Assessment framed by AO on a non-existent company is a nullity

M/s. Sony Mobile Communications (India) Private Limited Vs. DCIT (ITAT Delhi)

Assessment framed by AO on a non-existent company is a nullity in the eyes of law and void and the provisions of section 292 B cannot rescue the Income Tax Department: Sony India case

Recently, in Sony Mobile Communications India (P) Ltd. (now merged with Sony India Pvt. Ltd.) vs. DCIT & Sony Mobile Communications India (P) Ltd. (now merged with Sony India Pvt. Ltd.) vs. ACIT [ITA No.554/Del/2015 A.Y.2010-11 and ITA No.836/Del/2014, decided on 06.07.2018], both the appeals filed by the assessee were allowed.

ITA No. 554/Del/2015 (A. Y. 2010-11):

Apart from grounds in the appeal, the Counsel for the assessee made an application under Rule 11 of the ITAT Rules, 1963 seeking admission of the following additional ground of appeal :-

“Ground 16 The assessment order passed under section 143 (3) read with section 144 C of the Act is void ab-initio as the assessment was undertaken in the name of a non-existent entity.”

Facts of the case, in brief, were that the assessee had filed its return of income for the A.Y. on 05.10.2010 declaring an income of Rs.17,07,57,513/-. The assessee company was primarily engaged in the business of importing buying and selling and distributing wide range of mobiles phones in India and providing related post sale support services. Since the assessee had undertaken international transaction with its AEs, the AO referred the matter to the TPO for determination of the ALP of the international transaction entered into by the assessee with its AE. The TPO determined an upward adjustment of Rs.56,30,78,638/- . The assessee approached the DRP who declined to interfere with the transfer pricing adjustment made by the AO. The assessee approached the Tribunal and Tribunal gave some part relief against which the assessee as well as revenue approached the Hon’ble Delhi High Court. The Hon’ble High Court in ITA No. 638/Del/2015 filed by assessee and ITA No. 614/Del/2015 filed by the Revenue vide order dated 28.01.2016 restored the matter to the file of the Tribunal with certain directions.

The Counsel for the assessee submitted that the DRP in the order dated 21.10.2014 has mentioned the name of the appellant as Sony Mobile Communication India Private Limited (Now merged with Sony India Private Ltd). Referring to the order of the TPO he submitted that the TPO vide order dated 27.01.2014 has mentioned the name of the assessee as Sony Mobile Communication India Private Ltd (earlier known as Sony Ericson Mobile Communication (India) Private Ltd ). Referring to the order of the AO dated 22.12.2014 he submitted that the AO has passed the order in the name of Sony Ericson Mobile Communications (India) Private Ltd. He accordingly submitted that even after the order was passed by the DRP mentioning that the company has now merged with Sony India Private Limited, the AO has passed the final order in the old name i.e. a nonexistent company.

Referring to the sequence of events the Counsel for the assessee drew the attention of the Bench to the following dates:

The learned Members of the ITAT, Delhi observed that various decisions relied by the Counsel for the assessee support his case. So far as the various decisions relied by the DR were concerned these decisions in our opinion were distinguishable and not applicable to the facts of the present case. The learned Members of the ITAT, Delhi held that the assessment framed by the AO on a non-existent company is a nullity in the eyes of law and void and the provisions of section 292 B cannot rescue the department. Therefore, the order is unsustainable and accordingly the same is quashed. The additional ground raised by the assessee is accordingly allowed. Since the assessee succeeds on this legal ground, therefore, the various other grounds raised by the assessee in appeal are not adjudicated being academic in nature.

 ITA No. 836/Del/2014 (A. Y. 2009-10):

In the above appeal also the assessee raised the following additional grounds under Rule 11 of the IT AT Rules, 1963:
“Ground 17 That Assessment Order Passed under section 143 (3) read with section 144C of the Act is void-ab-initio as the assessment was undertaken in the name of a non-existent entity.”

After hearing both the sides, the learned Members of the ITAT, Delhi found that here also the assessee filed its return of income on 30.09.2009 declaring total income of Rs.31,13,48,587/-in the name of Sony Mobile Communications India Private Limited (earlier known as  Sony Ericsson Mobile Communications (India) Private Limited). The TPO passed the order in the name Sony Ericsson Mobile Communication (India) Private Limited. The AO on the basis of the order dated 29.01.2013 of the TPO made adjustment of Rs.70,15,73,668/- on account of ALP of the international transaction entered into by the assessee with its AE. The DRP vide order dated 23.12.2013 passed the order in the name of Sony Mobile Communication India Private Limited (earlier known as Sony Ericson Mobile Communications (India) Private Limited). Since the facts of the instant case were identical to the facts in case of the ITA No.554/Del/2015, therefore, following observations there in, the additional ground raised by the assessee was allowed since the assessment has been framed as a non-existent company. Since the assessee succeeds on this additional ground, therefore, the other grounds have become academic in nature and therefore are not being adjudicated.