Is a defect order framed on a non-existent company curable or does it make the final assessment order void?


Quick Summary
The Delhi High Court considered whether an assessment order made against a company that no longer existed was valid. The Income Tax Appellate Tribunal (ITAT) had previously ruled that such an assessment was a nullity and void, meaning it could not be cured. These appeals challenged that ITAT decision.

Court :
Delhi High Court

Brief :
These appeals, impugn the common order dated 6th July, 2018 of the Income Tax Appellate Tribunal (ITAT) (in ITA No.836/Del/2014 for the Assessment Year 2009-10 and in ITA No.554/Del/2015 for the Assessment Year 2010-11, allowing the appeals of the Respondent-Assessee against the separate orders under Section 143(3)/144C, of the Assessing Officer (AO), for the Assessment Years 2009-10 and 2010-11) holding, that “Since the final assessment in the instant case has been made on a non-existent company, therefore, following the decisions cited (supra) we hold that the assessment framed by the AO on a non-existent company is a nullity in the eyes of law and void and the provisions of section 292B cannot rescue the department. Therefore, the order is unsustainable and accordingly the same is quashed.”

Citation :
ITA-115/2019

IN THE HIGH COURT OF DELHI AT NEW DELHI
ITA 115/2019
PR. COMMISSIONER OF INCOME TAX-8 ..... Appellant

Through: Mr. Raghvendra Singh, Adv.

versus
 
SONY MOBILE COMMUNICATIONS
INDIA PVT. LTD. ..... Respondent

Through: Mr. Nageswar Rao, Ms. Deepika,
Agarwal and Ms. Viyushti Rawat,
Advs.

AND

ITA 119/2019
PR. COMMISSIONER OF INCOME TAX-8 ..... Appellant
Through: Mr. Raghvendra Singh, Adv.

versus

SONY MOBILE COMMUNICATIONS
INDIA PVT. LTD. ..... Respondent

Through: Mr. Nageswar Rao, Ms. Deepika,
Agarwal and Ms. Viyushti Rawat,
Advs.

CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
HON'BLE MR. JUSTICE SANJEEV NARULA

O R D E R
18.05.2021

1. These appeals, impugn the common order dated 6th July, 2018 of the Income Tax Appellate Tribunal (ITAT) (in ITA No.836/Del/2014 for the Assessment Year 2009-10 and in ITA No.554/Del/2015 for the Assessment Year 2010-11, allowing the appeals of the Respondent-Assessee against the separate orders under Section 143(3)/144C, of the Assessing Officer (AO), for the Assessment Years 2009-10 and 2010-11) holding, that “Since the final assessment in the instant case has been made on a non-existent company, therefore, following the decisions cited (supra) we hold that the assessment framed by the AO on a non-existent company is a nullity in the eyes of law and void and the provisions of section 292B cannot rescue the department. Therefore, the order is unsustainable and accordingly the same is quashed.”

2. Though these appeals came up first before this Court on 4th February, 2019, but notice thereof was ordered to be issued only on 14th November, 2019. The counsels were heard on 1st February, 2021 and 10th February, 2021, on, whether these appeals raise substantial questions of law and are to be admitted for hearing.

3. The ITAT, in the impugned order, has recorded the facts of ITA No.554/Del/2015 for the Assessment Year 2010-11 before it and has further recorded that the facts of ITA No.836/Del/2014 for the Assessment Year 2009-10 are identical. The said facts, as recorded, are (i) that the Respondent-Assessee company is primarily engaged in the business of importing, buying, selling and distributing wide range of mobile phones in India and of providing related post sale support services; (ii) on the Respondent-Assessee filing the return of income for the assessment years 2009-10 and 2010-11 (subject assessment years), since the RespondentAssessee had undertaken international transaction with its Associated Enterprises (AEs), the AO referred the matter to the Transfer Pricing Officer (TPO) for determination of the Arm’s Length Price (ALP) of the international transaction entered into by the Respondent-Assessee with its AE; (iii) the TPO determined upward adjustment of Rs.56,30,78,638/-; (iv) the Respondent-Assessee approached Dispute Resolution Panel (DRP), which declined to interfere with the transfer pricing adjustment made by the AO; (v) the Respondent-Assessee thereafter approached the ITAT.

To know more in details find the attachment file

FAQ :

The appeals concerned whether an assessment order made by the Assessing Officer on a company that was non-existent at the time was valid or void.

The ITAT held that an assessment framed on a non-existent company is a nullity in the eyes of the law and is therefore void. They stated that Section 292B of the Income Tax Act could not rescue the department in such cases.

The assessment years in question were 2009-10 and 2010-11.

The respondent company was primarily involved in importing, buying, selling, and distributing mobile phones in India, as well as providing related post-sale support services.

The TPO was involved because the respondent company had undertaken international transactions with its Associated Enterprises. The TPO determined an upward adjustment to the Arm's Length Price (ALP) of these transactions.

 
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