DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BENGALURU, BANGALORE V. CISCO SYSTEMS (INDIA) PVT LTD, BANGALORE

ITA 842/BANG/2024

AI Insights

The case revolves around an appeal by the Revenue against the order of the CIT(A), which quashed an assessment order issued in the name of Scientific Atlanta India Technology Pvt Ltd, a company that had merged with Cisco Systems (India) Pvt Ltd. The merger was effective from April 1, 2010, and was acknowledged by the tax authorities in 2012. Despite this, an assessment order for the year 2014-15 was issued in the name of the non-existent company based on data suggesting financial transactions under its name. The CIT(A) quashed the assessment, leading to the Revenue's appeal. The Tribunal dismissed the Revenue's appeal, emphasizing that the assessment in the name of a non-existent entity was not legally tenable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474079 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Other Referred Cases: PCIT(Central) v. Mahagdn Realtors (P) Ltd, Infosys BPM Limited vs. JCIT, ACIT vs. iGate Infrastructure Management Services Ltd, India Medtronic Pvt. Ltd. vs. JCIT, PCIT vs. Maruti Suzuki India Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERA MALHOTRA
• Assessee Lawyers: NAGESWAR RAO
• Keywords: Transfer pricing; Reason to believe; Validity of assessment; Scheme of amalgamation; Tangible material
• Section: 147; 148; 142(1); 143(2); 153A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 842/Bang/2024 Assessment Years : 2014-15 The Dy. Commissioner of Income Tax, Circle – 2(1)(1), Bengaluru. Vs. Cisco Systems (India) Pvt. Ltd., SEZ Unit, Kadubeesanahalli Village, Bengaluru. PAN – AABCC 0258 Q APPELLANT RESPONDENT Assessee by : Shri Nageswar Rao, Advocate Revenue by : Ms. Neera Malhotra, CIT (DR) Date of hearing : 26.11.2024 Date of Pronouncement : 17.02.2025 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the Revenue against the order passed by the DCIT, Bengaluru dated 11/06/2024 for the assessment year 2014-15. 2. The Revenue has raised the following grounds of appeal; “The Ld. CIT(A) erred in facts and law in quashing the assessment order passed u/s 147 of the Income Tax Act, 1961, in the case of M/s Scientific Atlanta India Technology Pvt Ltd, predecessor to successor M/s Cisco Systems (India) Pvt Ltd. The order passed by the CIT(A) is opposed to the ratio laid down in the Hon'ble Supreme Court judgement in the case of PC.IT(Central) v. Mahagdn Realtors (P) Ltd, [2022 SCC Online SC 407].” ITA No.842/Bang/2024 Page 2 of 9 . 3. The only effective issue raised by the revenue is that the learned CIT(A) erred in quashing the assessment order on the reasoning that the order was passed in the name of non-existing company. 4. The facts in brief are that the assessee, namely Scientific Atlanta India Technology Pvt Ltd. (hereafter SA India) merged with Cisco Systems (India) Pvt. Ltd. (hereafter Cisco India) w.e.f. 1st April 2010 in a scheme of amalgamation approved by the Hon’ble Karnataka High Court vide order dated 19th November 2010. Subsequently, the assessee vide letter 14th February 2012 informs the office of Chief Commissioner of Income Tax (CCIT)-II Chennai about the amalgamation of SA India with Cisco India. The assessee further writes an application for transfer of record from JAO of SA India i.e. ACIT Circle-6(1) to JAO of Cisco India i.e. DCIT Circle-11(2) Bangalore. The prayer of the assessee was approved by the tax authority acknowledging the amalgamation of SA India vide order dated 5th June 2012. Thus, the assessee namely SA India ceased to exist with effect from appointed date of amalgamation i.e. 1st April 2010. 4.1 Subsequently, the Revenue from NMS data for F.Y. 2013-14 relevant to A.Y. 2014-15 observed that the SA India has made a payment against credit card bill for Rs. 92,38,50,600/- but has not filed any return of income for the A.Y. 2014-15. Based on the information obtained from NMS data, the JCIT (OSD) corporate circle -6(1) Chennai as on 17th March 2021, recorded reason to believe that the income chargeable to tax has escaped assessment and, on the day, JCIT as per the provision of section 151 of the Act, has written a letter to the office ITA No.842/Bang/2024 Page 3 of 9 . of PCIT Chennai-3 for approval for issue of notice under section 148 of the Act. Thereafter, the notice under section 148 of the Act was issued by the office of ACIT corporate circle-6(1) Chennai i.e. Jurisdictional AO (JAO) dated 31st March 2021. The assessee failed to make reply to the notice issued under section 148 of the Act and under section 142(1) of the Act issued by the JAO. 4.2 Subsequently vide order sheet date 8th December 2021 the case was transferred from JAO to Faceless assessment center. The NFAC also issued several notices under section 142(1) of the Act which were not replied. Thus, the NFAC finally framed assessment order under section 147 r.w.s. 144 of the Act dated 25th March 2022 in the name of SA India which was not in existent in relevant assessment year i.e. 2014-15. 4.3 The successor assessee (Cisco India) preferred an appeal before the National Faceless Appellate Center Delhi (NAFC)/learned CIT(A) and challenged the validity of assessment order framed in the name of non- existent assessee. The NAFC/learned CIT(A) vide order dated 27th February 2024 quashed the assessment order. The relevant finding is extracted as under: “4.4 I have gone through the above facts, the appellant has filed the copy of the letter regarding the merger before the Chief Commissioner of Income Tax ('CCIT)-II, Chennai, on February 14, 2012. The appellant has also filed copy of letter of transfer request of Scientific Atlanta's files from ACIT, Circle VI(1) Chennai to DCIT, Circle 11(2) Bangalore which was approved by CCIT -II, Chennai, through a letter dated June 05, 2012. Copy of High Court order dated November 19, 2010 has also been filed. It is seen from the assessment order that the assessment order has been passed in the name of Scientific Atlanta which ceased to exist in the assessment year 2011-12. 4.5 In the case of Infosys BPM Limited vs. JCIT (Income Tax Appellate Tribunal, Bangalore). The Hon'ble Tribunal held that the assessment order framed in the name of a non-existent entity after it ceased to exist was considered ab initio void and null in the eyes of the law. A similar precedent was cited from a case involving ACIT vs. iGate Infrastructure Management ITA No.842/Bang/2024 Page 4 of 9 . Services Ltd where it was held that an assessment order passed by the Income Tax authorities in a jurisdiction different from the changed registered office of the company is without jurisdiction and bad in law. In the event of amalgamation of companies: a. The income of the amalgamating company up to the date of amalgamation should be assessed in the hands of the amalgamating company (predecessor) if the amalgamating company is in existence at the time of initiation of assessment. b. If the amalgamating company is not in existence at the time of initiation of assessment proceedings, the income of the amalgamating company up to the date of amalgamation should be assessed in the hands of the amalgamated company (successor) under the caption \"successor of predecessor\" in a similar manner and to the same extent as it would have been made on the predecessor. The consequence of the abov6 position of law is that the assessment made and the order passed on the ariaIgamating company when it is dissolved or not in existence is considered a nullity. Therefore, the judgment concluded that the -..impugned assessment order in the case of Infosys BPM Limited vs. JCIT was non-est and Yab initio void, and hence annulled. 4.6 Further, in the :case of India Medtronic Pvt. Ltd. (IMPL), The Income Tax Appellate Tribunal (ITAT) Mumbai held that the entire assessment order passed in the name of a non-existing entity, i.e., the amalgamated entity, is null and void and therefore liable to be quashed. Facts of the Case: The assessee, India Medtronic Pvt. Ltd. (IMPL), was incorporated on 02/05/2002 and was primarily engaged in trading and marketing of medical devices, medical equipment products, and related services. M/s. Covidien Healthcare India Pvt. Ltd. (CHIPL), in whose name the orders were passed, including the draft assessment order, transfer pricing order, and final assessment order, was merged with IMPL with effect from 26/08/2016 pursuant to the order of the National Company Law Tribunal (NCLT) dated 10/08/2017. CHIPL ceased to exist from the appointed date upon the filing of the NCLT order with the Registrar of companies, with the effective date of merger being 01/09/2017. Prior to its merger, CHIPL filed its return of income for A.Y. 2016-17 on 30/11/2016, later revised on 03/08/2017. Notice u/s. 143(2) dated 29/08/2017 was issued by ACIT, Corporate Circle 1(2) Chennai, in the name of CHIPL for scrutiny assessment proceedings. The assessee informed the assessing officer (AO) about the merger vide letter dated 26/12/2017, filed in the name of CHIPL. The ITAT Mumbai held that the decision of the Hon'ble Apex Court in the case of Mahagun Realtors Pvt. Ltd. is not applicable to the facts of the assessee's case. However, the facts of the case were found to be covered by the judgment of the Apex Court in the case of Maruti Suzuki India Ltd. Consequently, the entire assessment order passed in the name of the non- existing entity was deemed null and void, and hence, quashed. 4.7 Considering the facts of the case of the assessee wherein the assessment order has been passed on 25.03.2022 in the name of non-existing entity, i.e., Scientific Atlanta which ceased to exist in the assessment year 2011-12 is null and void, and hence, quashed. 5. As a result, the appeal of the assessee is allowed.” ITA No.842/Bang/2024 Page 5 of 9 . 5. Being aggrieved by the order of the learned NAFC/CIT(A), the revenue is in appeal before us. 6. The learned DR before us has filed multiple written submissions on different dates but the core argument of the revenue was revolving about the non-adherence of the principles laid down in the judgement of Hon’ble Supreme Court in the case of PCIT Vs. Mahagun Realtors P Ltd. As per the ld. DR, the proceedings initiated in the name of amalgamating company will not invalidate the assessment proceedings post amalgamation. As per the ld. DR there were tangible materials available with the revenue that the credit card transactions were carried out in the name of the amalgamating company even after amalgamation which is evident from the annual information returns. Likewise, the PAN of the amalgamating company was not surrendered from the portal of income tax department even after the amalgamation of the company. 7. On the other hand, the learned AR before us filed a paper book running from pages 1 to 183 and contended that the revenue despite knowing the fact fully that the assessee company has been amalgamated by virtue of the order of Hon’ble Karnataka High Court, has issued the notice in the name of non-existing company and therefore the assessment made qua the non-existing company is bad in law. 7.1 Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. ITA No.842/Bang/2024 Page 6 of 9 . 8. We have heard the rival contentions of both the parties and perused the materials available on record. Regarding the legality of the order framed by the AO under section 147 r.w.s. 144 the Act, we note that the AO on the first page of his order has mentioned the name of the assessee SA India which was erstwhile company. Thus, the assessment order was framed in the name of non-existent entity (SA India), as SA India was merged with Cisco India w.e.f. 1st April 2010. This fact has communicated by the successor Cisco India to the office of CCIT Chennai-II vide letter dated 14th February 2012. Further, the Cisco India has filed a request letter for transfer of record from Chennai to Bangalore which been recognized by the tax authority vide order dated 5th June 2012 for transfer of jurisdiction and records. 8.1 In view of the above, it is seen that Revenue authorities were aware of the fact about the amalgamation and consequently non- existence of amalgamating company yet the assessment has been framed by the AO in the name of amalgamating company which ceased to exist for the assessment year (2014-15), subsequent to the date of amalgamation. 8.2 The Hon'ble Supreme Court observed and agreed in the case PCIT Vs. Maruti Suzuki India Limited reported in 416 ITR 613 to the ratio laid down in Saraswati Industrial Syndicate Ltd. v. CIT [1990] 53 Taxman 92/186ITR278(SC), wherein the Hon’ble Apex court observed that once the amalgamation is sanctioned, the amalgamating company is dissolved without winding up, in terms of Section 394 of the Companies Act, 1956. The amalgamating company ceases to exist in the eyes of law, thus becoming non-existent. Since, it does not exist in the eyes of ITA No.842/Bang/2024 Page 7 of 9 . law, it cannot be regarded as a 'person' (under Section 2(31) of The Act) against whom assessment proceedings can be initiated or an order be passed. Therefore, the assessing officer does not have jurisdiction to issue such notice or pass any order against a non-existent entity. Such rationale can also be applied to a dead individual. Since a deceased would not be considered as a 'person' under the Act, thus any such notice/order issued in that name will be invalid or void. 8.3 Thus, the JAO at Chennai in the instant case issued notice in the name of non-existent assessee and NAFC framed assessment in the name of the assessee which ceased to exist despite the fact about the scheme of amalgamation was brought to the notice of the taxing authority at Chennai where jurisdiction of SA India was lied when it was in existence. In other words, the Revenue was aware of the complete fact that the company was no longer in existence, yet the JAO at Chennai issued notice in the name of non-existing assessee and based on such notice, the NFAC also has framed the assessment in the name of non-existing company. Therefore, in the given facts and circumstances, the assessment order is not maintainable in the eyes of law as the same is void ab initio. 8.4 Before parting we note that the learned DR before us placed heavy reliance on the judgment of Hon’ble Supreme Court in the case of PCIT vs. Mahagun Realtors (P.) Ltd. reported in 137 taxmann.com 91. However, we note that the facts involved in case of Mahagun Realtors (P.) Ltd is distinguishable from the facts involved in the present case. In the case of the Mahagun Realtors (P.) Ltd. (supra), the Hon’ble Supreme Court found that the fact about amalgamation was neither ITA No.842/Bang/2024 Page 8 of 9 . communicated to the Department nor the fact about amalgamation was revealed during the search proceedings carried out at the premises of Mahagun Realtors (P.) Ltd. The return in response to notice under section 153A of the Act was filed in the name of amalgamated company only, appeal against assessment order also made in the name of amalgamated company only. Therefore, the Hon’ble Supreme Court in the given facts held that the mere fact that the assessment order made in the name of amalgamated company will not invalidate the order per- se. On the other hand, in the present case the fact about amalgamation of the SA India with Cisco India was already communicated and acknowledged by the department. Hence, in our considered opinion the principle laid down by the Hon’ble Supreme Court in the case of Mahagun Realtors (P.) Ltd. (supra) cannot be applied in the present case. 8.5 In view of the above detailed discussion, we do not find any infirmity in the order of the learned NAFC/CIT(A) and accordingly the ground of appeal of the revenue is hereby dismissed. 9. In the result, appeal of the revenue is hereby dismissed. Order pronounced in court on 17th day of February, 2025 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 17th February, 2025 / vms / ITA No.842/Bang/2024 Page 9 of 9 . Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore "