehemently contended that the assessee is not seeking
waiver of tax liability and the assessee fairly accepts that as per section 2(1B) of
the Act, the tax liability is fastened on the amalgamated company and hence the
assessee has raised legal objection that the assessment has been framed in the
name of non-existent entity on 21.2.14 despite the fact that the assessee by way
of letter dated 27.1.12 intimated the Assessing Officer about the merger of
assessee company with Sapient Consulting Pvt. Ltd., the amalgamated company
in pursuance to the order of Hon'ble Delhi High Court dated 12.10.11 censuring
merger of the assessee as per scheme of amalgamation u/s 391 to 394 of the
Companies Act, 1956 dated 6.1.12 w.e.f. the appointed date viz. 1.4.11 which is
also apparent from the scheme of amalgamation available at pages 79-80 of the
assessee's paper book. Ld. Senior counsel further pointed out that the assessee
9
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
is not challenging the validity of notice u/s 143(2) of the Act and hence, the
propositions relied by ld. Ld. DR and provisions of section 292B or 292BB of
the Act are not applicable to the case of the assessee.
13. Learned counsel of the assessee has also drawn our attention towards
order of ITAT Delhi in the case of Impsat vs ITO reported as 91 ITD 354
(Del) and submitted that once the amalgamating company ceased to exist on the
appointed date, there was no question of assessing it for income tax as there is
no provision in the Act to assess addition which is dissolved. Ld. Senior
counsel lastly placed his reliance on the decision of Spice Infotainment vs CIT
and submitted that their lordships have explicitly held that the irresistible
conclusion would be that provisions of section 292B of the Act are not
applicable in such a case where the assessment has been framed in the name of
amalgamating company and the framing of assessment against a non-existing
person or entity goes to the root of the matter which is not a procedural
irregularity but a jurisdictional defect as there could not be any assessment
against a dead person.
14. On careful consideration of above submissions, at the very outset, we find
it appropriate to note some admitted and undisputed facts that the assessee filed
its return of income in the name of amalgamating company on 26.9.09 and the
Assessing Officer issued notice on 18.8.2010 u/s 143(2). Subsequently on
12.10.11, the Hon'ble Delhi High Court passed an order sanctioning merger of
10
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
assessee with Sapient Consulting Ltd. an amalgamated company and on
18.11.11, the assessee filed form 21 along with copy of the Hon'ble Delhi High
Court order (supra) sanctioning the scheme of amalgamation with ROC and on
6.1.12 as per scheme of amalgamation and under Companies Act, the assessee
amalgamating company merged with Sapient Consulting Ltd. in pursuance to
the order of Hon'ble Delhi High Court w.e.f. 1.4.11 i.e. appointed date. It is
also important to note that on 27.1.2012, the assessee filed a letter before the
Assessing Officer intimating the merger of the company with Sapient
Corporation Pvt. Ltd., however, the Assessing Officer on 19.10.12 issued notice
u/s 143(2) along with notice dated 142(1) of the Act on the assessee
amalgamating company. After issuing additional questionnaires dated 5.12.12
and 13.2.13 on amalgamating company, the Assessing Officer on 22.3.13
passed draft assessment order u/s 144C of the Act on amalgamating company.
Finally, the Assessing Officer passed final assessment order u/s 143(3) r/w
section 144C of the Act on amalgamating company on 20.1.2014 in pursuance
to the directions of the DRP dated 19.2.13 u/s 144C(5) of the Act.
15. In the light of above noted dates of events having taken place in the
present case, we proceed to decide the legal objection of the assessee against
validity of impugned assessment orders. At the very outset, we are required to
consider the ratio of the decision of Hon'ble High Court of Delhi in the case of
Spice Entertainment Ltd vs CST dated 3.8.2011 in I.T.A. No. 475-476 of 2011
11
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
wherein their lordships speaking for Hon'ble Jurisdictional High Court held as
follows:-
"16. When we apply the ratio of aforesaid cases to the facts of
this case, the irresistible conclusion would be provisions of s.
202B 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 s.
143(2) of the Act. In 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 Assessing Officer only if it is
still permissible as per law and has not become time-barred."
At the very outset, we respectfully note the dicta laid down by the Hon'ble High
Court that the provisions of section 292B of the Act are not applicable in such a
case where assessment has been framed in the name of non-existent
amalgamated company. Their lordships further held that the framing of
assessment against non-existent 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. In the case of Spice Infotainment Ltd.
(supra), their lordships also pointed 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
12
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
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 also held that in
substitute the name of the appellant/amalgamated company in the place of
amalgamating company may be given and then notice may be issued as per
provisions of the Act.
16. In the light of the ratio of the judgment of Hon'ble High Court in the case
of Spice (supra), when we analyze the facts and circumstances of the present
case, we clearly observe that undisputedly and admittedly, the return was filed
by amalgamating company on 26.9.2009. The Assessing Officer issued notices
u/s 143(2) of the Act in the name of amalgamating company on 18.8.2010.
Subsequently, letter dated 27.1.2012 was filed before the Assessing Officer,
during the course of assessment proceedings, informing the order of the Hon'ble
High Court dated 12.10.2011. However, the Assessing Officer issued notices
u/s 143(2) and 142(1) of the Act along with questionnaire on the amalgamating
company. After issuing said notices, the Assessing Officer issued additional
questionnaires on 5.12.2012 and 13.2.2013 on amalgamating company. The
Assessing Officer passed draft assessment order u/s 144C of the Act on
amalgamating company. Finally, the Assessing Officer passed final assessment
order u/s 143(3) r/w section 144C of the Act on amalgamating company in
pursuance to the directions of the ld. DRP dated 19.2.2013 u/s 144C(5) of the
Act.
13
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
17. In the light of above noted facts, we clearly observe that the facts of the
present case are quite similar to the facts of the case of Spice (supra), wherein
their lordships have held that framing of assessment against non-existent
entity/person goes to the root of the validity of the assessment which is not a
procedural irregularity curable u/s 292B of the Act or under any other provision
of the Act but it is a jurisdictional defect because there cannot be framing of any
assessment order against a dead person or entity which is non-existent on the
date of framing/passing assessment order.
18. Respectfully following the ratio of order of Hon'ble High Court in the
case of Spice Entertainment (supra), we are inclined to hold that the assessment
order dated 20.1.14 in the name of non-existent amalgamating company having
jurisdictional defect is not sustainable and therefore, we quash the same. It is
ordered accordingly. The additional ground no. 1 and 1.1 of the assessee for
Assessment Year 2009-10 are allowed.
19. Since we have quashed assessment order being without valid jurisdiction,
the other grounds of the assessee become academic and infructuous and we also
dismiss the same being infructuous without any deliberations on merit.
14
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
Revenue's appeal in I.T.A. No. 981/Del/2014 for A.Y. 2009-10
20. Since we have quashed assessment order dated 20.1.2014 by the earlier
part of this order, the Revenue's appeal arising from the same order does not
survive for adjudication and we also dismiss the same being infructuous.
Assessee's appeal I.T.A. No. 1306/Del/2015 for Assessment Year 2010-11
21. The assessee has also raised additional ground in this appeal challenging
the jurisdiction of the Assessing Officer passing assessment order u/s 143(3) r/w
section 144C of the Act against non-existent entity. Except the date of filing
return and passing assessment order etc., the facts and circumstances of the
appeal of the assessee are quite similar and thus we order that our conclusion for
Assessment Year 2009-10 in the earlier part of this order will apply mutatis
mutandis to Assessment Year 2010-11 and hence, assessment order passed on
29.12.2014 is also quashed being passed against non-existent amalgamating
company.
15
I.T.A. 1728, 1306/D/14 & 1306/D/15
Assessment year 2009-10, 2010-11
22. In the result, appeals of the assessee for both the years are allowed and
appeal of the Revenue for Assessment Year 2009-10 is dismissed being
infructuous.
Order pronounced in the open court on 23.11.2015.
Sd/- Sd/-
( O.P. KANT) (C.M. GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 23rd November, 2015
`GS'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT 4.CIT(A)
5. DR
Asst. Registrar
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