Case Law Details
Abbott India Ltd. Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity, would be without jurisdiction and liable to be set aside.
Facts- The assessee Solvay Pharma India Ltd. , engaged in the business of manufacturing and trading in pharmaceuticals, filed its return of income declaring total income of ₹48,34,49,690/- on 30th September, 2008.
As the assessee has entered into international transaction, it was referred to the TPO to determine the Arm’s Length Price of the same. TPO passed an order under Section 92CA(3) of the Act proposing an adjustment of ₹1,64,90,460/-. AO also disallowed several expenditure and also made an adjustment under Section 145A of the Act and accordingly, total income was determined in the draft assessment order at ₹51,67,05,479/-. Objections to the draft assessment order were filed before the learned Dispute Resolution Panel, who gave a direction on 30th July, 2012 and based on that final assessment order was passed determining total income of the assessee at ₹51,62,20,927/-.
Against this assessment order Abbott India Ltd. as successor to Solvay Pharma India Ltd. preferred this appeal before us.
Conclusion- The Hon’ble Supreme Court in case of Principal Commissioner Of Income Tax Versus Maruti Suzuki India Ltd has held that where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity, would be without jurisdiction and was to be set aside.
Held that where there is no denial that assessee has intimated to the learned assessing officer and the learned dispute resolution panel as well as the jurisdictional assessing officer about the fact of amalgamation, we have no hesitation in holding that the assessment order passed in the name of non-existent entity in the name of Solvay Pharma Ltd is void and liable to be quashed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
ITA No.7778/Mum/2012 is filed by Abbott India Ltd (formerly Solvay Pharma India Ltd), Mumbai (assessee /appellant) for A.Y. 2008-09, against the assessment order passed by The Additional Commissioner Of Income-Tax (Appeals)-7(2), Mumbai (the learned Assessing Officer) under Section 143(3) read with section 144C of the Income-tax Act, 1961 (the Act), dated 31st October, 2012, wherein the return of income of the assessee of ₹48,34,49,690/- is assessed at ₹51,62,20,927/-. This assessment order is passed in the name of ‘Solvay Pharma India Ltd’.
2. ITA No.2032/Mum/2014 is filed by Abbott India Ltd. (as successor to Solvay Pharma India Ltd.) against the assessment order passed by the learned Assessing Officer under Section 143(3) read with section 144C of the Income-tax Act, 1961 (the Act) dated 22nd March, 2013, assessing the total income of the assessee at ₹56,05,260/- against the return income of ₹49,18,44,320/-. This assessment order was passed in the name of Solvay Pharma India Ltd.
3. For both the above appeals assessee has filed additional ground vide letter dated 28th March, 2023, challenging the validity of final assessment order passed under Section 143(3) read with section 144C(13) of the Act.
4. The additional ground raised for A.Y. 2008-09 reads as under:-
“On the facts and in the circumstances of the case, the Appellant wishes to raise the following additional ground of appeal which is independent of the other grounds of appeal.
3. Additional Ground No 3-Validity of final assessment order dated 31 October 2012 passed under section 143(3) r.w.s. 144C(13) of the Act
3.1 On the facts and in the circumstances of the case and in law, the Learned Assessing Officer erred in passing the final assessment order dated 31 October 2012 under section 143(3) r.w.s. 1448 of the Act on non-existent company i.e. Solvay Pharma India Limited.
3.2 The learned Assessing Officer erred in not appreciating the fact that:
a) The act of framing an assessment on a company which is not in existence is illegal and bad in law.
b) With effect from 1 January 2011 (appointed date), Solvay Pharma India Limited had already merged with Abbott and intimation of the same was already given to the learned Assessing Officer vide letter dated 10 August 2011.
3.3 In view of above grounds of appeal, the assessment order dated 31 October 2012 passed by the learned Assessing Officer under section 143(3) r.w.s. 144C(13) of the Act on non-est company is bad in law and ought to be quashed. The Appellant craves leave to add, alter, modify or delete or modify the above grounds of appeal.”
5. Identical additional ground was also raised for assessment year 2009 – 10.
6. In the application for admission of additional ground, assessee submitted that the additional ground raised is jurisdictional in nature, does not require any verification of fact and involves a pure question of law. It can be admitted at any time during the pendency of the appeal. The assessee relied on the decision of the Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC), Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC) and Full Bench decision of the Hon’ble Bombay High Court in case of Ahmadabad Electricity Company Ltd. Vs. CIT (1993) 199 ITR 351 (Bom).
7. The learned Authorized Representative reiterated the above submission and requested that additional ground may be admitted.
8. The learned Departmental Representative vehemently opposed the application for admission of additional grounds stating that above grounds were never raised before the learned lower authorities and therefore, at this stage it cannot be admitted.
9. On careful consideration of the additional ground raised and reasons advances for its admission, we find that the additional ground raised by the assessee goes to the root of the matter and does not involve any fresh investigation of facts. Assessee challenges the validity of the final assessment order passed. The various decision of the Hon’ble Supreme Court and decision of the Hon’ble Bombay High Court also support admission of the additional ground. Not raising before the lower authorities a particular issue cannot be ground for not admitted the additional ground. In such circumstances only the provisions of admission of the additional grounds are introduced. In view of above, we admit additional ground raised by the assessee.
10. As the additional ground is jurisdictional in nature, we proceed to decide it first for assessment year 2008 – 09. Facts leading to the case shows that assessee Solvay Pharma India Ltd. , engaged in the business of manufacturing and trading in pharmaceuticals, filed its return of income declaring total income of ₹48,34,49,690/- on 30th September, 2008. As the assessee has entered into international transaction, it was referred to the learned Transfer Pricing Officer to determine the Arm’s Length Price of the same. The learned Transfer Pricing Officer passed an order under Section 92CA(3) of the Act proposing an adjustment of ₹1,64,90,460/-. The learned Assessing Officer also disallowed several expenditure and also made an adjustment under Section 145A of the Act and accordingly, total income was determined in the draft assessment order at ₹51,67,05,479/-. Objections to the draft assessment order were filed before the learned Dispute Resolution Panel, who gave a direction on 30th July, 2012 and based on that final assessment order was passed determining total income of the assessee at ₹51,62,20,927/-. Against this assessment order Abbott India Ltd. as successor to Solvay Pharma India Ltd. preferred this appeal before us.
11. Further Fact shows that
i Hon’ble Bombay High Court vide order dated 15th July, 2011, approved amalgamation scheme, wherein Solvay Pharma India Ltd amalgamated with Abbott India Ltd. As per scheme of amalgamation the appointed date was 1st January, 2011 and effective date was the date after necessary formalities for same is completed. (Page number 1 – 33 of the paper book)
ii Assessee filed form no.21 with MCA intimating that Solvay Pharma India Ltd has amalgamated with Abbott India Ltd on 1st November, 2011. (Page number 34 – 38 of the paper book)
iii By letter dated 10th August, 2011, the assessee informed the learned Assessing Officer about the fact of amalgamation. It also stated that henceforth all notices, correspondences, communications pertaining to ‘Solvay Pharma India Ltd’ may be sent to ‘Abbott India Ltd’. Such letter is placed at page no.39 of the Paper Book.
iv Assessee submitted a letter dated 19 September 2011 wherein in the first paragraph itself the assessee mentioned that Solvay Pharma India Ltd has merged with Abbott India Ltd with effective date of 10 August 2011 and once again submitted the various communications already addressed to the assessing officer with respect to the above aspect. This letter is in response to notice under section 142 (1) for assessment year 2008 – 09. (Page number 40 of the paper book).
v Vide letter dated 17 October 2011 filed before the learned transfer pricing officer placed at page number 45 – 52 of the paper book was furnished by Abbott India Ltd.
vi Subsequently all the correspondences were made by Abbott India Ltd before the learned assessing officer/learned TPO and the learned dispute resolution panel.
vii The objections in form number 35A was also filed by Abbott India Ltd however the assessee himself mentioned the name of the eligible assessee as Solvay Pharma India Ltd (now merged with Abbott India Ltd).
Assessment year 2009 – 10
viii On 17 July 2013 assessee informed the learned assessing officer about the change of address giving the address of Abbott India Ltd and specifically mentioning in the paragraph number 1 of the letter that according to the scheme of merger of Solvay Pharma India Ltd with Abbott India Ltd has been approved by the honourable High Court with effect from 1 January 2011. (Page 40 of the paper book)
ix on 9 January 2013 in communication to the Additional Commissioner Of Income Tax Transfer Pricing – II (4) Mumbai (the learned TPO) it was also specifically mentioned that Solvay Pharma India Ltd is now known as Abbott India Ltd. (Page 41 of the paper book)
x on 5 March 2018 letter was addressed to the Additional Commissioner Of Income Tax – Range (7) (2) Mumbai wherein a specific reference was made that Solvay Pharma India private limited has now been merged with the Abbott India Ltd in terms of scheme of merger between Abbott India Ltd and Solvay Pharma India Ltd approved by the honourable Bombay High Court wide its order dated 15 July 2011. The assessee also submitted the permanent account number of both the entities. (Page number 51 of the paper book)
xi on 14 March 2013 once again the same identical information was furnished to the assessing officer placed at page number 55 of the paper book
xii when the Dispute Resolution Panel was presented with the objections towards the draft assessment order which was signed by authorized signatory of Abbott India Ltd also clearly mentioned that the Solvay Pharma India private limited has now been merged with Abbott India Ltd white letter dated April 22, 2013 submitted on 23 April 2013 (page 61) of the paper book
xiii Form number 35A being objections to the draft order was also stating that name and address of the eligible assessee as Solvay Pharma India Ltd (now merged with Abbott India Ltd. The form number 35 was also verified by the director of Abbott India Ltd.
xiv On 3rd may 2013 assessee filed additional evidences before the dispute resolution panel by letter dated 23 August 2013 which is placed at page number 65 of the paper book clearly shows the fact of amalgamation.
xv When the remand report was called by the learned Dispute Resolution Panel, rejoinder that was submitted by the assessee by letter dated 6 December 2013 which was submitted on 9 December 2013 placed at page number 76 of the paper book where the fact of the amalgamation was once again intimated.
xvi Vide letter dated 17 December 2013 submitted to the Secretary, Dispute Resolution Panel – 1, Mumbai the fact of the merger was also submitted placed at page number 78 of the paper book.
xvii The letter dated 8th January 2014 submitted to the Deputy Commissioner of Income Tax Range 7 (2), Mumbai submitted on 9 January 2014 also submits the fact of the amalgamation.
12. For assessment year 2008 – 09 the order under section 92CA (3) of The Income Tax Act 1961 was passed by The Additional Commissioner Of Income Tax Transfer Pricing –II (4), Mumbai (the learned TPO) on 25/10/2011 in the name of Solvay Pharma India Ltd.
13. For assessment year 2008 – 09 draft assessment order was passed by the learned assessing officer on 26/12/2011 in the name of Solvay Pharma India Ltd.
14. Learned DRP Mumbai passed direction on 30/7/2012 in the name of Solvay Pharma India Ltd whereas form number 35A being objections to the draft assessment order clearly mentions the eligible assessee as Solvay Pharma India Ltd (now merged with Abbott India Ltd). It was also verified by the director of Abbott India Ltd.
15. Consequently the final assessment order was passed on 31/10/2012 in the name of Solvay Pharma India Ltd.
16. The claim of the learned authorized representative is that by various correspondence the assessing officer as well as the learned dispute resolution panel was intimated about the amalgamation of Solvay Pharma India Ltd with Abbott India private limited however, despite above communication, all the orders passed by the learned TPO and the learned assessing officer as well as the learned dispute resolution panel are in the name of Solvay Pharma India limited which should have been passed in the name of Abbott India Ltd and therefore such orders passed are on a nonexistent entity and consequently are invalid and liable to be quashed. The learned authorized representative relied heavily on the decision of the honourable Supreme Court in case of Principal Commissioner Of Income Tax Versus Maruti Suzuki India Ltd [2019] 107 com 375 (SC) where it has been held that Where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity, would be without jurisdiction and was to be set aside. He also submitted that there are series of decision of various high courts and coordinate benches which say that where the assessment order is passed in the name of a non existing entity are invalid, if fact of its non existence is communicated to the assessing authorities in advance.
17. The learned departmental representative vehemently submitted that merely because the order is passed in the name of Solvay Pharma India private limited which is merged with the Abbott India Ltd does not make the orders invalid. It was further stated that the assessee has also communicated with the learned assessing officer in the name of a non-existent entity citing the permanent account number of the nonexistent entity. He further relied upon the decision of the honourable Supreme Court in case of Principal Commissioner of Income-tax V Mahagun Realtors P Ltd [2022] 137 com 91 (SC).
18. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that factum of knowledge of amalgamation is not disputed by the learned departmental representative nor is there any denial of information with regard to the amalgamation by the Jurisdictional Assessment Officer, the learned dispute resolution panel. We find that recently the honourable Bombay High Court on identical facts and circumstances of the case in New Age Buildtech (P.) Ltd. V National Faceless Assessment Centre [2023] 151 com 66 (Bombay)[26-04-2023] has held as under:-
“5. Be that as it may, this Court in the case of CLSA India (P.) Ltd. v. Dy. CIT [2023] 149 taxmann.com 380/Order dated 10th February 2022 in Writ Petition No. 2462 of 2022 (passed by the bench of whom one of us viz. Hon’ble Justice Dhiraj Singh Thakur was a member) has held that an active PAN of a non-existent company cannot create an exception in favour of the revenue to dilute in any manner the principles enunciated by the following judgments:
i. The judgment of the Apex Court in the case of Saraswati Industrial Syndicate Ltd. v. CIT [1990] 53 Taxman 92/186 ITR 278 which held that when two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another; the amalgamating company loses its entity;
ii. The judgment of the Delhi High Court in the case of Spice Entertainment Ltd. CST 2012 (280) ELT 43 (Delhi) which held that once the factum of amalgamation of a company had been brought to the notice of the A.O., despite which the proceedings are continued and an order of assessment passed in the name of non-existent company, the order of assessment would not be merely a procedural defect but would render it void; and
iii. The judgment of the Apex Court in the case of Pr. CIT v. Maruti Suzuki India Ltd.[2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 which held that if despite informing the assessing officer if the jurisdictional notice was issued in the name of erstwhile company, then the basis on which the jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation and the participation in the proceedings by the assessee cannot operate as an estoppel against law.
6. In our view, considering the facts of the present case on the touchstone of the aforestated well settled propositions of law therefore, the Order of assessment u/s 143(3) dated 28th September 2022 and consequential notices u/s 156, 270A, 271AAC(1) issued in the name of a non-existent entity are void.”
19. Decision relied upon by the learned departmental representative on case of principal Commissioner of income tax versus Mahagun Realtorts Pvt Limited [2022] 137 taxmann.com 91 (SC) wherein it has been held that Where post amalgamation, no indication was given to AO during search conducted at premises of assessee-amalgamating company about amalgamation and return filed pursuant to notice issued under section 153A suppressed fact of amalgamation, since conduct of assessee reflected that it consistently held itself as assessee, assessment order passed in name of assessee-amalgamating company was valid. In the present case, at all stages the assessee informing the assessing officer and the learned dispute resolution panel about the fact of amalgamation and apparently assessee did not suppress the fact of amalgamation but made it loud and clear at every stage. Therefore, the ratio of that decision does not apply to the facts of the case before us.
20. In view of above facts and judicial precedents , where there is no denial that assessee has intimated to the learned assessing officer and the learned dispute resolution panel as well as the jurisdictional assessing officer about the fact of amalgamation, which is comprised in paper book filed for assessment year 2008 – 09 containing 57 pages wherein various correspondences were cited before us supporting the same, we have no hesitation in holding that the assessment order passed in the name of nonexistent entity in the name of Solvay Pharma Ltd is void and liable to be quashed. Accordingly we quash the assessment order passed for assessment year 2008 – 09.
21. With respect to assessment year 2009 – 10 also the facts are identical. The assessee has submitted a paper book containing 81 pages wherein the various correspondences also shows that the learned assessing Officer was intimated of the fact of amalgamation of Solvay Pharma Ltd. Solvay Pharma Ltd was a non-existent entity post amalgamation. For assessment year 2009 – 10 the learned transfer pricing officer in order passed under section 92CAl (3) of the act dated 30/1/2013 in the first paragraph itself mentioned about the fact of amalgamation. The transfer pricing officer’s order was passed in the name of Solvay Pharma India Ltd. The draft assessment order dated 22/3/2013 is also passed in the name of Solvay Pharma India Ltd and consequently the directions of the learned dispute resolution panel dated 20/12/2013 specifically mentioned in the name of the assessee as Solvay Pharma India Ltd (now Abbot India Ltd). In the paragraph number 2 of the direction of the learned dispute resolution panel the fact of the amalgamation is clearly mentioned. Despite the above facts the final assessment order passed under section 143 (3) read with section 144C (13) of the act dated 29/1/2014 was passed in the name of Solvay Pharma India Ltd. Accordingly for assessment year 2009 – 10 also we have no hesitation in quashing the assessment order passed in the name of a non-existent entity.
22. In view of the above facts, the additional ground raised by the assessee for the both the years succeed and are allowed quashing the assessment order for both the assessment years.
23. As we have already quashed the assessment order is passed in the name of non-existent entity for both the assessment years i.e. assessment year 2008 – 09 and 2009 – 10, all other grounds of appeal of the assessee are not required to be adjudicated.
24. In the result appeal filed by the assessee for both the assessment years are allowed.
Order pronounced in the open court on 12.07.2023.
Author Bio
