Assessment Order passed against amalgamated (non-existing) company is without jurisdiction

Teleperformance Global Services Private Limited Vs Acit (Bombay High Court)

The Supreme Court in the case of Maruti Suzuki  had considered that income, which was subject to be charged to tax for the assessment year 2012-13 was the income of erstwhile entity prior to amalgamation. Transferee had assumed liabilities of transferor company, including that of tax. The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under Section 143(2) of the Act was issued on 26.9.2013, the scheme of amalgamation had been approved by the high court with effect from 1.4.2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292 (b) of the Act.

The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. Vs. CIT⁸. The Supreme Court has also referred to decision of Delhi high court in the case of CIT Vs. Spice Enfotainment Ltd.⁹ and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B. The Supreme Court had also taken note of decision in Spice Entertainment (supra) was followed by Delhi high court in matters, viz. CIT Vs. Dimensions Apparels (P.) Ltd.¹⁰, CIT Vs. Micron Steels (P) Ltd.¹¹; CIT Vs. Miscra India (P). Ltd.¹² and in CIT Vs. Intel Technology India Ltd.¹³ Karnataka high court has held, if a statutory notice is issued in the name of non-­existing entity, entire assessment would be nullity in the eye of law. It has also been so held by Delhi high court in the case of Pr. CIT Vs. Nokia Solutions and Network India (P) Ltd.¹⁴

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. Rule made returnable forthwith. Heard learned Senior Advocate Mr. J. D Mistri for the petitioner and Mr. Sham Walve advocate for respondent-State finally by consent.

2. The petition questions propriety, legality and validity of notice dated 30^th March, 2019 issued by respondent No. 1 – the Assistant Commissioner of Income Tax, Delhi pursuant to section 148 of the Income Tax Act, 1961 (for short “the Act”) for the assessment year 2012-13; and order dated 31^st December, 2019 passed under section 144 read with section 147 of the Act in the name of M/s. Tecnovate Esolutions Private Limited.

3. Mr. J. D. Mistri, learned senior advocate for the petitioner draws our attention to the factual events that, M/s. Tecnovate Esolutions Pvt. Ltd. (for short “TSPL”) was a registered company engaged in business of providing back office support services/ remote data entry services for customers in and outside India. Under order dated 11^th February, 2011, a scheme of amalgamation of aforesaid company with M/s. Intelnet Global Services Pvt. Ltd. , was approved 950-2020 with effect from 1^st April, 2010 and since then the aforesaid TSPL ceased to exist. Subsequently, M/s. Intelenet Global Services Pvt. Ltd. amalgamated with M/s. Serco BPO Pvt. Ltd. Thereafter there had been change in the name with effect from 11^th January, 2016 from M/s. Serco BPO Pvt. Ltd to M/s. Intelnet Global Services Pvt. Ltd. There had been a further change in the name from M/s. Intelenet Global Services Pvt. Ltd to Teleperformance Global Services Pvt. Ltd. (TGSPL) with effect from 12^th February, 2019. He submits that as such, petitioner is successor of M/s. TecnovateEsolutions Pvt. Ltd.

4. It has been referred to that post amalgamation, for assessment year 2012-13 M/s. Intelenet Global Services Pvt. Ltd. filed its income tax returns on 30^th November, 2012 and revised its return on 31^st March, 2014 for the period 1^st April, 2011 to 6^th July, 2011. Its assessment was completed under ection 143(3) of the Act vide order dated 23^rd September, 2016. M/s. Intelenet Global Services Pvt. Ltd. had filed returns for the period from 7.07.2011 to 31.03.2012 on 30^th November, 2012 and revised returns on 31^st March, 2014. Its assessment had been completed under Section 143(3) of the Act under order 31^st January, 2017.

5. Notice dated 30^th March, 2019 under section 148 of the 3/18 950-2020 Act for the assessment year 2012-13 in the name of TSPL had been issued by respondent No. 1 directing to file return of income within thirty days stating there is reason to believe that income chargeable to tax had escaped assessment,, without realising that said company was a non existing entity.

6. He submits, petitioner became aware of aforesaid notice based on telephonic conversation of respondent No. 1 with an employee of petitioner in second week of September, 2019. Petitioner had filed a letter dated 18^th September, 2019 stating that TSPL has been amalgamated with effect from 1^st April, 2010 and since then said company has ceased to exist, and as such, there is no question of filing returns of income for assessment year 2012-13 by said company. The then company M/s. Intelenet Global Services pvt. Ld. had duly filed returns of income for all the subsequent assessment years, and had as such submitted that the notice had been issued on misconception and appears to be an inadvertent error. In ensued telephonic conversation with respondent No. 1, the petitioner was advised to file online response. While attempts had been unsuccessful and portal was not letting petitioner to upload any document including reply, reply had been submitted via email on 29^th November, 2019, enclosing a separate letter of even date. Petitioner had submitted that even after merger, some times the payers make payment to the petitioner, however, erroneously, continue to mention the PAN of erstwhile company and accordingly said deduction is reflected in the 26 AS of erstwhile company and not petitioner company, and petitioner in its return considered all such payments and claimed all such deduction. As such, there is no question of escaping assessment for the assessment year 2012-13.

7. It is contended that without considering the reply or even referring to the telephonic conservation of petitioner with respondent No. 1, assessment order dated 31^st December, 2019 for the assessment year 2012-13, under section 144 read with section 147 of the Act, in the name of TSPL computing total income at Rs. 14,50, 95,452/- was passed. It has been referred to that respondent No. 1 purports to allege that petitioner had neither filed response to the show-cause notice nor filed returns of income for relevant assessment year. As per 26AS statement, taxes have been deducted with respect to transactions amounting to Rs. 14.51 Crores, hence, the same is treated as taxable under the provisions of the Act.

8. Petitioner on realising that assessment order dated 31^st December, 2019 had been passed against M/s. TecnovateEsolutions Pvt. Ltd., the petitioner is constrained to file writ petition, challenging notice dated 30^th March, 2019 and assessment order dated 31^st December, 2019.

9. Mr. Mistri, learned senior counsel submits that while the facts are indisputable, impugned notice dated 30^th March, 2019 and impugned order dated 31^st December, 2019 for assessment year 2012­13 in the name of M/s. Tecnovate Esolutions Pvt. Ltd. are clearly without jurisdiction. He submits that having ragard to the amalgamations with effect from 1^st April, 2010 onwards petitioner is the only company in existence and subsequent to period of the merger, any proceedings could be initiated only by officer having jurisdiction over the petitioner i.e. respondent No. 3 and not respondent No. 1. Impugned notice issued for the period viz. assessment year 2012-13 after the amalgamation is clearly outside the scope of jurisdiction of respondent No. 1. He refers to the letters dated 18^th September, 2019 and 29^th November, 2019 as well as e-mails dated 16^th October, 2019. He submits that despite aforesaid, the decision purports to consider that impugned notice has not been responded to. He submits that there is not even a whisper about the objection by petitioner to the notice and the proceedings. He submits that no assessment or re-assessment proceedings can be initiated against a person not in existence during  the relevant period. Thus the impugned notice and impugned order are absolutely without jurisdiction. He submits that it has been ignored that M/s. Tecnovate Esolutions Pvt. Ltd. had not been in existence with effect from 1.4.2010 for the financial year 2011-12. He submits that M/s. Intelenet Global Services Pvt. Ltd. had already filed returns of income for the assessment year 2012-13 and assessment completed under Section 143(3) of the Act. In the circumstance, there is no question of assessment being reopened or the assessment order being passed in the name of erstwhile company.

10. He submits, petitioner was not afforded any opportunity of hearing. Notice dated 4^th December, 2019 was not served on the petitioner, even the same was not uploaded on the e-portal. The impugned notice and the impugned order of assessment are in breach of principles of natural justice. He thereafter, urges to allow the petition, quashing and setting aside impugned notice date 30^th March and the impugned order dated 31^st December, 2019.

11. Respondent No. 4 has submitted its reply. The petition is resisted contending that notice dated 30^th March, 2019 and assessment order dated 31^st December, 2019 for assessment year 2012-13 are legal and sustainable as per the provisions of the Act. It is contended that 950-2020 petitioner as successor entity had been responsible to reply the notices including show-cause notice issued on 4^th December, 2019 through ITBA system of the department and the notices and orders were dispatched to the concerned assessee on its email id which is registered with the department for receiving such communications. It had been realized that the PAN of the entity TSPL had been apparently active in the database of the department. It is being referred to that petitioner has appellate forum to approach against the order passed. It is further being referred to that jurisdiction over the company TSPL is with the Circle 25(1), Delhi. Thus, it is contended that petitioner is not entitled to any of the relief claimed, as such, petition is liable to be dismissed.

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