Income Tax Act, 1961 – ss.143(2), 292B and ss.2(31), 92CA(3), 142(1), 144C (15)(b), 148, 153(1), 153(4), 170(2), 260A – Assessee, joint venture between Suzuki Motor Corporation and Maruti Suzuki India Limited (MSIL) was known as Suzuki Metal India Limited upon incorporation – Subsequently, w.e.f 8 June 2005, its name was changed to Suzuki Powertrain India Limited (SPIL) – On 28 Nov. 2012, the assessee filed its return of income in the name of SPIL declaring income of Rs. 212,51,51,156/- – On 29 Jan. 2013, scheme for amalgamation of SPIL and MSIL was approved by the High Court w.e.f 1 April 2012 – Notices issued u/s.143(2)and 142(1) to the amalgamating company – Draft assessment order was passed in the name of SPIL seeking to increase the total income of the assessee by Rs.78.97 Crores – On 31 Oct. 2016, final assessment order was passed in the name of SPIL – In appeal before ITAT, the assessee objected that the assessment proceedings were continued in the name of the non-existent entity SPIL and the final assessment order issued in the name of non-existent entity was invalid – Final assessment order set aside – Affirmed by the High Court – Held: In the present case, notice u/s.143(2) under which jurisdiction was assumed by the assessing officer was issued to a non-existent company – Assessment order was issued against the amalgamating company – This is substantive illegality and not procedural violation of the nature adverted to in s.292B – Despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name – Basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation – Participation by the amalgamated company would have no effect since there could be no estoppel against law, in view of the judgment of Co-ordinate Bench in Spice Enfotainment case which dismissed the appeal of the Revenue on 2 Nov. 2017 – Decision in Spice Enfotainment case has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012 – No reason to take a different view and the same is adopted in respect of the present appeal which relates to AY 2012-13 – Constitution of India – Art.141 – Companies Act, 1956 – s.394 – Estoppel – Doctrine of Merger. Assessee is a joint venture between Suzuki Motor Corporation and Maruti Suzuki India Limited (MSIL). Upon incorporation, the assessee was known as Suzuki Metal India Limited. Subsequently, with effect from 8 June 2005, its name was changed to Suzuki Powertrain India Limited (SPIL). On 28 November 2012, the assessee filed its return of income declaring income of Rs. 212,51,51,156/-. The return of income was filed in the name of SPIL (no amalgamation having taken place on the relevant date). On 29 January 2013, a scheme for amalgamation of SPIL and MSIL was approved by the High Court with effect from 1 April 2012. On 2 April 2013, MSIL intimated the assessing officer of the amalgamation. The case was selected for scrutiny by the issuance of notice under Section 143(2) on 26 September 2013, followed by another notice under Section 142(1) to the amalgamating company. On 11 March 2016, draft assessment order was passed in the name of SPIL (amalgamated with MSIL). The Order sought to increase the total income of the assessee by Rs. 78.97 crores in accordance with the order of the Transfer Pricing Offer in order to ensure that the international transactions with regard to the payment of royalty to the Associated Enterprises is at Arm’s Length. On 12 April 2016, MSIL filed appeal before the Dispute Resolution Panel (DRP) as successor in interest of the erstwhile SPIL, since amalgamated. DRP issued order in the name of MSIL. Final assessment order was passed on 31 October 2016 in the name of SPIL making addition of Rs.
78.97 crores to the total income of the assessee. The assessee filed appeal before the Income Tax Appellate Tribunal. The Tribunal vide order dated 6 April 2017, set aside the final INDIA LTD.
assessment order on the ground that it was void ab initio, having been passed in the name of a non-existent entity by the assessing officer. The order was affirmed in appeal under Section 260A by the High Court. Hence, the present appeal.
Dismissing the appeal, the Court
HELD : 1.1 Certain significant facets of the present case are: (i) The income which is sought to be subjected to the charge of tax for AY 2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of Rs. 78.97 crores; (ii) Under the approved scheme of amalgamation, the transferee has assumed the liabilities of the transferor company, including tax liabilities; (iii) The consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist; (iv) Upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed; (v) Prior to 26 September 2013 when the jurisdictional notice under Section 143 (2) was issued, the scheme of amalgamation had been approved on 29 January 2013 by the High Court of Delhi under the Companies Act 1956 with effect from 1 April 2012; (vi) The assessing officer assumed jurisdiction to make an assessment in pursuance of the notice under Section 143 (2). The notice was issued in the name of the amalgamating company in spite of the fact that on 2 April 2013, the amalgamated company MSIL had addressed a communication to the assessing officer intimating the fact of amalgamation. In the above conspectus of the facts, the initiation of assessment proceedings against an entity which had ceased to exist was void ab initio. [Para 19] [816-A-D; 817-A-E]
1.2 In Spice Entertainment, Division Bench of the Delhi High Court dealt with the question as to whether an assessment in the name of a company which has been amalgamated and has been dissolved is null and void or, whether the framing of an assessment in the name of such company is merely a procedural defect which can be cured. The High Court held that upon a notice under Section 143 (2) being addressed, the amalgamated company had brought the fact of the amalgamation to the notice of the assessing officer. Despite this, the assessing officer did not substitute the name of the amalgamated company and proceeded to make an assessment in the name of a non-existent company which renders it void. This, in the view of the High Court, was not merely a procedural defect. Moreover, the participation by the amalgamated company would have no effect since there could be no estoppel against law. Following the decision in Spice Entertainment, the Delhi High Court quashed assessment orders which were framed in the name of the amalgamating company in:
(i) Dimension Apparels; (ii) Micron Steels; and (iii) Micra India. [Para 20] [817-F-H; 818-E-F]
1.3 A batch of Civil Appeals was filed before Supreme Court against the decisions of the Delhi High Court, the lead appeal being Spice Enfotainment. On 2 November 2017, a Bench of this Court consisting of Hon’ble Mr Justice Rohinton Fali Nariman and Hon’ble Mr Justice Sanjay Kishan Kaul dismissed the Civil Appeals and tagged the Special Leave Petitions. The doctrine of merger results in the settled legal position that the judgment of the Delhi High Court stands affirmed by the said decision in the Civil Appeals. The order of assessment in the case of the respondent for AY 2011-12 was set aside on the same ground. This resulted in Special Leave Petition by the Principal Commissioner of Income Tax – 6 Delhi. The Special Leave Petition was dismissed by two judge Bench of this Court consisting of Hon’ble Mr Justice Rohinton Fali Nariman and Hon’ble Ms Justice Indu Malhotra on 16 July 2018 in view of the order dated 2 November 2017 governing Civil Appeal No.
285 of 2014 in Spice Enfotainment and the connected batch of cases. Though, leave was not granted by this Court, reasons have been assigned by this Court for rejecting the Special Leave Petition. The law declared would attract the applicability of Article
141 of the Constitution. [Paras 24-26] [819-F-G; 820-A-D]
1.4 It was in the peculiar facts of the case that Supreme Court indicated its agreement that the wrong name given in the notice was merely a clerical error, capable of being corrected under Section 292B. The “peculiar facts” of Skylight Hospitality INDIA LTD.
emerge from the decision of the Delhi High Court. [Para 27] [821-D-E]
1.5 There is no conflict between the decisions of this Court in Spice Enfotainment (dated 2 November 2017) and in Skylight Hospitality LLP (dated 6 April 2018). In this case, the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B. [Paras 30, 31] [823-D; 824-A, D]
1.6 In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment. [Para 33] [827-B-D]
1.7 No reason is found to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must be adopted in respect of the present appeal which relates to AY 201213. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. [Para 34] [827-E-F]
Principal Commissioner of Income Tax – 6, New Delhi v. Maruti Suzuki India Limited (2017) 397 ITR 681 DEL ; Spice Entertainment Ltd. v. Commissioner of Service Tax 2012 (280) ELT 43 (Del.) ; Skylight Hospitality LLP v. Assistant Commissioner of Income Tax, Circle-28(1), New Delhi (2018) 405 ITR 296 (Delhi) ; Skylight Hospitality LLP case (Judgment of Supreme Court dtd. 06.04.2018 in SLP (C) No.7409 of 2018) ; CIT, New Delhi v. Spice Enfotainment Ltd. (Judgment of Supreme Court dtd. 02.11.2017 in Civil Appeal No. 285 of 2014) ; CIT v. Intel Technology India (P) Ltd. [2016] 380 ITR 272 (Kar.) ; PCIT v. Nokia Solutions & Network India (P) Ltd. [2018] 402 ITR 21 (Del) ; BDR Builders and Developers Pvt. Ltd. v ACIT [2017] 397 ITR 529 (Del) ; Rustagi Engineering Udyog (P.) Ltd. v DCIT [2016] 382 ITR 443 (Del) ; Khurana Engineering Ltd. v DCIT [2014] 364 ITR 600 (Guj) ; Takshashila Realties (P) Ltd. v DCIT [2017] 77 160 (Guj.) ; Alamelu Veerappan v. ITO [2018] 257 Taxman
72 (Madras) ; CIT v. Dimension Apparels Pvt. Ltd. [2015] 370 ITR 288 (Del) ; CIT v Micron Steels P. Ltd. [2015] 372 ITR 386 (Del.) (MAG.) ; CIT v Micra India (P) Ltd. [2015] 231 Taxman 809 (Del.) ; CIT v BMA Capfin Ltd. [2018] 100 329 (Del.) ; Rajender Kumar Sehgal v ITO (2019) 260 Taxman 412 (Del) ;
Chandreshbhai Jayantibhai Patel v. ITO (2019) 261 Taxman 137 (Guj) ; Commissioner of Income Tax, Shillong v. Jai Prakash Singh (1996) 3 SCC 525 : [1996]
3 SCR 377 ; Chatturam v. CIT (1947) 15 ITR 302 (FC) ; Maharaja of Patiala v. CIT (1943) 11 ITR 202 (Bombay) – referred to.
Judgment of Supreme Court dtd. 16.07.2018 in SLP (C) Diary No. 14106 of 2018 ; Kunhayammed v. State of Kerala (2000) 6 SCC 359 : [2000] 1 Suppl. SCR 538 ; Saraswati Industrial Syndicate Ltd. v. CIT (1990) 186 ITR 278 (SC) – relied on.
Halsbury’s Laws of England (4th edition volume 7) – referred to.
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