Case Law Details
Atos India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
The issue under consideration is whether the assessment initiated in the name of a non-existing entity is justified in law?
ITAT states that, even after the learned DRP taking into account the fact of merger and passing order by giving directions to the learned AO in the name of the merged entity i.e. Atos India Pvt. Ltd, the learned AO continued to frame the final assessment order in the name of erstwhile amalgamating company. Hence, it could be safely concluded that the learned AO had passed draft assessment order as well as the final assessment order in the name of non-existent entity despite having due intimation of the fact of merger duly approved by the Hon’ble Bombay High Court vide order dated 21/12/2012. The law is now very well settled that assessment framed on an non-existent entity deserves to be declared as void ab initio by the recent decision of the Hon’ble Supreme Court in the case of PCIT vs. Maruthi Suzuki India Ltd., reported in 416 ITR 613 wherein it was held that where during pendency of assessment proceedings, assessee company was amalgamated with another company and thereby lost its existence, the assessment order passed subsequently in the name of said non-existent entity, would be without jurisdiction and was to be set aside. Respectfully following the same, we hold that the assessment order framed by the learned AO in the instant case deserves to be quashed as the same is without jurisdiction, being framed on a non-existent entity. Accordingly, the additional ground raised by the assessee is allowed. Since, the entire assessment is quashed on a legal issue, the adjudication of various other grounds of merits becomes infructuous.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by Revenue is directed against the final order passed by the Assessing Officer dated 31.01.2017 under Section 143(3) r.w.s. 144C(13) of Income Tax Act, 1961 (hereinafter “the Act”) and it relates to A.Y. 2012-13.
2. The assessee has raised the following grounds of appeal: –
“1. Ground No. 1 – Transfer pricing (“TP’) adjustment in relation to provision of software development services
1.1. On the facts and circumstances of the case and in law, the Hon’ble Dispute Resolution Panel – 1 (‘Hon’ble DRP’) erred in upholding the action of the Deputy Commissioner of Income Tax, Circle – i4(i)(i), Mumbai (‘Ld, AO’)/ Additional Commissioner of Income Tax, Transfer Pricing – 1(1), Mumbai (Ld. TPO’) in making an adjustment of Rs. 6,01,99,278 in relation to the international transaction of provision of software development services. In doing so, the Hon’ble DRP erred in :
1.1.1. upholding the action of the Ld. AO/ Ld, TPO in rejecting the TP documentation maintained by the Appellant;
1.1.2. upholding the action of the Ld. AO/ Ld. TPO in including companies in the comparability analysis which are different from the Appellant in functions, asset base and risk profile;
1.1.3. upholding the action of the Ld. AO/ Ld. TPO in not including companies in the comparability analysis which are similar to the Appellant in functions, asset base and risk profile ;
1.1.4. not directing the Ld. AO/ Ld. TPO to grant working capital adjustment; and
1.1.5. upholding the action of the Ld. AO/ Ld. TPO in incorrectly computing profit level indicator of certain comparable .
The Appellant therefore prays that the Ld. AO / Ld. TPO be directed to treat the actual value of international transaction of provision of software development services as at arm’s length and delete the TP adjustment of Rs. 6,01,99,278.
2. Ground No. 2 – Denial of claim of depreciation on goodwill
On the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the action of the Ld. AO in disallowing the claim of depreciation on goodwill amounting to Rs. 2,00,50,209 on the alleged ground that unless the goodwill is found to be genuine and depreciation is ground to be allowable in the preceding year / years, the claim of depreciation of goodwill cannot be allowed in this assessment year.
The Appellant therefore prays that the Ld. AO be directed to allow the claim of depreciation on goodwill.
3. Ground No. 3 – Denial of deduction of provisions paid/written back
On the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the action of the Ld. AO in disallowing the deduction of provisions paid / written back amounting to Rs. 8,51,09,147 on the alleged ground that no documentary evidence in support of the claim has been furnished.
The Appellant therefore prays that the Ld. AO be directed to allow the deductions of provision paid/written back.
4. Ground No. 4 – Denial of deduction of excess provisions for earlier year written back
On the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the action of the Ld. AO in disallowing the deduction of excess provisions written back amounting to Rs. 5,87,78,387 on the alleged ground that no documentary evidence in support of the claim has been furnished.
The Appellant therefore prays that the Ld. AO be directed to allow the deduction of excess provisions for earlier year written back amounting to Rs. 5,87,78,387.
5. Ground No. 5 – Denial of deduction of project risk expenses written back
On the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the action of the Ld. AO in disallowing the deduction of provision of project risk expenses written back amounting to Rs. 70,35,549 on the alleged ground that no documentary evidence in support of the claim has been furnished.
The Appellant therefore prays that the Ld. AO be directed to allow the deduction of provision of project risk expenses written back amounting to Rs. 70, 35,549.
6. Ground No. 6 – Denial of deduction of preliminary expenses
On the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the action of the Ld. AO in disallowing the deduction of preliminary expenses under section 350 of the Act amounting to Rs. 1,96,333 on the alleged ground that the impugned expenditure do not fall within the ambit of Section 350 of the Act,
The Appellant therefore prays that the Ld. AO be directed to allow the deduction of preliminary expenditure u/s. 350 of the Act.
7. Ground No. 7 – Delay in payment of employee’s ESIC contribution
On the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the action of the Ld. AO in denying claim of deduction on account of delay in payment of employee’s ESIC contribution under section 36(i)(va) of the Act amounting to Rs.i2,88,O54 on the alleged ground that the employee’s ESIC contribution has been paid after the due date prescribed u/s. s6(i)(va) of the Act.
The Appellant therefore prays that the Ld. AO be directed to allow the deduction of employee’s ESIC contribution.
8. Ground No. 8 – Credit of Self-Assessment Tax
On the facts and in the circumstances of the case and in law, the Ld. AO has erred in denying the credit of self-assessment tax amounting to Rs.2,62,19,000.
The Appellant therefore prays that the Ld. AO be directed to allow the credit of self-assessment tax and oblige.
9. Ground No. 9 – Initiation of penalty proceedings
On the facts and in the circumstances of the case and in law, the Ld. AO has erred in proposing to initiate penalty under Section 271(1) of the Act for various additions/disallowances.
The Appellant therefore prays that the Ld. AO be directed not to initiate penalty proceedings and oblige.”
3. Though the assessee had raised various grounds on merits of various additions/disallowances made by the learned AO pursuant to DRP directions the learned counsel for the assessee emphises that the assessee had raised an additional ground vide petition dated 4.4.2019 stating that the assessment has been framed on a non-existing entity and accordingly is void abinitio. He submits that in identical circumstances the ITAT has quashed the assessment order dated 24.12.2019 for A.Y. 2011-12.
4. We may refer the order of the ITAT which adjudicates as under: –
“We find that the undisputed facts available on record are as under:-
a) Atos IT Solutions and Services Private Ltd was originally incorporated on 27.3.2010 under the name “Siemens Information Systems (India) Pvt Ltd” which was subsequently changed to “Siemens IT Solutions and Services Pvt Ltd”. This was incorporated as a wholly owned subsidiary of Siemens Pte. Ltd, Singapore. The assessee started its operation from 1.10.2010.
b) During the year under consideration, Siemens Pte. Ltd, Singapore transferred its shareholding in “Siemens IT Solutions and Services Pvt Ltd” to “Siemens IT Solutions & Services GMBH, Germany” and accordingly, the assessee became wholly owned subsidiary of “Siemens IT Solutions & Services GMBH, Germany, whose ultimate holding company was Siemens AG. Before filing the return of income, the ultimate holding company was changed from Siemens AG to Atos SA, France. Consequently, the name of the company was changed to Atos IT Solutions and Services Pvt Ltd.
c) The assessee filed its return of income for the Asst Year 2011-12 on 30.11.2011 in the name of Atos IT Solutions and Services Pvt Ltd declaring total income of Rs 14,53,98,874/- which was subsequently revised to `4,64,70,033/-. Subsequently, Atos IT Solutions and Services Private Ltd got merged into Atos India Private Ltd in view of scheme of amalgamation which was duly approved by the Hon’ble Bombay High Court dated 21.12.2012 enclosed in pages 1335 to 1350 of the Paper Book filed before us.
d) The assessee’s case was picked up for scrutiny and notice u/s 143(2) of the Act was issued on 29.8.2013 by the ITO-7(2)(4) in the name of Atos IT Solutions and Services Private Ltd.
e) During the course of hearing, the assessee vide letter dated 31.1.2014 enclosed in page 1332 of the paper book, submitted the order of the Hon’ble Bombay High Court approving merger of Atos IT Solutions and Services Private Ltd into Atos India Private Ltd.
f) Accordingly, the jurisdiction was transferred from DCIT-7(2) to the jurisdiction of its successor company i.e. DCIT – 8(1), vide transfer memo dated 31.1.2014 enclosed in page 1334 of the paper book.
g) The assessee vide letter dated 3.2.2014 filed its consent with respect to such transfer of jurisdiction. Further, the assessee also filed the order of the Hon’ble Bombay High Court approving merger of Atos IT Solutions and Services Private Ltd into Atos India Private Ltd with the learned DCIT-8(1) as well. The evidences in this regard are enclosed in pages 1333 to 1350 of the paper book.
h) Thereafter, due to internal restructuring in department, jurisdiction was transferred from DCIT -8(1) to Assistant/Deputy Commissioner of Income-tax – 14(1X1) (“ACIT/DCIT 14(1X1)”) vide notice dated January 05, 2015. The evidence in this regard is enclosed in page No. 1354 of the paper book.
i) The assessee vide letter dated January 12, 2015, filed all the submissions which were filed before the previous assessing officers including the submission dated February 03, 2014 & January 31, 2014 wherein the order of the Hon’ble Bombay High Court approving merger was submitted.
j) Therefore, it can be seen from above that the assessee has submitted the copy of the Bombay High Court approving merger with all the Assessing Officers including the Assessing Officer who has passed the assessment order i.e. ACIT/DCIT-14(1)(1).
k) However, despite of mentioning the fact, the draft assessment order as well as the final assessment order was passed in the name of “Atos IT Solutions and Services Private Ltd” which was not in existence at the time of passing the orders.
5. In these circumstances, the assessee has raised an additional ground challenging the validity of assessment framed in the hands of non-existent entity. This issue goes to the root of the matter and does not involve verification of any fresh facts in as much as the entire facts are already available on record and the same are not disputed. Accordingly, the additional ground raised by the assessee is hereby admitted and taken up for adjudication.
6. We find that the learned DR vide letter dated 25/10/2019 submitted the written submissions of the learned AO with regard to the additional ground by seeking report from the learned AO. We find that the assessee had pleaded that the copy of fact of merger of Atos IT Solutions and Services Pvt. Ltd. with Atos India Pvt. Ltd., pursuant to the scheme of amalgamation duly approved by the Hon’ble Bombay High Court vide order dated 21/12/2012 was indeed submitted to the learned AO during the course of assessment proceedings vide letters dated 31/01/2014 and 03/02/2014. The Bench directed the learned DR to verify the availability of these letters from the assessment folder. Accordingly, the report dated 15/10/2019 was submitted by the learned AO through the learned CIT(DR) wherein the learned AO had agreed to the fact that the letters dated 31/01/2014 and 03/02/2014 were indeed available in the case records of the assessee but the enclosures are not available thereon. We find that the entire objections of the learned AO vide letter dated 15/10/2019 had already been addressed by us hereinabove. The very fact that the revenue was indeed aware of the fact of merger of Atos IT Solutions and Services Pvt. Ltd with Atos India Pvt. Ltd. is evident from the excruciating fact that on 31/01/2014 the jurisdiction of the assessee was transferred from DCIT 7(2) to DCIT 8(1) which is jurisdiction of Atos India Pvt. Ltd. being the successor company to the assessee. The evidence in this regard is enclosed in page 1334 of the paper book by way of transfer memo signed by DCIT 7(2), Mumbai. Hence, it cannot be said that the learned AO was not intimated about the fact of merger with Atos India Pvt. Ltd., We also find that pursuant to this forwarding memo / transfer memo dated 31/01/2014 for transfer of jurisdiction from DCIT 7(2) Mumbai to DCIT 8(1) Mumbai, the assessee vide letter dated 03/02/2014 had filed its consent for transfer of jurisdiction. Even before the new Assessing Officer i.e. DCIT 8(1) Mumbai, assessee had once again filed a copy of the order of the Bombay High Court approving the amalgamation of Atos IT Solutions and Services Pvt. Ltd. with Atos India Pvt. Ltd. The evidences in this regard as stated supra are enclosed in pages 1333 to 1350 of the paper book. Later, by yet another letter dated 12/01/2015, the assessee had informed the subsequent Assessing Officer i.e. ACIT-14(1)(1), Mumbai (pursuant to internal restructuring in the department wherein the jurisdiction of the case was transferred), wherein on the subject column itself the fact of merger of Atos IT Solutions and Services Pvt. Ltd. with Atos India Pvt. Ltd. vide High Court order dated 29/12/2012 was very clearly mentioned in bold letters. Evidences in this regard are enclosed in page 1351 to 1353 of the paper book. Despite all these facts, the following orders were passed by the lower authorities.
a) Order u/s.92CA(3) of the Act by the Additional Commissioner of Income Tax, Transfer Pricing – 1(1), Mumbai dated 27/01/2015 in the name of Atos IT Solutions and Services Pvt. Ltd., (amalgamating company)
b) Draft assessment order dated 31/03/2015 in the name of Atos IT Solutions and Services Pvt. Ltd. (amalgamating company)
c) Directions issued by the learned DRP u/s.144C(5) of the Act dated 29/12/2015 in the name of Atos IT solutions and Services Pvt. Ltd (now merged with Atos India Pvt. Ltd.)
d) Final assessment order pursuant to the directions of learned DRP was passed u/s.143(3) r.w.s. 144C(13) of the Act dated 27/01/2016 in the name of Atos IT Solutions and Services Pvt. Ltd.
7. From the aforesaid facts, it could be seen that even after the learned DRP taking into account the fact of merger and passing order by giving directions to the learned AO in the name of the merged entity i.e. Atos India Pvt. Ltd, the learned AO continued to frame the final assessment order in the name of erstwhile amalgamating company. Hence, it could be safely concluded that the learned AO had passed draft assessment order as well as the final assessment order in the name of non-existent entity despite having due intimation of the fact of merger duly approved by the Hon’ble Bombay High Court vide order dated 21/12/2012. The law is now very well settled that assessment framed on an non-existent entity deserves to be declared as void ab initio by the recent decision of the Hon’ble Supreme Court in the case of PCIT vs. Maruthi Suzuki India Ltd., reported in 416 ITR 613 wherein it was held that where during pendency of assessment proceedings, assessee company was amalgamated with another company and thereby lost its existence, the assessment order passed subsequently in the name of said non-existent entity, would be without jurisdiction and was to be set aside. Respectfully following the same, we hold that the assessment order framed by the learned AO in the instant case deserves to be quashed as the same is without jurisdiction, being framed on a non-existent entity. Accordingly, the additional ground raised by the assessee is allowed. Since, the entire assessment is quashed on a legal issue, the adjudication of various other grounds of merits becomes infructuous.”
8. Referring to the above order of the Income Tax Appellate Tribunal in assessee’s own case, the learned counsel of the assessee submitted that assessee is confident of getting the necessary relief from the ITAT on the additional ground and accordingly he submitted that he is not prepared to argue upon the merits of the appeal.
9. Per contra learned Departmental Representative submitted that the assessee filed its return of income on 29.11.2012. Assessment order has been framed showing the following name:
“M/s. Atos IT Solutions and Services Pvt. Ltd. Formerly Siemens Information Systems (India) Ltd., now known as Atos India Pvt. Ltd.”
The DRP order mentions the assessee’s name as “Altos IT Solutions Private Limited, now merged with Atos India Pvt. Ltd., formerly Siemens Information Systems (India) Ltd.”
10. The Honourable Bombay High Court approved the amalgamation on 21.12.2012 with effect from 01.07.2011. The assessee did not file any revised return of income despite the fact that time was available. The assessee did not get the PAN and particulars of the assessee duly affected and changed in the information system of the Revenue as per the requirement by making necessary application to the NSDL. Due to lack of change in the particulars of PAN the Departmental system continued to issue notices and other documents in the pre-amalgamation name. Due to lack of change in PAN particulars and name in the departmental system the AO duly framed the order by duly incorporating the full particulars. The assessee itself paid ITAT appeal fee in 2017 in the name of earlier company.
11. In the light of the above Departmental Representative reiterated that the assessee not following the due procedures for change in name and No. in the PAN details, the Assessing Officer has no option but to frame the assessment by incorporating all the particulars along with the unchanged PAN. The Departmental Representative submitted that assessee is not aggrieved by the old PAN in the assessment order as it is due to the mistake of the assessee itself that it did not change. The Departmental Representative submitted that the particulars in the name used by the Assessing Officer capture all the particulars and there is no reason to hold the assessment illegal.
12. per contra learned counsel of the assessee submits that in identical circumstances ITAT in assessee’s own case has quashed assessment hence the same should be duly followed. As regards the issue of getting the particulars of PAN changed by application and other due course and the issue of filing of revised return, learned counsel of the assessee submitted that these might have been done.
13. Upon careful consideration we find that honourable Supreme Court in the case of Honda CIEL (295 ITR 466) has held that non-consideration of the order of the ITAT in assessee’s own case can render the order of another bench of the ITAT containing mistake apparent from record. Since the above said order of the ITAT in assessee’s own case has not been reversed by the honourable High Court, we duly follow the aforesaid order and hold that since the facts are identical, the assessee succeeds on addition ground following the aforesaid ratio. Accordingly the assessment is treated as null and void.
14. Since the learned counsel of the assessee has stated that he is confident of winning the case on the additional ground on jurisdiction and is not prepared on the merits of the case, the merits of the case are not be adjudicated and treated as not pressed.
15. In the result, the appeal filed by the stands partly allowed.
Order pronounced under Rule 334(4) of the ITAT Rules on 11th August, 2020.
