Case Law Details
Brevo CRM Solutions Private Limited Vs Assessment Unit (ITAT Delhi)
The assessee, Brevo CRM Solutions Private Limited, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi, challenging the final assessment order passed under Sections 143(3), 144C(13) and 144B of the Income-tax Act for Assessment Year (AY) 2022-23. The appeal arose from transfer pricing adjustments relating to software development services and interest on outstanding receivables. The assessee also challenged the levy of interest, initiation of penalty proceedings, and raised an additional legal ground contending that the assessment order was invalid because it had been passed in the name of a non-existent company.
The return of income for AY 2022-23 had originally been filed by Silver Line IT Solutions Private Limited. The case was selected for complete scrutiny under CASS on account of large international transactions in services coupled with low profitability and addition of assets eligible for higher depreciation. During assessment, the matter was referred to the Transfer Pricing Officer (TPO), who proposed transfer pricing adjustments in respect of software development services and interest on outstanding receivables. After objections were considered by the Dispute Resolution Panel (DRP), the Assessing Officer (AO) passed the final assessment order making a transfer pricing adjustment of ₹4,11,07,866, comprising ₹4,11,04,320 relating to software development services and ₹3,545 relating to interest on outstanding receivables.
In its appeal, the assessee challenged the transfer pricing adjustments on several grounds. It contended that the TPO had incorrectly determined the arm’s length price of software development services, wrongly modified the economic analysis contained in the transfer pricing documentation, incorrectly computed the operating margins of both the assessee and comparable companies, arbitrarily rejected one of the comparable companies selected by the assessee, introduced functionally dissimilar comparables, and failed to grant working capital adjustment. The assessee also disputed the adjustment relating to interest on outstanding receivables, contending that the receivables did not constitute a separate international transaction, that invoices had been realised within the accepted credit period, and that any impact of receivables was already subsumed in the working capital adjustment. It further challenged the levy of interest under Section 234B, initiation of penalty proceedings under Section 270A, and contended that the assessment was barred by limitation.
The assessee also sought admission of an additional legal ground. It submitted that Silver Line IT Solutions Private Limited had merged with Creatorbox Softwares Private Limited with effect from 1 April 2024 pursuant to a scheme approved by the National Company Law Tribunal (NCLT). Subsequently, Creatorbox Softwares Private Limited had changed its name to Brevo CRM Solutions Private Limited with effect from 16 April 2025. The assessee pointed out that the merger and subsequent name change had been duly intimated to the DRP, the TPO and the AO before the DRP issued its directions and before the AO passed the final assessment order. Despite these intimations, both the DRP directions dated 31 October 2025 and the final assessment order dated 25 November 2025 were passed in the name of Silver Line IT Solutions Private Limited, which had ceased to exist. The assessee relied on the Supreme Court decision in Maruti Suzuki India Limited in support of its contention that an assessment framed in the name of a non-existent entity is without jurisdiction.
The Tribunal admitted the additional ground, observing that it raised a pure question of law going to the root of the matter and did not require further investigation into facts. It noted that the merger had been approved by the NCLT with effect from 1 April 2024 and that the subsequent change of name had also been duly intimated to the tax authorities. The Tribunal found from the record that, despite receiving these communications, both the DRP and the AO had continued to issue orders in the name of Silver Line IT Solutions Private Limited, which was no longer in existence.
Relying on the Supreme Court’s decision in Principal Commissioner of Income Tax v. Maruti Suzuki India Limited, the Tribunal held that once a company has merged and ceased to exist pursuant to an approved scheme of amalgamation, any assessment order subsequently passed in the name of the amalgamating company is without jurisdiction and liable to be set aside. Applying this principle, the Tribunal held that both the DRP directions and the final assessment order, having been passed in the name of a non-existent entity despite prior intimation of the merger and name change, were invalid in law.
Accordingly, the Tribunal set aside the DRP directions dated 31 October 2025 and the final assessment order dated 25 November 2025. Since the appeal was allowed on the additional legal ground, all other grounds relating to the transfer pricing adjustments, interest, penalty proceedings and limitation were rendered academic and were left open without adjudication. As a consequence, the stay application filed by the assessee was dismissed as infructuous.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal filed by the assessee and Stay Application are against the final assessment order dated 25.11.2025 of the ld. Assessing Officer/ Assessment Unit u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment year (‘AY’) 2022-23.
2. Brief facts of the case are that the appellant/ assessee, BREVO CRM SOLUTIONS Pvt. Ltd. was formerly known as Creatorbox Softwares P. Ltd. and Successor entity of Silver Line IT solutions Pvt. Ltd. A Silver Line IT Solutions Pvt. Ltd. filed return of income for Assessment Year 2022-23 on 30.11.2022 declaring total income of Rs. 4,91,24,571/-. The case of Silver Line IT Solutions Pvt. Ltd. was selected for complete scrutiny under CASS for following reasons:
a. Large value of international transactions in services in comparison to revenue from sale of services shown in ITES and low profitability (T.P.Risk Parameter) and
b. Addition of assets during the year in the block of assets where rate of depreciation claimed is 40% or higher.
Notice under section 143(2) of the Act dated 02.06.2023 and notice u/s 142(1) of the Act along with questionnaire dated 04.07.2023 were issued. The assessee failed to respond the notices.
2.1 On issue of large value of international transactions in services in comparison to revenue from sale of services shown in ITR and low profitability (T.P. Risk Parameter), the case was referred to Technical Unit for assistance/advice on determination of arm’s length price (ALP) of the transaction(s) as per Sec. 92CA of the Act on 12.07.2023. Ld. TPO vide order dated 02.01.2025 proposed and adjustment of Rs. 4,36,58,078/- in respect of software development services and interest on outstanding trade receivables. The draft assessment order u/s 144C(1) of the Act dated 20.01.2025 proposing an addition of Rs. 4,36,58,078/- was passed. The assessee filed objections before Dispute Resolution Penal, New Delhi on 18.02.2025 which were disposed of vide order dated 31.10.2025.
2.2 On completion of proceedings, ld. AO vide order dated 25.11.2025 made an adjustment of Rs. 4,11,07,866/- (i.e. Rs. 3,545/- i.r.o. international transactions relating interest on outstanding receivables & 4,11,04,320/-i.r.o. international transactions software development services).
3. Being aggrieved, the appellant/assessee preferred present appeal on following grounds:
“Ground relating to transfer pricing adjustment – INR 41,107,865
- Adjustment relating to international transaction of provision of software development services INR 41,104,320
1.1. The Ld. AO along with the Ld. TPO (under the directions of Hon’ble DRP) erred on facts and in law in making an addition of INR 41,104,320 to the Appellant’s taxable income by incorrectly determining the arm’s length price for the provision of software development services.
1.2. Ld. AO/Ld. TPO erred on facts and in law in modifying the economic analysis carried out by the Appellant in the Transfer Pricing Documentation (TP Documentation’) and introducing new filters, without providing any cogent reasons.
1.3. Ld. AO/Ld. TPO erred on facts and in law in incorrectly computing the net cost-plus margin of the tested party. Among the other errors, Ld. AO/Ld. TPO erred in treating the expense incurred on donation as operating in nature.
1.4. Ld. AO/Ld. TPO erred on facts and in law in incorrectly computing the net cost-plus margin of comparable companies for arriving at the arm’s length price.
1.5. Ld. AO/ Ld. TPO erred on facts and in law in arbitrarily rejecting Kireeti Soft Technologies Limited selected by the Appellant in the TP Documentation basis the provisions of Rule 108(2) of the Income Tax Rules, 1962 (‘Rules’).
1.6. Ld. AO/Ld. TPO erred on facts and in law in introducing new companies without appreciating that such companies are functionally dissimilar to the Appellant and thereby, violate the provisions of Rule 10B(2) of the Rules.
1.7. Ld. AO/Ld. TPO erred in law in not allowing working capital adjustment under the provisions of Rule 10B(1) and Rule 10B(3) of the Rules.
2. Adjustment relating to international transactions pertaining to interest on outstanding receivables – INR 3,545
2.1. The Ld. AO/Ld. TPO erred on facts and in law in treating outstanding receivables from AE as a separate international transaction.
2.2. The Ld. AO/Ld. TPO erred on facts and in law in not appreciating the fact that the Appellant has realized the invoices within a weighted average credit period of 28 days which is well within the accepted credit policy of 60 days by the Ld. TPO/ Ld. AO, thereby, not warranting an addition.
2.3. The Ld. AO/ Ld. TPO erred on facts and in law in not appreciating that once a working capital adjustment is performed, it subsumes the impact of outstanding receivables made by the Appellant.
Other grounds
3. The Ld. AO erred on facts and in law in levying excess interest under section 234B of the Act.
4. The Ld. AO erred on facts and in law in initiating penalty proceedings under Section 270A of the Act.
5. On the facts and circumstances of the case and in law, the assessment proceedings are barred by limitation in view of Section 153 read with Section 144C of the Act.”
3.1 The appellant/assessee through application requested additional ground as under:
“Ground No. 6
6.1. “On facts and circumstances of the case and in law, the assessment order dated November 25, 2025 passed by the Assessment Unit, Income Tax Department (‘Ld. AO’) and the directions pronounced by the Hon’ble Dispute Resolution Panel (‘DRP’) dated October 31, 2025 in the name of Silver Line IT Solutions Private Limited (‘Silver Line’) is invalid and bad in law.
6.2. ” On facts and circumstances of the case and in law, the Ld. AO erred in passing the assessment order dated November 25, 2025 in the name of Silver Line which was not in existence on the date of passing the assessment order as it stood merged with Brevo CRM Solutions Private Limited (‘Brevo CRM’) (formerly known as Creatorbox Softwares Private Limited (‘Creatorbox’)) effective from April 01, 2024 as approved by the National Company Law Tribunal (‘NCLT’). Thus, the assessment order in the name of non-existent company (being the merged company) is invalid and bad in law.”
4. Ld. Authorized Representative for appellant/assessee submitted that additional ground raises a legal plea and does not require investigation into the facts but arises out of facts already available on record. The assessee inadvertently omitted to raise the additional ground earlier. The additional ground of appeal is necessary for the substantial justice. Silver Line IT Solutions Private Limited got merged with Creatorbox Softwares Private Limited with effect from April 01, 2024 pursuant to scheme of merger approved by the NCLT vide order dated December 23, 2024. A copy of the said order is Annexure 1. This fact was duly intimated to the Hon’ble Dispute Resolution Panel (‘Hon’ble DRP’), Learned Transfer Pricing Officer, 3(1)(2), Delhi (‘Ld. TPO’) as well as to the Learned Assessing Officer, Circle 23(3), Delhi, vide letters dated February 18, 2025. The copy of these letters are attached as Annexure 2.
4.1 Subsequent to the aforesaid merger, the name of Creatorbox Softwares Private Limited was changed to Brevo CRM Solutions Private Limited with effect from April 16, 2025. A copy of the certificate of incorporation is Annexure 3. This fact was also duly intimated to Hon’ble Dispute Resolution Panel (‘Hon’ble DRP’), Learned Transfer Pricing Officer, 3(1)(2), Delhi (‘Ld. TPO’) as well as to the Learned Assessing Officer, Circle 23(3), Delhi vide letters dated June 16, 2025. The copy of these letters are attached as Annexure 4.
4.2 Despite the timely intimations made regarding merger and subsequent name change, Hon’ble DRP issued the directions dated October 31, 2025 and Ld. AO passed the final assessment order dated November 25, 2025 in the name of Silver Line, i.e., the erstwhile entity.
4.3. Reliance was placed on Pr. Commissioner of Income Tax, New Delhi v/s Maruti Suzuki India Limited (Civil Appeal No 5409 of 2019 (Arising out of SLP(C) No 4298 of 2019)).
5. Ld. Departmental Representative submitted that the Departmental Authorities have fairly passed the impugned order.
6. From examination of record in the light of aforesaid rival contention, it is crystal clear that the appellant/assessee has raised additional ground of appeal which was inadvertently omitted earlier. The additional ground of appeal raises legal issue which goes to root of the matter. As per ratio of judgment in National Thermal Power company Ltd. vs. CIT [1998]229 ITR 383 (SC) and the above factual position the additional ground of appeal is admitted.
6.1 The final assessment order dated 25.11.2025 by Ld. AO and ld. DRP directions dated 31.10.2025 are in name of Silver Line IT Solutions Pvt. Ltd. with PAN No. AALCS4064L. Hon’ble NCLT vide order dated
25.11.2024 had ordered merger of Silver Line IT Solutions Pvt. Ltd. with Creatorbox Softwares P. Ltd. with effect from 01.04.2024 copy of order is Annexure 1 and letter of intimation to DRP and TPO dated 18.02.2025 is Annexure 2. The Creatorbox Softwares P. Ltd. was changed to Brevo CRM Solutions Pvt. Ltd. with effect from 16.04.2025, copy of certificate of incorporation is Annexure 3 and intimation to DRP and Ld. TPO as well as Ld. AO is 16.06.2025 is Annexure 4.
6.2 In view of above material facts it is apparent on record that despite intimation regarding merger and subsequent name change DRP issued direction dated 31.10.2025 and ld. AO passed final assessment order dated 25.11.2025 in name of Silver Line IT Solutions Pvt. Ltd. which is a non-existing entity.
6.3 As per ratio of judgment in Pr. Commissioner of Income Tax, New Delhi v/s Maruti Suzuki India Limited (Civil Appeal No 5409 of 2019 (Arising out of SLP(C) No 4298 of 2019)) of the Hon’ble Apex Court, it is well settled that where assessee company is amalgamated with another company and thereby lost its existence pursuant to approval of scheme of merger, assessment order passed subsequently in name of said non-existing entity will be considered without jurisdiction and was to be set aside.
6.4 In view of material glaring fact and well settled principle of law, the passing of directions dated 31.10.2025 by Hon’ble DRP and final assessment order dated 25.11.2025 by Ld. AO in name of Silver Line IT Solutions Private Limited, a non-existing entity being invalid are set aside. Additional Ground of Appeal No. 6 (6.1 and 6.2) are allowed.
7. For decision of additional Ground of Appeal No. 6 and Grounds of Appeal Nos.1 to 5 have been rendered academic in nature and are left open.
8. In the result, the appeal filed by the assessee is allowed and application for Stay is dismissed as infructuous.
Order pronounced in the open court on 29th .05.2026
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