In a recent case before Income Tax Appellate Tribunal ( ITAT ), New Delhi it was ruled that an assessment against a non-existent entity cannot be rectified by invoking Section 292 of the Income Tax Act.
Cross appeals were filed by assessee Genpact India Pvt.Ltd. and revenue, DCIT, New Delhi against the order of ld. Commissioner of Income-tax (Appeals), (CIT(A)) for the Assessment year (AY) 2015-16.
Since the appeals were connected and had common issues, they were disposed of by a common order. The assessee and revenue had raised an appeal against the order of CIT(A), New Delhi.
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Genpact India Pvt. Ltd was amalgamated with Genpact India as a result of a scheme of amalgamation which was approved by the High Court at Telangana and Andhra Pradesh through an order.
The assessing officer had passed the order, and was well aware that the amalgamating company Genpact India Pvt. Ltd. was not in existence at that time. This was supported by a letter addressed to Member, CBDT and a copy to assessing officer, DCIT, which was intimated by the assessee that Genpact India ( a wholly owned subsidiary of Empower ) in its 68th meeting of Board of Approval ( BoA ) for SEZs held on December 30, 2015, and had obtained the approval of the BoA for change in the entrepreneurship of its SEZ units to Empower.
They had also mentioned that the scheme was allowed by the High Court of New Delhi, Telangana and Andhra Pradesh, and details of the jurisdiction Assessing Officers was placed by the assessee before the Revenue authorities.
CIT(A) had upheld the assessment order passed by the Assessing Officer disregarding the fact that the same was passed on non-existing entities. There it constitutes too bad in law and is void ab initio.
The Revenue’s counsel, represented by Sapna Bhatia submitted that the scheme of amalgamation was approved on 27.12.2017. The CITA had considered the issue raised by the assessee and held that ce the assessment notice was issued, the assessee had represented the case through its duly Authorized Representative and filed various submissions without objecting the issue raised in the current appeal.
Further it was also brought to the notice of the tribunal that the assessee did not even communicate in writing with the Assessing Officer about the fact that the assessee had merged with another company, during the assessment proceedings. Further, ld. CIT (A) also observed that the assessee has filed the appeal in the name of Genpact India i.e. the name of the erstwhile company.
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Section 2(31) of the Income Tax Act, 1961 states that when the amalgamating company ceases to exist, it can’t be regarded as a person against whom the assessment proceeding can be initiated or an order can be passed.
In the present case Genpact India was not existent at the time of conducting assessment proceedings or on the date of passing Assessment order. Based on the facts and findings the whole assessment was said to be void ab initio.
The Income Tax Appellate Tribunal, comprising Accountant member Rifaur Rahman and Judicial Member Sudhir Kumar observed that the legal issue was in favor of assessee and quashed the assessment order.
Thus the appeal filed by revenue was dismissed.
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