The Delhi High Court has held that an assessment order passed in the name of an amalgamating company that has ceased to exist following a merger is a ‘substantive illegality’ and is void ab initio, especially when the Assessing Officer was duly informed of the amalgamation prior to framing the assessment. Further, framing an assessment against a non-existent entity is a fundamental jurisdictional error, not a mere procedural mistake, defect, or omission. Consequently, such a defect is not curable under Section 292B of the Income Tax Act.
The High Court explained that technical glitches or limitations within the Revenue’s internal systems, like the ITBA portal cannot serve as a valid excuse for non-compliance with the substantive provisions of the law. The onus is on the Revenue to ensure its systems are compliant. Also, mere participation in proceedings by the successor (amalgamated) company does not operate as an estoppel against the law and cannot validate an assessment order that is fundamentally void for being framed against a non-existent entity.
The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar considered the contention of the Revenue Department that the error was a procedural irregularity curable under Section 292B, caused by a technical glitch in the Income Tax Business Application (ITBA) portal. It was argued that since the initial notice was valid and subsequent orders by the TPO and DRP were in the correct name, there was substantial compliance. Refuting these contentions, the Bench clarified that an assessment framed against a non-existent entity is a ‘substantive illegality’, not a mere clerical error.
The Bench followed the binding precedent in Spice Entertainment Ltd. v. Commissioner of Service Tax, which was affirmed by the Supreme Court. In that case, it was held that an assessment against an amalgamating entity is akin to an assessment against a ‘dead person’ and constitutes a jurisdictional defect, that cannot be cured as a procedural irregularity under Section 292B of the Act.
Further, the Bench stated that a taxpayer cannot be held accountable for the malfunctioning of the Revenue’s IT portal. It held that it is the Revenue’s responsibility to ensure its systems comply with the provisions of the Act, and not the other way around. The Bench noted that the Revenue had successfully passed the assessment order for the preceding AY 2015-16 in the correct name of the amalgamated entity, which belied the claim of a systemic inability to do so.
Briefly, the matter pertains to the Assessment Year (AY) 2016-17, when the original return of income was filed by Boeing International Corporation India (BICIPL). Subsequently, BICIPL (the amalgamating company) merged with BIPL (the amalgamated company) through a scheme of merger, approved on Feb 27, 2018. The Respondent informed the Revenue about the amalgamation through a letter, and this fact was known to the Assessing Officer (AO) well before the draft assessment order was framed.
A scrutiny notice under Section 143(2) of the Income Tax Act was correctly issued to BICIPL, as the amalgamation had not yet occurred, and the Transfer Pricing Officer (TPO) passed an order in the correct name of the successor company, BIPL. However, the AO framed the draft assessment order in the name of the erstwhile company, BICIPL.
On appeal, the Dispute Resolution Panel (DRP) issued its directions in the name of the correct successor company, BIPL. Despite this, the AO passed the final assessment order again in the name and PAN of the non-existent amalgamating company, BICIPL. The matter reached the ITAT, which held that the final assessment order was passed in the name of a non-existent entity and was therefore void ab initio.
Cases Relied On:
Principal Commissioner of Income Tax v. Vedanta Limited – 2025:DHC:216-DB
C.I.T. New Delhi v. M/s. Spice Enfotainment Ltd. – Civil Appeal No. 285/2014
PCIT v. Maruti Suzuki – (2020) 18 SCC 331
CIT v. Sony Mobile Communications India Pvt Ltd. – 2023/DHC/001366
Appearances:
Advocates Debesh Panda, Zehra Khan, Vikramaditya Singh, Nivedita, Delphina Shinglai, Harshpreet Singh, A. Shankar, and Ravicha Sharma, for the Appellant/ Revenue
Senior Advocate Sachit Jolly, along with Advocates Sherry Goyal, Viyushti Rawat, Devansh Jain, Sohum Dua and A. Shankar Bajpai, for the Respondent/ Taxpayer
