Orders to Non-Existent Entities Void; Draft Assessment Order must for Section 144C

20 Cube Logistics Solutions Pvt. Ltd. Vs DCIT (ITAT Chennai)

The Legal Implications of Orders Issued to Non-Existent Entities: 20 Cube Logistics Solutions v. DCIT

The recent ruling in 20 Cube Logistics Solutions v. DCIT by the Income Tax Appellate Tribunal (ITAT) Chennai adds significant weight to an important legal principle: orders issued to non-existent entities are fundamentally void. This case reinforces the jurisprudence established by the Supreme Court in Maruti Suzuki India Ltd and emphasizes the critical procedural requirements in tax proceedings involving merged entities.

Background

20 Cube Logistics Solutions Private Limited merged with 20Cube Logistics Private Limited effective April 1, 2021, with approval from the Regional Director, Ministry of Corporate Affairs on May 6, 2023. Despite the assessee informing both the Jurisdictional Assessing Officer and the Transfer Pricing Officer about this merger, the authorities proceeded to issue Transfer Pricing orders and a draft assessment order in the name of the non-existent (amalgamating) entity.

The assessee challenged these orders on the grounds that they were issued to a non-existent entity and therefore was invalid, rendering all subsequent proceedings void.

Key Legal Principle Established

The ITAT held that the existence of a valid Transfer Pricing order and draft assessment order are “foundational cornerstones” for a valid assessment. When these orders are issued in the name of a non-existent entity, they are fundamentally void, and all subsequent proceedings are legally untenable.

Tribunal’s Analysis

The ITAT emphasized several critical points:

1. Jurisdictional Requirement: The issuance of a valid draft assessment order is a jurisdictional requirement, not merely a procedural formality.

2. Non-Curable Defect: Such errors cannot be cured under Section 292B of the Income Tax Act, as they constitute an erroneous assumption of jurisdiction rather than a clerical error.

3. Chain of Validity: A legally valid final assessment order must be preceded by a legally valid draft assessment order, which in turn requires a legally valid Transfer Pricing order.

4. Distinction from Mahagun Realtors: Unlike in Mahagun Realtors (where the tax department was not informed of the merger), in this case, the authorities were duly notified about the amalgamation.

Precedents Relied Upon

The ITAT relied on several significant decisions:

1. Maruti Suzuki India Ltd (416 ITR 613): The Supreme Court held that orders issued to non-existent entities are illegal and void.

2. FedEx Express Transportation (108 taxmann.com 542): The Mumbai ITAT established that all proceedings subsequent to an invalid draft assessment order are deemed illegal.

3. Boeing India Pvt Ltd (121 taxmann.com 276): The Delhi ITAT affirmed that a valid draft assessment order is a sine qua non for proceedings under section 144C.

4. Pharmazell India Pvt Ltd (2024): The Madras High Court distinguished Mahagun Realtors and followed Maruti Suzuki’s principle.

Implications for Tax Practice

This ruling has significant implications for tax proceedings involving merged entities:

1. Procedural Vigilance: Tax authorities must exercise extreme caution in issuing notices and orders in cases involving merged entities.

2. Corporate Responsibility: Merging entities must promptly inform all relevant tax authorities about amalgamations.

3. Jurisdictional Safeguards: The ruling reinforces that jurisdictional requirements are fundamental and cannot be treated as mere technicalities.

4. Chain of Validity: A defect at any stage of assessment proceedings can invalidate all subsequent actions.

Conclusion

The 20 Cube Logistics Solution case reinforces that procedural compliance in tax proceedings is not merely technical but substantive. The ruling clarifies that orders issued to non-existent entities aren’t just procedurally flawed—they’re fundamentally void ab initio. For tax practitioners and corporate entities involved in mergers and acquisitions, this decision underscores the importance of meticulous procedural compliance and timely communication with tax authorities regarding structural changes.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This appeal filed by the assessee is directed against the final assessment order passed by the Deputy Commissioner of Income Tax, Corporate Circle 3(1), Chennai, u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2021-12 dated 30.10.2024 in pursuant to the directions of the Dispute Resolution Panel-2, Bengaluru dated 19.09.2024.

2. The assessee has raised the following grounds of appeal:

The Appellant submits the following grounds of appeal (“GoA”), on the facts and m the circumstances of the case and in law, without prejudice to one another:

1. General Grounds

11. The Ld. TPO, Ld. AO and Ld. DRP (hereinafter collectively referred as lower authorities’) erred in finalizing an order of assessment which suffers from legal defects such as but not limited to being passed n violation of principles of natural justice, contrary to the provisions of the Act, barred by limitation, not backed by valid sanctions / approvals, is devoid of merits and are contrary to facts on record and applicable law and has been completed without adequate inquiries and as such is liable to be quashed.

2. Validity of assessment proceedings

2.1. The final assessment order dated October 30, 2024 passed under Section 143(3) read with Section 144C(13) of the Act, is barred by limitation as per Section 153(1) read with Section 153(4) of the Act and therefore, is void-ab-initio, bad in law and is accordingly liable to be quashed.

2.2. The draft assessment order dated December 29, 2023, transfer pricing order dated October 26, 2023 and the final assessment order October 30, 2024 have been issued on a non-existent entity which renders all the above orders illegal, invalid and accordingly liable to be quashed.

2.3. The final assessment order dated October 30, 2024 and the draft assessment order dated December 29,2023 have been passed by the Deputy Commissioner of Income Tax, Corporate Circle 3(1), Chennai i.e., the Jurisdictional Assessing Officer (“JAO”), which is contrary to the provisions of the Act and accordingly liable to be quashed.

2.4. The reference made by the Technical Unit on December 27, 2022 under Section 92CA(1) of the Act, is illegal, invalid and without jurisdiction, thereby rendering the consequential transfer pricing order, draft assessment order and the final assessment order bad in law, contrary to the provisions of the Act and therefore liable to be quashed.

3. Downward TP adjustment towards payment of management service fees

3.1. The lower authorities erred in determining the arm’s length price of the payment made towards management service fees to be NIL by adopting the “Other Method” for benchmarking and thereby erred in finalizing a downward adjustment, amounting to INR 4,33,71,686, without appreciating the submissions made by the Appellant.

3.2. The lower authorities erred in rejecting the aggregation approach adopted by the Appellant in its transfer pricing documentation, for benchmarking the payment made towards management service fees.

3.3. The lower authorities erred in arriving at erroneous conclusions, such as, the Appellant is not in receipt of the impugned services, the Appellant has not established the need and the benefit for obtaining the impugned services and also that the impugned services are in the nature of shareholder activities which are not required to be remunerated separately.

4. Upward TP adjustment towards interest on overdue receivables

4.1. The lower authorities have erred in making an upward TP adjustment towards interest on overdue trade receivables amounting to INR 7,49,011, without appreciating that the provisions of Chapter X of the Act are extraneous to the facts of the present case.

4.2. The lower authorities erred in not appreciating that the outstanding receivables is a consequence of the primary transaction of sale of finished goods which is already at arm’s length and further erred in not appreciating that the working capital adjustment takes into account the impact of outstanding receivables on the profitability and accordingly, a separate upward adjustment is not warranted.

4.3. Without prejudice, the lower authorities erred in finalizing an upward TP adjustment towards interest on outstanding receivables without appreciating that the Appellant does not charge any interest on delayed receivables from non-AEs.

4.4. Without prejudice, the lower authorities erred in arbitrarily adopting LIBOR + 450 bps to benchmark the interest on overdue receivables and also further erred in considering a credit period of 3o days.

5. Fallacious computation of total income

5.1. The Ld. AO erred in considering the Appellant’s total income as INR 144,25,75,639 in the computation sheet rather than the actual total income computed in the final assessment order amounting to INR11,19,55,797.

5.2. The Ld. AO erred in levying interest and fee amounting to INR 15,95,88,468 while computing the Appellant’s total tax liability.

The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra and all consequential relief thereto. The Appellant craves leave to add and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this appeal.

3. The brief facts of the case are that the assessee M/s.20Cube Logistics Solutions Private Limited (PAN AAECC4178L) (merged with 20Cube Logistics Private Limited) is a company engaged in the business of providing freight forwarding services, consolidation services, express services, transportation management services etc., to its customers. The AO passed a draft assessment order dated 29.12.2023 u/s.143(3) r.w.s.144C(1) of the Act after incorporating the transfer pricing adjustments proposed by the TPO vide order dated 26.10.2023, passed u/s.92CA(3) of the Act. Aggrieved by the proposed adjustments, the assessee filed its objections before the Ld. Dispute Resolution Panel (“Ld. DRP”) in Form 35A on 25.01.2024. The Ld.DRP vide order dated 19.09.2024, provided partial relief with respect to the transfer pricing adjustments proposed in the draft assessment order, which were given effect to by the TPO vide order dated October 04.10.2024. Subsequently, the AO, in conformity with the directions of the Ld. DRP, passed the final assessment order dated 30.10.2024, u/s.143(3)r.w.s. 144C(13) of the Act with transfer pricing adjustments relating to downward adjustment towards payment of management fee amounting to Rs.4.33 crores and downward adjustment towards notional interest on overdue receivable amounting to Rs.0.07 crores. Aggrieved by the order of the AO, the assessee is before us.

4. Orders issued on a non-existent entity are invalid [Ground No. 2.2]

The ld. AR for the assessee stated that in pursuant to the approval of the Regional Director, Ministry of Corporate Affairs, dated May 06, 2023, 20Cube Logistics Private Limited (PAN AAACO0730G) (“amalgamating company”) was merged into 20Cube Logistics Solutions Private Limited (PAN AAECC4178L) (“the Appellant”), with effect from April 01, 2021[refer pg. 99 of the paperbook].

The relevant dates and events transpiring from the facts of the present case is tabulated below:

4.1 The ld.AR submitted that the assessee, vide letter dated May 29.05.2023 [refer pg.91 of the paperbook], intimated the Jurisdictional Assessing Officer (“JAO”), that 20Cube Logistics Private Limited (PAN AAACO0730G) has been merged with the assessee and accordingly the amalgamating entity ceases to exist. The assessee’s case was selected for scrutiny by the Faceless Assessing Officer (“NFAC”) and this was intimated to the assessee vide a notice issued under section 143(2) of the Act, dated 28.06.2022.Subsequent to the assessee’s merger, the assessee’s case was transferred from the NFAC to the JAO. The JAO, vide notice issued under section 142(1) of the Act, dated 01.12.2023[refer pg. 85 of the paperbook], informed the assessee that the Assessee’s case has been transferred from the NFAC to the JAO due to merger and also requested the assessee to submit complete details relating to such merger, in response to which the assessee made complete submissions vide letter dated 14.12.2023 [refer pg. 92 of the paperbook].

4.2 During the course of the TP assessment, the assessee has also intimated the TPO vide letter dated 14.08.2023 [refer pg. 85 of the paperbook] that 20Cube Logistics Pvt Ltd (currently non-existent entity)has merged into the assessee and accordingly requested the TPO to direct all subsequent correspondences to the assessee. The ld.AR stated that ignoring the above intimations and also the fact the very assessment had been transferred from the NFAC to the JAO on account of merger of 20Cube Logistics Pvt Ltd (currently non-existent entity),the lower authorities have issued the Transfer Pricing order dated 26.10.2023 and the Draft assessment order dated 29.12.2023 on the name and PAN of the non-existent entity (i.e., 20Cube Logistics Pvt Ltd (PAN AAACO0730G)).

4.3 In this regard, the ld.AR placing reliance on the decision of the Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd [416 ITR 613][refer pg. 1 of the case law compilation] submits that any order issued in the name or PAN of the non-existent entity would be illegal, invalid and without jurisdiction accordingly liable to be quashed.

4.4 The ld.AR also places reliance on the decision of the Hon’ble Madras High Court in the case of Pharmazell India Pvt Ltd [2024 (7) TMI 1436](refer pg. 236 of the case law compilation] and also on the decision of the Chennai and Bangalore Bench of the Hon’ble Tribunal in the case of L&T Infrastructure Development Projects Ltd [ITA 946/CHNY/2017](refer pg. 34 of the case law compilation] and Biocon Biologics Ltd [2022 (9) TMI 1113](refer pg. 47 of the case law compilation], respectively, which follow the principle laid down by the Hon’ble Supreme Court.

4.5 The ld.AR also submits that, mentioning the name and PAN of the non-existent entity on the orders or notices is not a clerical error that can be cured by Section 292B of the Act, rather an erroneous assumption of jurisdiction which makes such an order illegal, invalid and liable to be quashed. This was also clearly established by the Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd (supra).

4.6 The ld.AR also submits that the decision of the Hon’ble Supreme Court is in the case of Mahagun Realtors Pvt Ltd [443 ITR 194] is not applicable to the facts of the present case, for the reason that in Mahagun Realtor’s case the factum of the amalgamation was never brought to the notice of the AO. To the contrary, the ld.AR submits that the JAO has been duly intimated about the merger and also that the assessment has been transferred from NFAC to JAO on account of the merger, as stated supra. The Hon’ble Supreme Court’s decision in the case of Mahagun Realtors Pvt Ltd (supra) has been distinguished by the Hon’ble Madras High Court in the case of Pharmazell India Pvt Ltd (supra) and also by the Bangalore Bench of the Hon’ble Tribunal in the case of Biocon Biologics Ltd (supra).

4.7 Further, the ld.AR submitted that the TP order and Draft assessment order in the name of the non-existent entity and hence consequential final assessment order is bad in law.In the present case, the TP order and the draft assessment order are issued on the non­existent entity, whereas the final assessment order has been issued on the name of the existing entity. Accordingly, the ld.AR submitted that issuance of the final assessment order in the name of the existing entity (i.e., amalgamated entity) does not lead to a conclusion that the TP order and the draft assessment order issued on a non-existing entity would be deemed valid. The ld.AR also submitted that existence of a valid TP order and a draft assessment order are the foundational cornerstones for a valid assessment and accordingly absence of the same will invalidate the entire assessment proceeding. The ld.AR places reliance on the decision of the Mumbai Bench of the Tribunal in the case of FedEx Express Transportation and Supply Chain Services India Pvt Ltd [108 taxmann.com 542], wherein the Hon’ble Tribunal has held that all proceedings subsequent to an invalid draft assessment order would be deemed illegal. The relevant portion of the decision has been extracted below:

“… 21. Thus, it can be concluded that Sec. 144C of the Act impacts the assessee as it empowers the Assessing Officer to make a variation in the income or loss returned which is prejudicial to the interest of the assessee. Against such variation proposed by the Assessing Officer in the draft assessment order, it is only the assessee who has been given a right to object. Hence, such a right must arise from a legally sustainable valid draft order. If under the provisions of the Act an authority is required to exercise power or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner, a proposition which is fortified by the judgment of the Hon’ble Allahabad High Court in the case of Dr. Shashi Kant Garg v. CIT [2006] 152 Taxman 308/285 ITR 158. In other words, the existence of a legally valid draft order becomes the premise or foundation for the commencement of alegally valid DRP proceedings and consequently, a legally valid final assessment order as per Sec. 143(3) r.w.s.144C(13) of the Act. In view of the above, we hold that it is mandatory for the Assessing Officer to pass a legally valid draft assessment order and without the same, he cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act.

24. A perusal of the aforesaid judgments of the Hon’ble Bombay High Court leads to an irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act. Obviously, passing of draft assessment order creates a right upon an ‘eligible assessee’ to approach the DRP. In other words, the triggering of special provisions contained in Sec. 144C of the Act or the special right available to the ‘eligible assessee’ springs up only by virtue of passing of draft assessment order under Section 144C(1) of the Act on the ‘eligible assessee’. Thus, if such an order is passed on an assessee who is not an ‘eligible assessee’ as defined in Sec. 144C(15)(b)(i) of the Act, it would render the entire proceedings pursuant to such order null and void. Therefore, in the present case, as the draft assessment order has been passed in the name of FEIPL, which is a non-existent entity, and there is no draft assessment order passed in the name of FETSCS, the existing amalgamated company, there cannot be said to be a valid draft assessment order inexistence. It is for this reason we are inclined to uphold the stand of the assessee that all the subsequent proceedings post the invalid draft assessment order are illegal, bad in law and void ab initio.

25. We also derive support from the judgment of the Hon’ble Madras High Court in the case of Vijay Television (P.) Ltd. (supra) and from the Hon’ble Andhra Pradesh High Court in the case of Zuari Cements Ltd. (supra) where a draft assessment order was required to be passed as per law but was not passed and hence the final assessment order was held to be without jurisdiction. Further, even in cases where a draft assessment order was passed but it was not so required to be passed in law, since the assessee was not an ‘eligible assessee’, the entire assessment proceedings thereafter have been held to be bad in law and liable to be quashed by the Hon’ble High Courts in the cases of Honda Cars India Ltd. (supra), Pankaj Extrusion Ltd.(supra) and ESPN Star Sports Mauritius S.N.C ET Compagnie (supra).

26. We may now refer to the arguments set-up by the Ld. DR. Ostensibly, the Ld. DR admitted that draft assessment order being passed in the name of a non-existent entity is a mistake; but, the stand of the Ld. DR is that such a mistake is rectifiable in terms of Sec. 292B of the Act. In this context, we have already inferred in the earlier paras that the draft assessment order cannot be passed unless there is an ‘eligible assessee’ in terms of Sec. 144C(15)(b)(i) of the Act. We have also noted earlier that it is obligatory on the part of the Assessing Officer to pass a valid draft assessment order; failure to do so amounts to a jurisdictional defect, which in our view, cannot be cured under Section 292B of the Act or corrected by passing the final assessment order in the correct name, as canvassed by the Ld. DR. To emphasise, a draft assessment order in the name of an ‘eligible assessee’ provides the requisite jurisdiction to the Assessing Officer under Section144C(1) of the Act. If there is a mistake while complying with such a jurisdictional requirement, the same cannot be termed as a procedural irregularity or mistake rectifiable under Section 292B of the Act. Thus, the said stand of the Ld. DR is liable to be rejected. We hold so.

… 28. In conclusion, to summarise, we hold that since the Transfer Pricing order under Section 92CA(3) of the Act was passed in the name of the amalgamating company, FEIPL, which was not an ‘eligible assessee’ as per Sec. 144C(15)(b)(i) of the Act, the Assessing Officer did not have any jurisdiction under Section 144C(1) of the Act to pass a draft assessment order. Furthermore, the draft assessment order was also passed in the name of the amalgamating company, FEIPL which was a non-existent entity in the eyes of law on the date of passing of such order; thus, the draft assessment order passed in the present case is illegal and bad in law. Accordingly, the entire assessment proceedings based on such a draft assessment order are illegal and the same are hereby quashed.”

(Emphasis Supplied)

4.8 The above-mentioned decision in the case of FedEx Express Transportation and Supply Chain Services India Pvt Ltd (supra) has been followed by the Mumbai Bench of the Tribunal in the case of Siemens Ltd [TS-875-ITAT-2022Mum-TP]. The relevant portion of the decision has been extracted below:

“10. It is the plea of the Revenue that the final assessment order has been passed in the correct name and therefore the assessment has culminated in the hands of the existing entity. Now, the issue arises whether the passing of a draft assessment order under section 143(3) r/w section 144C(1) of the Act in the name of a non-existing company renders all the subsequent proceedings null and void. We find that the very same issue came up for consideration before the coordinate bench of the Tribunal in FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. vs DCIT, [2019] 108 taxmann.com 542 (Mum.) (Trib.), wherein it was held that where draft assessment order under section 144C was passed in name of amalgamating company, which was a non-existent entity in eyes of law on the date of passing of such order, it became an illegal order and, thus, entire assessment proceedings based on such an invalid draft assessment order is void ab initio and deserve to be quashed. The relevant findings of the Co– ordinate Bench of the Tribunal are as under:

11. We find that similar findings were rendered by another Co–ordinate Bench of the Tribunal in BOEING India (P.) Ltd. Vs ACIT, [2020] 121 com 276 (Delhi-Trib.). It was the submission of the learned DR that the cover letter to the draft assessment order mentioned the name of both entities and therefore merely mentioning the name of the non-existing company in the draft assessment order is not fatal. We are of the considered view that the cover letter to the draft assessment order is merely an intimation of the passing of the draft assessment order and the same cannot be equated to an order in itself. As it is only on the basis of the draft assessment order, the AO either completes the assessment or the assessee proceeds to file the objection against the additions made before the learned DRP under section144C of the Act. We further find that the learned DRP has also issued its directions under section 144C(5) of the Act in the name of Siemens VAI Metals Technologies Pvt. Ltd. (through their successors Siemens Ltd), which we find to be not a valid manner of passing the order as held by the Hon’ble Supreme Court in Maruti Suzuki India Ltd (supra).

12. Therefore, in light of the decision of the Hon’ble Supreme Court in Maruti Suzuki India Ltd (supra), the draft assessment order passed in the name of the non-existing company cannot be said to be a valid draft assessment order and therefore is set aside. Further, respectfully following the decision of the coordinate bench of the Tribunal in FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. (supra), all subsequent proceedings resulting from the invalid draft assessment order are also bad in law, void ab initio, and thus are ordered to be set aside. As a result, additional grounds No. 2 and 3, raised by the assessee, are allowed.”

(Emphasis Supplied)

4.9 The above-mentioned decision in the case of FedEx Express Transportation and Supply Chain Services India Pvt Ltd (supra) has also been followed by the Delhi Bench of the Hon’ble Tribunal in the case of and Boeing India Pvt Ltd [121 taxmann.com 276]. The relevant portion of the decision has been extracted below:

“7. Section 2, sub-section (31) defines “Person” which includes a company. On the date of issuing draft assessment order, the company BICIPL did not exist. Moreover, as per the Scheme u/s. 144C(1) and (3), the Assessing Officer becomes Functus Officio after passing draft assessment order which means that only the assessee can file objections or accept the said draft assessment order. If the assessee chose not to file objections, the Assessing Officer cannot alter the assessment. In our understanding of the law, issuance of valid draft order is sine qua non for section 144C of the Act to apply. Only a valid draft assessment order will trigger further proceedings before the DRP. Meaning thereby, that passing a draft assessment order is a jurisdictional requirement and if the Assessing Officer passes such an order in the name of a non existing person, there can never be a valid draft order in the eyes of law, making thereby the entire proceeding inherently without jurisdiction.

8. Under similar circumstances, the co-ordinate bench in the case of FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. [2019] 108 taxmann.com 542 (Mumbai – Trib.) has held as under:

… 11. Strongly supporting the order of the DRP, the ld. DR stated that the Assessing Officer has merely framed a draft of the proposed order of assessment. Hence it cannot be equated with the draft of any order of assessment. Therefore, there is no order at that point of time and claim of an order in the name of non est entity cannot be made by the assessee.

12. Both these objections of the ld. DR do not hold any ground, in as much, as the first objection has been answered by judicial decisions discussed elsewhere, and in so far as non-intimation is concerned, firstly, there is no obligation upon the assessee to intimate the Assessing Officer and secondly, as mentioned elsewhere, vide letter dated 10-4-2018, the assessee has intimated the Assessing Officer regarding the dissolution of BICIPL and to transfer all proceedings in the name of the appellant, BIPL.

13. Considering the factual matrix discussed elsewhere in the light of judicial decisions referred to herein above, we hold that the draft order framed u/s. 144C(1) of the Act is in the name of a non-existent company and accordingly, voidab initio, making all subsequent proceedings non- est. First substantive grievance is, accordingly, allowed.”

(Emphasis Supplied)

4.10 The ld.AR further submits that the AO is duty bound to adhere to the provisions of Section 144C of the Act and Section 144C(1) of the Act mandates the issuance of a valid draft assessment order. Therefore, once the draft assessment order is declared invalid for being issued on a non-existent entity, it logically follows that the provisions of Section 144C of the Act have been violated. Consequently, any final assessment order passed subsequent to such an invalid draft assessment order would also be rendered invalid, as it would be based on a legally unsustainable foundation. The above principle has also been accepted by the Hon’ble Madras High Court in the case of Vijay Television Pvt., Ltd [407 ITR 642].

4.11 The ld.AR also places reliance on the decision of the Hon’ble Madras High Court in the case of Pfizer Healthcare India Pvt Ltd (AY 2016-17) [433 ITR 28], which was later affirmed by the Division Bench of the Hon’ble Madras High Court, wherein the TP order passed on 01.11.2019 [i.e., one day late from its actual due date of 31.10.2019] was quashed for being barred by limitation. However, even after Hon’ble Madras High Court quashed the TP order in Pfizer Healthcare’s case, the AO proceeded to issue the final assessment order under Section 144C(13) of the Act. In an appeal against the final assessment order, the Chennai Bench of the Hon’ble Tribunal in Pfizer Healthcare India Pvt Ltd.’s case (AY 2016-17) [164 taxmann.com 27] concluded that since the TP order was declared non-est for being barred by limitation, consequently the assessee would cease to be an eligible assessee as defined under Section 144C(15)(b) of the Act and accordingly the machinery provisions of section 144C would not get triggered in the assessee’s case, thereby invalidating the final assessment order for being passed beyond the period of limitation as prescribed under section 153(1) of the Act.

4.12 Accordingly, the ld.AR prayed that the TP order dated 04.10.2024 and the draft assessment order dated 29.12.2023, be quashed for being issued on a non-existent entity. Accordingly, if the TP order and the draft assessment order are quashed, the ld.AR prays that the consequential impugned final assessment order be quashed for being in violation of Section 144C of the Act and also for being barred by limitation. Further, the ld.AR stated that the assessee reserves its rights to submit its arguments on the other grounds raised in the grounds of appeal filed along with the Form 36 in case the legal grounds are not held in favour of the assessee.

5. Per contra the ld.DR relied on the orders of the lower authorities and also ld. DRP and submitted that the final assessment order has been passed in the name of the correct assessee as per the directions of the DRP and hence the orders are in accordance with law and valid. Hence the ld.DR prayed for dismissing the legal grounds raised by the assessee.

6. We have heard the rival contentions perused the material available on record and gone through the orders of the authorities along with the various judicial decisions relied by the assessee. It is undisputed fact that the assessee company has been merged with 20Cube Logistics Private Limited pursuant to the approval of the Regional Director, MCA dated 06.05.2023 w.e.f. 01.04.2021 [Refer Pg. 95 & 99 of the Paper book]. We note that during the assessment proceedings the assessee has filed letter with the Jurisdictional Assessing Officer, intimating the merger of20Cube Logistics Pvt Ltd (bearing PAN AAACO0730G) with 20Cube Logistics Solutions Pvt Ltd (bearing PAN AAECC4178L) [Refer Pg. 91 of the Paperbook] on 29.05.2023.Similarly the assessee also filed letter intimating the merger with the TPO on 14.08.2023 by requesting to issue all future correspondence to the amalgamated company. It is pertinent to note that the assessee’s case was transferred to JAO from NFAC consequent to merger intimation for scrutiny assessment proceedings.

6.1 Further on perusal of documents we note that inspite of the intimation given by the assessee, the Jurisdictional Assessing Officer issued notice u/s.142(1) of the Act on the name and PAN of the non­existing entity i.e., 20Cube Logistics Pvt Ltd (bearing PAN AAACO0730G), requesting the assessee to provide details regarding recent mergers / amalgamation. Moreover, we find that the TP order dated 19.09.2024, and the draft assessment order dated 29.12.2023 are issued in the name and PAN of the non-existent entity, whereas the final assessment order has been issued on the name of the existing entity. Therefore, issuance of the final assessment order in the name of the existing entity (i.e., amalgamated entity) does not lead to a conclusion that the TP order and the draft assessment order issued on a non-existing entity would be deemed valid. We are concurring with the ld.AR argument that the existence of a valid TP order and a draft assessment order are the foundational cornerstones for a valid assessment and accordingly absence of the same will invalidate the entire assessment proceeding.

6.2 Our above view is supported by the decisions of the Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd [416 ITR 613], wherein their lordship held that any order issued in the name or PAN of the non-existent entity would be illegal, invalid and without jurisdiction accordingly liable to be quashed.

6.3 Further, the Hon’ble Apex court also establishes that mentioning the name and PAN of the non-existent entity on the orders or notices is not a clerical error that can be cured by Section 292B of the Act, rather an erroneous assumption of jurisdiction which makes such an order illegal, invalid and liable to be quashed.

6.4 Further, we note that the principle laid down in the above decision of the Hon’ble Apex court has been followed in the decision of the Hon’ble Madras High Court in the case of Pharmazell India Pvt Ltd [2024 (7) TMI 1436] and also the Chennai and Bangalore Bench of the Tribunal in the case of L&T Infrastructure Development Projects Ltd [ITA 946/CHNY/2017] and Biocon Biologics Ltd [2022 (9) TMI 1113], respectively.

6.5 We also note that the decision of the Hon’ble Supreme Court is in the case of Mahagun Realtors Pvt Ltd [443 ITR 194] is not applicable to the facts of the present case, for the reason that in Mahagun Realtor’s case the factum of the amalgamation was never brought to the notice of the AO. On the other hand, in the case on hand the JAO has been duly intimated about the merger and also that the assessment has been transferred from NFAC to JAO on account of the merger, as stated supra. The Hon’ble Supreme Court’s decision in the case of Mahagun Realtors Pvt Ltd (supra) has been distinguished by the Hon’ble Madras High Court in the case of Pharmazell India Pvt Ltd (supra) and also by the Bangalore Bench of the Tribunal in the case of Biocon Biologics Ltd (supra).

6.6 In the present case, our view of that the existence of a valid TP order and a draft assessment order are the foundational cornerstones for a valid assessment and accordingly absence of the same will invalidate the entire assessment proceeding is affirmed by the decision of the Mumbai Bench of the Tribunal in the case of FedExExpress Transportation and Supply Chain Services India Pvt Ltd [108 taxmann.com 542], wherein the Hon’ble Tribunal has held that all proceedings subsequent to an invalid draft assessment order would be deemed illegal. The relevant portion of the decision has been extracted below:

“… 21. Thus, it can be concluded that Sec. 144C of the Act impacts the assessee as it empowers the Assessing Officer to make a variation in the income or loss returned which is prejudicial to the interest of the assessee. Against such variation proposed by the Assessing Officer in the draft assessment order, it is only the assessee who has been given a right to object. Hence, such a right must arise from a legally sustainable valid draft order. If under the provisions of the Act an authority is required to exercise power or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner, a proposition which is fortified by the judgment of the Hon’ble Allahabad High Court in the case of Dr. Shashi Kant Garg v. CIT [2006] 152 Taxman 308/285 ITR 158. In other words, the existence of a legally valid draft order becomes the premise or foundation for the commencement of alegally valid DRP proceedings and consequently, a legally valid final assessment order as per Sec. 143(3) r.w.s.144C(13) of the Act. In view of the above, we hold that it is mandatory for the Assessing Officer to pass a legally valid draft assessment order and without the same, he cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act.

24. A perusal of the aforesaid judgments of the Hon’ble Bombay High Court leads to an irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act. Obviously, passing of draft assessment order creates a right upon an ‘eligible assessee’ to approach the DRP. In other words, the triggering of special provisions contained in Sec. 144C of the Act or the special right available to the ‘eligible assessee’ springs up only by virtue of passing of draft assessment order under Section 144C(1) of the Act on the ‘eligible assessee’. Thus, if such an order is passed on an assessee who is not an ‘eligible assessee’ as defined in Sec. 144C(15)(b)(i) of the Act, it would render the entire proceedings pursuant to such order null and void. Therefore, in the present case, as the draft assessment order has been passed in the name of FEIPL, which is a non-existent entity, and there is no draft assessment order passed in the name of FETSCS, the existing amalgamated company, there cannot be said to be a valid draft assessment order inexistence. It is for this reason we are inclined to uphold the stand of the assessee that all the subsequent proceedings post the invalid draft assessment order are illegal, bad in law and void ab initio.

25. We also derive support from the judgment of the Hon’ble Madras High Court in the case of Vijay Television (P.) Ltd. (supra) and from the Hon’ble Andhra Pradesh High Court in the case of Zuari Cements Ltd. (supra) where a draft assessment order was required to be passed as per law but was not passed and hence the final assessment order was held to be without jurisdiction. Further, even in cases where a draft assessment order was passed but it was not so required to be passed in law, since the assessee was not an ‘eligible assessee’, the entire assessment proceedings thereafter have been held to be bad in law and liable to be quashed by the Hon’ble High Courts in the cases of Honda Cars India Ltd. (supra), Pankaj Extrusion Ltd.(supra) and ESPN Star Sports Mauritius S.N.C ET Compagnie (supra).

26. We may now refer to the arguments set-up by the Ld. DR. Ostensibly, the Ld. DR admitted that draft assessment order being passed in the name of a non-existent entity is a mistake; but, the stand of the Ld. DR is that such a mistake is rectifiable in terms of Sec. 292B of the Act. In this context, we have already inferred in the earlier paras that the draft assessment order cannot be passed unless there is an ‘eligible assessee’ in terms of Sec. 144C(15)(b)(i) of the Act. We have also noted earlier that it is obligatory on the part of the Assessing Officer to pass a valid draft assessment order; failure to do so amounts to a jurisdictional defect, which in our view, cannot be cured under Section 292B of the Act or corrected by passing the final assessment order in the correct name, as canvassed by the Ld. DR. To emphasise, a draft assessment order in the name of an ‘eligible assessee’ provides the requisite jurisdiction to the Assessing Officer under Section 144C(1) of the Act. If there is a mistake while complying with such a jurisdictional requirement, the same cannot be termed as a procedural irregularity or mistake rectifiable under Section 292B of the Act. Thus, the said stand of the Ld. DR is liable to be rejected. We hold so.

… 28. In conclusion, to summarise, we hold that since the Transfer Pricing order under Section 92CA(3) of the Act was passed in the name of the amalgamating company, FEIPL, which was not an ‘eligible assessee’ as per Sec. 144C(15)(b)(i) of the Act, the Assessing Officer did not have any jurisdiction under Section 144C(1) of the Act to pass a draft assessment order. Furthermore, the draft assessment order was also passed in the name of the amalgamating company, FEIPL which was a non-existent entity in the eyes of law on the date of passing of such order; thus, the draft assessment order passed in the present case is illegal and bad in law. Accordingly, the entire assessment proceedings based on such a draft assessment order are illegal and the same are hereby quashed.”

(Emphasis Supplied)

The above-mentioned decision in the case of FedEx Express Transportation and Supply Chain Services India Pvt Ltd (supra) has also been followed by the Mumbai Bench of the Tribunal in the case of Siemens Ltd [TS-875-ITAT-2022Mum-TP].

6.7 In the identical set of facts of the present case, the Delhi Bench of the Hon’ble Tribunal in the case of and Boeing India Pvt Ltd [121 taxmann.com 276] by following the decision of FedEx Express Transportation and Supply Chain Services India Pvt Ltd (supra) has affirmed our view. The relevant portion of the decision has been extracted below:

“7. Section 2, sub-section (31) defines “Person” which includes a company. On the date of issuing draft assessment order, the company BICIPL did not exist. Moreover, as per the Scheme u/s. 144C(1) and (3), the Assessing Officer becomes Functus Officio after passing draft assessment order which means that only the assessee can file objections or accept the said draft assessment order. If the assessee chose not to file objections, the Assessing Officer cannot alter the assessment. In our understanding of the law, issuance of valid draft order is sine qua non for section 144C of the Act to apply. Only a valid draft assessment order will trigger further proceedings before the DRP. Meaning thereby, that passing a draft assessment order is a jurisdictional requirement and if the Assessing Officer passes such an order in the name of a non existing person, there can never be a valid draft order in the eyes of law, making thereby the entire proceeding inherently without jurisdiction.

8. Under similar circumstances, the co-ordinate bench in the case of FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. [2019] 108 taxmann.com 542 (Mumbai – Trib.) has held as under:

… 11. Strongly supporting the order of the DRP, the ld. DR stated that the Assessing Officer has merely framed a draft of the proposed order of assessment. Hence it cannot be equated with the draft of any order of assessment. Therefore, there is no order at that point of time and claim of an order in the name of non est entity cannot be made by the assessee.

12. Both these objections of the ld. DR do not hold any ground, in as much, as the first objection has been answered by judicial decisions discussed elsewhere, and in so far as non-intimation is concerned, firstly, there is no obligation upon the assessee to intimate the Assessing Officer and secondly, as mentioned elsewhere, vide letter dated 10-4-2018, the assessee has intimated the Assessing Officer regarding the dissolution of BICIPL and to transfer all proceedings in the name of the appellant, BIPL.

13. Considering the factual matrix discussed elsewhere in the light of judicial decisions referred to hereinabove, we hold that the draft order framed u/s. 144C(1) of the Act is in the name of a non-existent company and accordingly, voidab initio, making all subsequent proceedings non- est. First substantive grievance is, accordingly, allowed.”

(Emphasis Supplied)

6.8 Therefore, in the present facts and circumstances of the case, relying on the judicial decisions referred (supra) we are of the considered view that the order passed by the TPO and Draft assessment order passed by the AO in the name of the non-existent company is void ab initio and accordingly all the subsequent proceedings and orders are non-est. Accordingly, we quash the assessment by allowing the related grounds of appeal of assessee.

6.9 Since we have quashed the assessment on legal ground, the other issues on merits raised by the assessee becomes infructuous and hence, dismissed as infructuous.

7. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 21^st March, 2025 at Chennai.