Cyient Limited Hyd, Hyderabad V. DCIT, Circle-2(1), Hyd, Hyderabad

ITA 1052/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2197 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-07-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 22-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Keywords: Business income; Transfer pricing; International transaction; Procedural lapse; Scheme of amalgamation
• Section: 143(3); 142(1); 147; 148

Judgement Text

ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 1 OF 22 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS.1052 TO 1054/HYD/2016 (ASSESSMENT YEARS: 2004-05, 2006-07 & 2007-08) M/S. CYIENT LTD (FORMERLY INFOTECH ENTERPRISES LTD) SUCCESSOR TO TELE ATLAS INDIA LTD, HYDERABAD PAN: AAACT 4446 Q VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 2 ( 1 ) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI VIJAY MEHTA FOR REVENUE : SHRI J. SIRI KUMAR, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. ALL ARE ASSESSEES APPEALS FOR THE A.Y 2004-05, 200 6- 07 AND 2007-08 RESPECTIVELY AGAINST THE ORDER OF TH E CIT (A)-2, HYDERABAD DATED 24.02.2016. ITA NO.1052/HYD/2016 (A.Y 2004-05) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A COMPANY INCORPORATED IN JULY 1998, WAS ENGAGED IN T HE BUSINESS OF DEVELOPMENT OF DIGITIZED GEOGRAPHIC DATABASES AN D OTHER SOFTWARE, THROUGH ITS UNIT IN NOIDA WHICH WAS REGIS TERED WITH THE SOFTWARE TECHNOLOGY PARK OF INDIA (STPI). DURING TH E RELEVANT A.Y, THE ASSESSEE DECLARED BUSINESS INCOME OF RS.NIL A FTER CLAIMING DATE OF HEARING: 21.11 . 2017 DATE OF PRONOUNCEMENT: 2 9 . 1 2 .2017 ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 2 OF 22 DEDUCTION OF RS.59,799,866 U/S 10A OF THE ACT BEIN G 100% OF ITS PROFIT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.2014 DECLARING AN INCOME OF RS.4,59,586. DURING THE ASSE SSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO NOTICED T HAT THE ASSESSEE HAS ENTERED INTO AN INTERNATIONAL TRANSACT ION WITH ITS AE. SINCE THE AMOUNT OF INTERNATIONAL TRANSACTION W AS IN EXCESS OF RS.5.00 CRORES, HE MADE A REFERENCE TO THE TPO U /S 92CA OF THE ACT FOR DETERMINATION OF THE ARMS LENGTH PRICE (AL P) WHO PROPOSED AN ADJUSTMENT OF RS.2,00,59,479. IN ACCORD ANCE WITH THE TPOS ORDER, THE AO PASSED THE ASSESSMENT ORDER , AGAINST WHICH THE ASSESSEE PREFERRED AN APPEAL TO THE CIT ( A). THE CIT (A) CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS I N SECOND APPEAL BEFORE US. 3. WE FIND THAT CONCISE GROUNDS OF APPEAL ARE FILED ALONG WITH THE REVISED FORM NO.36. ON 3.4.2017. VIDE LETT ER DATED 20.11.2017, THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS OF APPEAL (I) CHALLENGING THE VALIDITY OF THE ASSESSME NT ON THE GROUND THAT THE ASSESSMENT WAS MADE ON A COMPANY WHICH WAS NOT IN EXISTENCE ON THE DATE OF THE ASSESSMENT ORDER, AS TELE ATLAS INDIA PVT LTD (TATPL) HAD MERGED WITH M/S. INFOTECH ENTE RPRISES LTD ON 1.10.2005 AND THE EXCLUSION OF (A) HINDUJA TMT L TD; AND (B) DATAMATICS TECHNOLOGIES LTD, FROM THE LIST OF COMPA RABLES ON THE GROUND THAT THESE COMPANIES HAD RELATED PARTY TRANS ACTIONS OF MORE THAN 25% DURING THE RELEVANT FINANCIAL YEAR. T HUS, THE ASSESSEE HAS PRAYED FOR ADMISSION OF ADDITIONAL GRO UNDS OF APPEAL, I.E. (I) AGAINST THE VALIDITY OF THE ASSESS MENT; AND (II) EXCLUSION OF THE ABOVE TWO COMPANIES FROM THE LIST OF COMPARABLES. ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 3 OF 22 4. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI VIJAY MEHTA, SUBMITTED THAT THE CHALLENGE AGAINST THE VAL IDITY OF THE ASSESSMENT IS A LEGAL ISSUE AND THEREFORE, PRAYED T HAT THE TRIBUNAL MAY ADMIT THE SAME IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NTPC LTD, REP ORTED IN 229 ITR 383 (S.C). 5. THE LEARNED DR, HOWEVER, OPPOSED THE ADMISSION O F THE ADDITIONAL GROUND STATING THAT THE ASSESSEE HAS PARTICIPATED BOTH IN THE ASSESSMENT PROCEEDINGS BEFORE THE AO AS WELL AS THE APPELLATE PROCEEDINGS BEFORE THE CIT (A) AND THEREF ORE, CHALLENGE TO THE VALIDITY OF THE PROCEEDINGS CANNOT BE ADMITT ED NOW AT THIS STAGE. HE DREW OUR ATTENTION TO THE PROVISIONS OF S ECTION 292B OF THE ACT TO SUPPORT HIS ARGUMENT. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE ARE SATISFIED THAT THE VALIDITY OF TH E ASSESSMENT CAN BE CHALLENGED AT ANY TIME AS IT GOES TO THE ROOT OF THE MATTER AND IS A LEGAL ISSUE. WITH ALL THE FACTS ON RECORD, IT CAN BE ADMITTED AT THIS STAGE ALSO AS HELD BY THE HON'BLE APEX COURT I N THE CASE OF NTPC (CITED SUPRA). WE ACCORDINGLY ADMIT AND ADJUDI CATE THE SAME AS UNDER: 7. IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSEE COMPANY WAS INITIALLY KNOWN AS TELE ATLAS INDIA PV T. LTD (TATPL) AND IT HAD MERGED WITH THE COMPANY INFOT ECH ENTERPRISES LTD DURING THE RELEVANT PREVIOUS YEAR AND THE NAME HAS ALSO BEEN CHANGED AND THE AO WAS ACCORDINGLY IN TIMATED AND ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 4 OF 22 THEREFORE, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE AMALGAMATING COMPANY WAS NO LONGER IN EXISTENCE, WH EN THE ASSESSMENT ORDER WAS PASSED ON 15.12.2006. HE SUBMI TTED THAT THE ASSESSEE HAS BROUGHT TO THE NOTICE OF THE AO, A BOUT THE AMALGAMATION, CHANGE OF CONSTITUTION AND THE CHANGE OF NAME AND THAT THE AO HAS ALSO TAKEN NOTE OF IT BY INCORP ORATING THE NEW NAME ALSO IN THE CAUSE TITLE OF THE ASSESSMENT ORDE R IN BRACKETS AFTER THE ASSESSEES OLD NAME. HE SUBMITTED THAT IN SPITE OF HAVING KNOWLEDGE ABOUT THE AMALGAMATION, THE AO HAS PASSED THE ASSESSMENT ORDER IN THE NAME OF THE AMALGAMATING CO MPANY WHICH IS NO LONGER IN EXISTENCE AND THEREFORE, THE ASSESSMENT ORDER ITSELF IS VOID. IN SUPPORT OF THIS CONTENTION , HE PLACED RELIANCE UPON THE DECISIONS OF THE HON'BLE DELHI HI GH COURT IN THE CASE OF (I) M/S. SPICE ENFOTAINMENT LTD (2012) 247 CTR (DEL.)500; (II) CIT VS. MICRA INDIA (P) LTD REPORTED IN (2015) 57 TAXMANN.COM 163(DELHI) AND (III) PR. CIT VS. MARUTI SUZUKI INDI A LTD REPORTED IN (2017) 397 ITR 681 (DEL.). HE FURTHER RELIED UPON T HE DECISION OF THE HON'BLE SUPREME COURT OF INDIA DATED 2.11.2017 WHEREIN THE CIVIL APPEALS OF THE REVENUE AGAINST THE ABOVE ORDE RS OF THE HON'BLE DELHI HIGH COURT HAVE BEEN DISMISSED BY THE HON'BLE SUPREME COURT OF INDIA. THUS, ACCORDING TO THE LEAR NED COUNSEL FOR THE ASSESSEE, FOLLOWING THE ABOVE DECISIONS, TH E ASSESSMENT ORDER HAS TO BE HELD TO BE VOID AB INITIO . 8. THE LEARNED DR, HOWEVER, SUBMITTED THAT THE ASSE SSEE HAS PARTICIPATED DURING BOTH THE ASSESSMENT AND APP ELLATE PROCEEDINGS AND BY VIRTUE OF SECTION 292B OF THE AC T, THE ASSESSMENT CANNOT HELD TO BE INVALID, PARTICULARLY SINCE THE RETURN OF INCOME WAS FILED BY THE AMALGAMATING COMP ANY ONLY. ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 5 OF 22 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30.10.2004 DECLARING INCOME OF RS.4,59,586. THE RETURN WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT ON 16.3.2 005. SUBSEQUENTLY, ON 4.5.2005, THE CASE WAS SELECTED FO R SCRUTINY AND NOTICES U/S 143(2) & 142(1) WERE ISSUED AND THE FIN AL ASSESSMENT ORDER DATED 15.12.2006 WAS PASSED U/S 143(3) OF THE ACT. IN THE CAUSE TITLE, THE NAME OF THE AMALGAMATING COMPANY I S MENTIONED AS THE ASSESSEE. THUS, WE FIND THAT WHILE PASSING T HE ASSESSMENT ORDER, THE AO WAS AWARE OF THE AMALGAMATION OF THE ASSESSEE COMPANY WITH INFOTECH ENTERPRISES LTD AND THEREFORE , IN THE ASSESSMENT ORDER, THE NAME OF THE ASSESSEE IS MENTI ONED AS M/S. TELE ATLAS INDIA PVT. LTD (NOW AMALGAMATED WITH INF OTECH ENTERPRISES LTD). THE PAN NO. AAACT-4446-Q IS ALSO OF THE AMALGAMATING COMPANY ONLY. 10. FROM THE ADDITIONAL GROUND OF APPEAL FILED BEFO RE US, WE FIND THAT M/S. TELE ATLAS PVT. LTD HAS MERGED WI TH M/S. INFOTECH ENTERPRISES LTD ON 1.10.2005 I.E. PROBABLY AFTER ISSUANCE OF NOTICES U/S 143(2) AND 142(1) OF THE ACT. FURTHE R, FROM THE CERTIFICATE OF INCORPORATION PURSUANT TO CHANGE OF NAME, DATED 5.5.2014, THE NAME OF M/S. INFOTECH ENTERPRISES HAS BEEN CHANGED TO CYIENT LIMITED. 11. FURTHER, WE ALSO FIND THAT IN FORM NO.35 FILED BEFORE THE CIT (A), THE ASSESSEE IS MENTIONED AS M/S. TELE ATLAS INDIA PVT. LTD (NOW AMALGAMATED WITH INFOTECH ENTERPRISES LTD) WITH PAN NO. AAACT-4446-Q BUT IS SIGNED BY THE WHOLE TIM E DIRECTOR OF INFOTECH ENTERPRISES LTD. THUS, IT APPEARS THAT EVEN THE ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 6 OF 22 ASSESSEE WAS UNDER THE IMPRESSION THAT IT WAS REPRE SENTING THE AMALGAMATING COMPANY. FURTHER, EVEN THOUGH, THERE I S A CHANGE IN THE NAME OF THE COMPANY W.E.F. 5.5.2014, THE SAM E WAS NOT BROUGHT TO THE NOTICE OF THE CIT (A) DURING THE APP ELLATE PROCEEDINGS, AS IN HIS ORDER DATED 24.2.2016, THE C IT (A), ALSO HAS ADOPTED THE SAME CAUSE TITLE AS MENTIONED IN FORM N O.35. 12. IN THESE FACTS AND CIRCUMSTANCES, LET US NOW EX AMINE THE APPLICABILITY OF THE JUDGMENTS RELIED UPON BY T HE ASSESSEE TO THE FACTS OF THE CASE BEFORE US. 13. IN THE CASE OF SPICE ENFOTAINMENT, THE HON'BLE DELHI HIGH COURT HAS HELD AS UNDER: 7. THE AFORESAID LINE OF REASONING ADOPTED BY THE T RIBUNAL IS CLEARLY BLEMISHED WITH LEGAL LOOPHOLES AND IS CONTR ARY TO LAW. NO DOUBT, M/S SPICE WAS AN ASSESSEE AND AS AN INCOR PORATED COMPANY AND WAS IN EXISTENCE WHEN IT FILED THE RETU RNS IN RESPECT OF TWO ASSESSMENT YEARS IN QUESTIONS. HOWEV ER, BEFORE THE CASE COULD BE SELECTED FOR SCRUTINY AND ASSESSM ENT PROCEEDINGS COULD BE INITIATED, M/S SPICE GOT AMALG AMATED WITH MCORP PVT. LTD. IT WAS THE RESULT OF THE SCHEME OF THE AMALGAMATION FILED BEFORE THE COMPANY JUDGE OF THIS COURT WHICH WAS DULLY SANCTIONED VIDE ORDERS DATED 11TH F EBRUARY, 2004. WITH THIS AMALGAMATION MADE EFFECTIVE FROM 1S T JULY, 2003, M/S SPICE CEASED TO EXIST. THAT IS THE PLAIN AND SIMPLE EFFECT IN LAW. THE SCHEME OF AMALGAMATION ITSELF PR OVIDED FOR THIS CONSEQUENCE, INASMUCH AS SIMULTANEOUS WITH THE SANCTIONING OF THE SCHEME, M/S SPICE WAS ALSO STOOD DISSOLVED BY SPECIFIC ORDER OF THIS COURT. WITH THE DISSOLUTI ON OF THIS COMPANY, ITS NAME WAS STRUCK OFF FROM THE ROLLS OF COMPANIES MAINTAINED BY THE REGISTRAR OF COMPANIES. 8. A COMPANY INCORPORATED UNDER THE INDIAN COMPANIE S ACT IS A JURISTIC PERSON. IT TAKES ITS BIRTH AND GETS LIFE WITH THE INCORPORATION. IT DIES WITH THE DISSOLUTION AS PER THE PROVISIONS OF THE COMPANIES ACT. IT IS TRITE LAW THAT ON AMALG AMATION, THE AMALGAMATING COMPANY CEASES TO EXIST IN THE EYES OF LAW. THIS POSITION IS EVEN ACCEPTED BY THE TRIBUNAL IN PARA-1 4 OF ITS ORDER ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 7 OF 22 EXTRACTED ABOVE. HAVING REGARD THIS CONSEQUENCE PRO VIDED IN LAW, IN NUMBER OF CASES, THE SUPREME COURT HELD THA T ASSESSMENT UPON A DISSOLVED COMPANY IS IMPERMISSIBL E AS THERE IS NO PROVISION IN INCOME-TAX TO MAKE AN ASSESSMENT THEREUPON. IN THE CASE OF SARASWATI INDUSTRIAL SYND ICATE LTD. VS. CIT, 186 ITR 278 THE LEGAL POSITION IS EXPLAINED IN THE FOLLOWING TERMS: 'THE QUESTION IS WHETHER ON THE AMALGAMATION OF THE INDIAN SUGAR COMPANY WITH THE APPELLANT COMPANY, THE INDIA N SUGAR COMPANY CONTINUED TO HAVE ITS ENTITY AND WAS ALIVE FOR THE PURPOSES OF SECTION 41(1) OF THE ACT. THE AMALG AMATION OF THE TWO COMPANIES WAS EFFECTED UNDER THE ORDER OF T HE HIGH COURT IN PROCEEDINGS UNDER SECTION 391 READ WITH SE CTION 394 OF THE COMPANIES ACT. THE SARASWATI INDUSTRIAL SYNDICATE, THE TRANS FREE COMPANY WAS A SUBSIDIARY OF THE INDI AN SUGAR COMPANY, NAMELY, THE TRANSFEROR COMPANY. UNDER THE SCHEME OF AMALGAMATION THE INDIAN SUGAR COMPANY STOOD DISS OLVED ON 29TH OCTOBER, 1962 AND IT CEASED TO BE IN EXISTE NCE THEREAFTER. THOUGH THE SCHEME PROVIDED THAT THE TRA NSFEREE COMPANY THE SARASWATI INDUSTRIAL SYNDICATE LTD. UND ERTOOK TO MEET ANY LIABILITY OF THE INDIAN SUGAR COMPANY W HICH THAT COMPANY INCURRED OR IT COULD INCUR, ANY LIAIBLITY, BEFORE THE DISSOLUTION OR NOT THEREAFTER. GENERALLY, WHERE ONLY ONE COMPANY IS INVOLVED IN CH ANGE AND THE RIGHTS OF THE SHARE HOLDERS AND CREDITORS ARE V ARIED, IT AMOUNTS TO RECONSTRUCTION OR REORGANISATION OR SCHE ME OF ARRANGEMENT. IN AMALGAMATION TWO OR MORE COMPANIES ARE FUSED INTO ONE BY MERGER OR BY TAKING OVER BY ANOTH ER. RECONSTRUCTION OR AMALGAMATION HAS NO PRECISE LEGAL MEANING. THE AMALGAMATION IS A BLENDING OF TWO OR M ORE EXISTING UNDERTAKINGS INTO ONE UNDERTAKING, THE SHA RE HOLDERS OF EACH BLENDING COMPANY BECOME SUBSTANTIALLY THE S HARE HOLDERS IN THE COMPANY WHICH IS TO CARRY ON THE BLE NDED UNDERTAKINGS. THERE MAY BE AMALGAMATION EITHER BY T HE TRANSFER OF TWO OR MORE UNDERTAKINGS TO A NEW COMPA NY, OR BY THE TRANSFER OF ONE OR MORE UNDERTAKINGS TO AN E XISTING COMPANY. STRICTLY AMALGAMATION DOES NOT COVER THE M ERE ACQUISITION BY A COMPANY OF THE SHARE CAPITAL OF OT HER COMPANY WHICH REMAINS IN EXISTENCE AND CONTINUES IT S UNDERTAKING BUT THE CONTEXT IN WHICH THE TERM IS US ED MAY SHOW THAT IT IS INTENDED TO INCLUDE SUCH AN ACQUISI TION. SEE HALSBURYS LAWS OF ENGLAND 4TH EDITION VOL. 7 PARA 1 539. TWO COMPANIES MAY JOIN TO FORM A NEW COMPANY, BUT THERE MAY BE ABSORPTION OR BLENDING OF ONE BY THE OTHER, BOTH AM OUNT TO AMALGAMATION. WHEN TWO COMPANIES ARE MERGED AND ARE SO ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 8 OF 22 JOINED, AS TO FORM A THIRD COMPANY OR ONE IS ABSORB ED INTO ONE OR BLENDED WITH ANOTHER, THE AMALGAMATING COMPANY L OSES ITS ENTITY.' 9. THE COURT REFERRED TO ITS EARLIER JUDGMENT IN GE NERAL RADIO AND APPLIANCES CO. LTD. VS. M.A. KHADER (1986) 60 C OMP CASE 1013. IN VIEW OF THE AFORESAID CLINCHING POSITION I N LAW, IT IS DIFFICULT TO DIGEST THE CIRCUITOUS ROUTE ADOPTED BY THE TRIBUNAL HOLDING THAT THE ASSESSMENT WAS IN FACT IN THE NAME OF AMALGAMATED COMPANY AND THERE WAS ONLY A PROCEDURAL DEFECT. 10. SECTION 481 OF THE COMPANIES ACT PROVIDES FOR D ISSOLUTION OF THE COMPANY. THE COMPANY JUDGE IN THE HIGH COURT CA N ORDER DISSOLUTION OF A COMPANY ON THE GROUNDS STATED THER EIN. THE EFFECT OF THE DISSOLUTION IS THAT THE COMPANY NO MO RE SURVIVES. THE DISSOLUTION PUTS AN END TO THE EXISTENCE OF THE COMPANY. IT IS HELD IN M.H. SMITH (PLANT HIRE) LTD. VS. D.L. MA INWARING (T/A INSHORE), 1986 BCLC 342 (CA) THAT 'ONCE A COMP ANY IS DISSOLVED IT BECOMES A NON-EXISTENT PARTY AND THERE FORE NO ACTION CAN BE BROUGHT IN ITS NAME. THUS AN INSURANC E COMPANY WHICH WAS SUBROGATED TO THE RIGHTS OF ANOTHER INSUR ED COMPANY WAS HELD NOT TO BE ENTITLED TO MAINTAIN AN ACTION I N THE NAME OF THE COMPANY AFTER THE LATTER HAD BEEN DISSOLVED'. 11. AFTER THE SANCTION OF THE SCHEME ON 11TH APRIL, 2004, THE SPICE CEASES TO EXIT W.E.F. 1ST JULY, 2003. EVEN IF SPICE HAD FILED THE RETURNS, IT BECAME INCUMBENT UPON THE INCOME TA X AUTHORITIES TO SUBSTITUTE THE SUCCESSOR IN PLACE OF THE SAID DEAD PERSON . WHEN NOTICE UNDER SECTION 143 (2) WAS SENT, THE APPELLANT/AMALGAMATED COMPANY APPEARED AND BROU GHT THIS FACT TO THE KNOWLEDGE OF THE AO. HE, HOWEVER, DID NOT SUBSTITUTE THE NAME OF THE APPELLANT ON RECORD. INS TEAD, THE ASSESSING OFFICER MADE THE ASSESSMENT IN THE NAME O F M/S SPICE WHICH WAS NON EXISTING ENTITY ON THAT DAY. IN SUCH PROCEEDINGS AND ASSESSMENT ORDER PASSED IN THE NAME OF M/S SPICE WOULD CLEARLY BE VOID. SUCH A DEFECT CANNOT B E TREATED AS PROCEDURAL DEFECT. MERE PARTICIPATION BY THE APPELL ANT WOULD BE OF NO EFFECT AS THERE IS NO ESTOPPEL AGAINST LAW . 12. ONCE IT IS FOUND THAT ASSESSMENT IS FRAMED IN T HE NAME OF NON-EXISTING ENTITY, IT DOES NOT REMAIN A PROCEDURA L IRREGULARITY OF THE NATURE WHICH COULD BE CURED BY INVOKING THE PROVISIONS OF SECTION 292B OF THE ACT. SECTION 292B OF THE ACT READS AS UNDER:- ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 9 OF 22 '292B. NO RETURN OF INCOME ASSESSMENT, NOTICE, SUMM ONS OR OTHER PROCEEDINGS FURNISHED OR MADE OR ISSUE OR TAK EN OR PURPORTED TO HAVE BEEN FURNISHED OR MADE OR ISSUED OR TAKEN IN PURSUANCE OF ANY OF THE PROVISIONS OF THIS ACT S HALL BE INVALID OR SHALL BE DEEMED TO BE INVALID MERELY BY REASONS OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF I NCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IF SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OT HER PROCEEDINGS IS IN SUBSTANCE AND EFFECT IN CONFORMIT Y WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT.' 13. THE PUNJAB & HARYANA HIGH COURT STATED THE EFFE CT OF THIS PROVISION IN CIT VS. NORTON MOTORS, 275 ITR 595 IN THE FOLLOWING MANNER:- 'A READING OF THE ABOVE REPRODUCED PROVISION MAKES IT CLEAR THAT A MISTAKE, DEFECT OR OMISSION IN THE RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IS NOT SUFFICIENT TO INVALIDATE AN ACTION TAKEN BY THE COM PETENT AUTHORITY, PROVIDED THAT SUCH RETURN OF INCOME, ASS ESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE PROVI SIONS OF THE ACT. TO PUT IT DIFFERENTLY, SECTION 292B CAN BE REL IED UPON FOR RESISTING A CHALLENGE TO THE NOTICE, ETC., ONLY IF THERE IS A TECHNICAL DEFECT OR OMISSION IN IT. HOWEVER, THERE IS NOTHING IN THE PLAIN LANGUAGE OF THAT SECTION FROM WHICH IT CA N BE INFERRED THAT THE SAME CAN BE RELIED UPON FOR CURING A JURIS DICTIONAL DEFECT IN THE ASSESSMENT NOTICE, SUMMONS OR OTHER P ROCEEDING. IN OTHER WORDS, IF THE NOTICE, SUMMONS OR OTHER PRO CEEDING TAKEN BY AN AUTHORITY SUFFERS FROM AN INHERENT LACU NA AFFECTING HIS/ITS JURISDICTION, THE SAME CANNOT BE CURED BY H AVING RESORT TO SECTION 292B. 14. THE ISSUE AGAIN CROPPED UP BEFORE THE COURT IN CIT VS. HARJINDER KAUR (2009) 222 CTR 254 (P&H). THAT WAS A CASE WHERE RETURN IN QUESTION FILED BY THE ASSESSEE WAS NEITHER SIGNED BY THE ASSESSEE NOR VERIFIED IN TERMS OF THE MANDATE OF SECTION 140 OF THE ACT. THE COURT WAS OF THE OPI NION THAT SUCH A RETURN CANNOT BE TREATED AS RETURN EVEN A RE TURN FILED BY THE ASSESSEE AND THIS INHERENT DEFECT COULD NOT BE CURED INSPITE OF THE DEEMING EFFECT OF SECTION 292B OF THE ACT. T HEREFORE, THE RETURN WAS ABSOLUTELY INVALID AND ASSESSMENT COULD NOT BE MADE ON A INVALID RETURN. IN THE PROCESS, THE COURT OBSERVED AS UNDER:- ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 10 OF 22 'HAVING GIVEN OUR THOUGHTFUL CONSIDERATION TO THE S UBMISSION ADVANCED BY THE LEARNED COUNSEL FOR THE APPELLANT, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 292B OF THE 1961 ACT DO NOT AUTHORIZE THE AO TO IGNORE A DEFECT OF A SUBSTA NTIVE NATURE AND IT IS, THEREFORE, THAT THE AFORESAID PRO VISION CATEGORICALLY RECORDS THAT A RETURN WOULD NOT BE TR EATED AS INVALID, IF THE SAME 'IN SUBSTANCE AND EFFECT IS IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT'. INSOFAR AS THE RETURN UNDER REFERENCE IS CONCERNED, IN TERMS OF SECTION 140 OF THE 1961 ACT, THE SAME CANNOT BE TREATED TO BE EVEN A RETURN FILED BY THE RESPONDENT ASSESSEE, AS THE SAME DOES NOT EVEN BEAR HER SIGNATURES AND HAD NOT EVEN BEEN VERIFIED BY HER. IN THE AFORESAID VIEW OF THE MATTE R, IT IS NOT POSSIBLE FOR US TO ACCEPT THAT THE RETURN ALLEGEDLY FILED BY THE ASSESSEE WAS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT. TH US VIEWED, IT IS NOT POSSIBLE FOR US TO ACCEPT THE CONTENTION ADVANCED BY THE LEARNED COUNSEL FOR THE APPELLANT ON THE BASIS OF SECTION 292B OF THE 1961 ACT. THE RETURN UNDER REFERENCE, W HICH HAD BEEN TAKEN INTO CONSIDERATION BY THE REVENUE, WAS A N ABSOLUTELY INVALID RETURN AS IT HAD A GLARING INHER ENT DEFECT WHICH COULD NOT BE CURED IN SPITE OF THE DEEMING EF FECT OF SECTION 292B OF THE 1961 ACT.' 15. LIKEWISE, IN THE CASE OF SRI NATH SURESH CHAND RAM NARESH VS. CIT (2006) 280 ITR 396, THE ALLAHABAD HIGH COUR T HELD THAT THE ISSUE OF NOTICE UNDER SECTION 148 OF THE I NCOME TAX ACT IS A CONDITION PRECEDENT TO THE VALIDITY OF ANY ASSESSMENT ORDER TO BE PASSED UNDER SECTION 147 OF THE ACT AND WHEN SUCH A NOTICE IS NOT ISSUED AND ASSESSMENT MADE, SUCH A DEFECT CANNOT BE TREATED AS CURED UNDER SECTION 292B OF TH E ACT. THE COURT OBSERVED THAT THIS PROVISIONS CONDONES THE IN VALIDITY WHICH ARISES MERELY BY MISTAKE, DEFECT OR OMISSION IN A NOTICE, IF IN SUBSTANCE AND EFFECT IT IS IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT. SINCE NO VAL ID NOTICE WAS SERVED ON THE ASSESSEE TO REASSESS THE INCOME, ALL THE CONSEQUENT PROCEEDINGS WERE NULL AND VOID AND IT WA S NOT A CASE OF IRREGULARITY. THEREFORE, SECTION 292B OF TH E ACT HAD NO APPLICATION. 16. WHEN WE APPLY THE RATIO OF AFORESAID CASES TO T HE FACTS OF THIS CASE, THE IRRESISTIBLE CONCLUSION WOULD BE PRO VISIONS OF SECTION 292B OF THE ACT ARE NOT APPLICABLE IN SU CH A CASE. THE FRAMING OF ASSESSMENT AGAINST A NON-EXISTING ENTITY/PERSON GOES TO THE ROOT OF THE MATTER WHICH IS NOT A ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 11 OF 22 PROCEDURAL IRREGULARITY BUT A JURISDICTIONAL DEFECT AS THERE CANNOT BE ANY ASSESSMENT AGAINST A DEAD PERSON . 17. THE ORDER OF THE TRIBUNAL IS, THEREFORE, CLEARL Y UNSUSTAINABLE. WE, THUS, DECIDE THE QUESTIONS OF LA W IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND ALLOW T HESE APPEALS. 18. WE MAY, HOWEVER, POINT OUT THAT THE RETURNS WER E FILED BY M/S SPICE ON THE DAY WHEN IT WAS IN EXISTENCE IT WO ULD BE PERMISSIBLE TO CARRY OUT THE ASSESSMENT ON THE BASI S OF THOSE RETURNS AFTER TAKING THE PROCEEDINGS AFRESH FROM TH E STAGE OF ISSUANCE OF NOTICE UNDER SECTION 143 (2) OF THE ACT . IN THESE CIRCUMSTANCES, IT WOULD BE INCUMBENT UPON THE AO TO FIRST SUBSTITUTE THE NAME OF THE APPELLANT IN PLACE OF M/ S SPICE AND THEN ISSUE NOTICE TO THE APPELLANT. HOWEVER, SUCH A COURSE OF ACTION CAN BE TAKEN BY THE AO ONLY IF IT IS STILL P ERMISSIBLE AS PER LAW AND HAS NOT BECOME TIME BARRED. 14. IN THE CASE OF MICRA INDIA (P) LTD (SUPRA), THE HON'BLE DELHI HIGH COURT WAS CONSIDERING THE CASE OF AN AS SESSEE WHICH HAD AMALGAMATED WITH ANOTHER COMPANY W.E.F. 1.4.200 8. THERE WAS A SEARCH ON SOME OTHER COMPANIES ON 20.10.2008 AND A NOTICE U/S 153C WAS ISSUED TO THE ASSESSEE ON 8.09. 2010. THE ASSESSEE HAD CHALLENGED THE PROCEEDINGS BEFORE THE AO ITSELF, BUT THE AO PROCEEDED TO COMPLETE THE ASSESSMENT IN THE NAME OF THE AMALGAMATING COMPANY WHICH ORDER WAS SET ASIDE BY T HE ITAT. ON APPEAL BY THE REVENUE, THE HON'BLE HIGH COURT TA KING NOTE OF ITS DECISION IN THE CASE OF SPICE ENFOTAINMENT (SUP RA) HAS HELD AS UNDER: 6. IN A CASE OF AMALGAMATION, THE PREDECESSOR OF TH E ASSESSEE (BEING A DISSOLVED COMPANY) 'CANNOT BE FOU ND'. CONSEQUENTLY, SECTION 170(2) OF THE ACT APPLIES. TH IS PROVISION CLARIFIES THAT WHERE THE PREDECESSOR CANN OT BE FOUND, 'THE ASSESSMENT OF THE INCOME OF THE PREVIOU S YEAR IN WHICH THE SUCCESSION TOOK PLACE UP TO THE DATE O F THE SUCCESSION AND OF THE PREVIOUS YEAR PRECEDING THAT YEAR ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 12 OF 22 SHALL BE MADE ON THE SUCCESSOR IN LIKE MANNER AND T O THE SAME EXTENT AS IT WOULD HAVE BEEN MADE ON THE PREDECESSOR.' (EMPHASIS SUPPLIED) 7. THE REVENUE, HOWEVER, URGES THAT THE ASSESSMENT IS JUSTIFIED BECAUSE THE LIABILITIES OF THE AMALGAMATI NG COMPANY ACCRUE TO THE AMALGAMATED (TRANSFEREE) COMPANY. WHILE THAT IS TRUE, THE QUESTION HERE IS W HICH ENTITY MUST THE ASSESSMENT BE MADE ON. THE TEXT OF SECTION 170(2)MAKES IT CLEAR THAT THE ASSESSMENT MUST BE MADE ON THE SUCCESSOR (I.E., THE AMALGAMATED COMPANY). 8. IN SARASWATI INDUSTRIAL SYNDICATE (SUPRA) IT WAS HELD THAT: ' AFTER THE AMALGAMATION OF THE TWO COMPANIES THE TRA NSFEROR COMPANY CEASED TO HAVE ANY ENTITY AND THE AMALGAMAT ED COMPANY ACQUIRED A NEW STATUS AND IT WAS NOT POSSIB LE TO TREAT THE TWO COMPANIES AS PARTNERS OR JOINTLY LIABLE IN RESPECT OF THEIR LIABILITIES AND ASSETS.' IN VIVID MARKETING (SUPRA), THIS COURT HELD: 'WHEN THE ASSESSING OFFICER PASSED THE ORDER OF ASS ESSMENT AGAINST THE RESPONDENT COMPANY, IT HAD ALREADY BEEN DISSOLVED AND STRUCK OFF THE REGISTER OF THE REGISTRAR OF COM PANIES U/S 560 OF THE COMPANIES ACT. IN THESE CIRCUMSTANCES, THE T RIBUNAL RIGHTLY HELD THAT THERE COULD NOT HAVE BEEN ANY ASS ESSMENT ORDER PASSED AGAINST THE COMPANY WHICH WAS NOT IN EXISTEN CE AS ON THAT DATE IN THE EYES OF LAW IT HAD ALREADY BEEN DI SSOLVED.' IT WAS FURTHER HELD THAT SECTION 176 OF THE ACT, WH ICH ENACTS PROVISIONS RELATING TO DISCONTINUATION OF BU SINESS, DOES NOT APPLY TO A CASE OF AMALGAMATION/DISSOLUTIO N. IT WAS FURTHER HELD THAT SECTION 159 OF THE ACT, WHICH PROVIDES FOR TAX LIABILITY TO BE ATTACHED TO THE LE GAL REPRESENTATIVES OF A DECEASED PERSON, IS ALSO INAPP LICABLE. THE LANGUAGE OF SECTION 159EX-FACIE APPLIES TO NATU RAL PERSONS, AND CANNOT BE EXTENDED, THROUGH A LEGAL FI CTION, TO THE DISSOLUTION OF COMPANIES. 9. THERE IS ANOTHER ASPECT IN THESE APPEALS, WHICH IS THE APPLICABILITY OF SECTION 292B OF THE ACT. SECTION 2 92B, INTER ALIA, PRESCRIBES THAT PROCEEDINGS ETC. INITIA TED CANNOT BE DEEMED INVALID 'MERELY BY REASON OF MISTA KE, ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 13 OF 22 DEFECT OR OMISSION' IN ANY RETURN OF INCOME, ASSESS MENT OR NOTICE. THE REVENUE HAD ARGUED THAT THIS PROVISI ON NEUTRALIZES PROCEDURAL DEFECTS IN JURISDICTION. IN THESE CIRCUMSTANCES, IT WAS SUBMITTED, HAVING REGARD TO T HE ASSESSEE'S OMISSION TO URGE THE SO-CALLED ILLEGALIT Y AT THE THRESHOLD, THE COURTOUGHT TO INTERFERE WITH THE ORD ER OF THE ITAT. THIS QUESTION, TOO, HAS BEEN DEALT WITH - IN CIT V. DIMENSION APPARELS PVT. LTD. REPORTED IN (2015) 370 ITR 288. IN THAT CASE, AFTER NOTICING SECTION 292B, THE COURT DISCUSSED THE RULING IN SPICE ENTERTAINMENT (SUPRA), WHEREIN IT HAD BEEN HELD THAT SINCE THE ASSESSMENT MADE IN SUCH CASES IS AGAINST AN AMALGAMATED COMPANY IN RESPECT OF INCOME OF THE AMALGAMATING COMPANY FOR THE PERIOD PRIOR TO THE AMALGAMATION, THE INCOME TAX AUTHORITIES ARE NEVERTHELESS UNDER AN OBLIGATION TO SUBSTITUTE THE SUCCESSOR IN PLACE OF THE AMALGAMATED COMPANY. THUS , 'SUCH A DEFECT CANNOT BE TREATED AS PROCEDURAL DEFE CT'. IN ANY EVENT, IT IS TO BE NOTED THAT THE FACT OF AMALG AMATION OF THE ASSESSEE WITH THE TRANSFEREE COMPANY HAD BEE N INTIMATED AND DISCLOSED IN RESPONSE TO THE NOTICE UNDER SECTION 153C ON 22.11.2010. ACCORDINGLY, THIS GROUND, TOO, HAS NO MERIT AND IS REJECTED. 10. IN THE PRESENT CASE, NO DOUBT THERE WAS PARTICI PATION DURING THE COURSE OF ASSESSMENT; HOWEVER, THE AO, D ESPITE BEING TOLD THAT THE ORIGINAL COMPANY WAS NO LONGER IN EXISTENCE, DID NOT TAKE REMEDIAL MEASURES AND DID N OT TRANSPOSE THE TRANSFEREE AS THE COMPANY WHICH HAD T O BE ASSESSED. INSTEAD, HE RESORTED TO A PECULIAR PROCED URE OF DESCRIBING THE ORIGINAL ASSESSEE AS THE ONE IN EXIS TENCE; THE ORDER ALSO MENTIONED THE TRANSFEREE'S NAME BELO W THAT OF M/S MICRA INDIA PVT. LTD. NOW, THAT DID NOT LEAD TO THE ASSESSMENT BEING COMPLETED IN THE NAME OF TH E TRANSFEREE COMPANY. ACCORDING TO THE AO, M/S MICRA INDIA PVT. LTD. WAS STILL IN EXISTENCE. CLEARLY, TH IS WAS A CASE WHERE THE ASSESSMENT WAS CONTRARY TO LAW, AS HAVING BEING COMPLETED AGAINST A NON-EXISTENT COMPA NY. THE ITAT'S DECISION IS, IN THE CIRCUMSTANCES, JUSTI FIED AND WARRANTED. 15. IN THE CASE OF MARUTI SUZUKI INDIA LTD, THE HON 'BLE DELHI HIGH COURT WAS DEALING WITH THE ASSESSMENT OF AN ASSESSEE, WHICH HAD FILED ITS RETURN OF INCOME ON 12.11.2011 AND VIDE COURT ORDER DATED 29.1.2013, THE ASSESSEE COMPANY HAD AMA LGAMATED ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 14 OF 22 WITH SPIL W.E.F. 1.4.2012 BUT THE ASSESSMENT ORDER WAS PASSED IN THE NAME OF THE AMALGAMATING COMPANY. FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SPICE E NFOTAINMENT (CITED SUPRA) AND MICRA INDIA (P) LTD (SUPRA), THE HON'BLE HIGH COURT HELD THE ASSESSMENT ORDER TO BE A NULLITY. 16. THUS, IT CAN BE SEEN THAT BOTH IN THE CASES OF SPICE ENFOTAINMENT AND MICRA INDIA (P) LTD, THE NOTICES U /S 143(2) AND 153C RESPECTIVELY WERE ISSUED AFTER THE ASSESSEE TH EREIN CEASED TO EXIST AFTER AMALGAMATION AND THEREFORE, THE ASSESSM ENTS WERE HELD TO BE VOID AB INITIO . BUT WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF SPICE ENFOTAINMENT LTD, WHILE HOLDING THAT THE ASSESSMENT IN THE NAME OF NON-EXISTING COMPANY IS NOT A PROCEDURAL IRREGULARITY OF THE NATURE WHICH COULD B E CURED BY INVOKING THE PROVISIONS OF SECTION 292B, HAS ALSO T AKEN NOTE OF THE FACT THAT IN THAT CASE RETURNS WERE FILED BY TH E AMALGAMATING COMPANY ON THE DAY WHEN IT WAS IN EXISTENCE AND THE REFORE, IT WOULD BE PERMISSIBLE TO CARRY OUT THE ASSESSMENT ON THE BASIS OF THOSE RETURNS AFTER TAKING THE PROCEEDINGS AFRESH F ROM THE STAGE OF ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. IT WAS HE LD THAT IN SUCH CIRCUMSTANCES, IT WOULD BE INCUMBENT UPON THE AO TO SUBSTITUTE THE NAME OF THE ASSESSEE IN PLACE OF THE AMALGAMATI NG COMPANY AND THEN ISSUE NOTICE TO THE ASSESSEE, BUT SUCH A C OURSE OF ACTION CAN BE TAKEN BY THE AO ONLY IF IT IS STILL PERMISSI BLE AS PER LAW AND HAS NOT BECOME TIME BARRED. 17. IN THE CASE BEFORE US, WE FIND THAT THE RETURNS WERE FILED BY THE AMALGAMATING COMPANY AND THE NOTICES U /S 143(2) & 142(1) WERE ISSUED PROBABLY TO THE ASSESSEE PRIOR T O ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 15 OF 22 AMALGAMATION, THEREFORE THE SCRUTINY ASSESSMENTS WE RE VALIDLY INITIATED, BUT THE ASSESSMENT ORDER IS PASSED ON A NON-ENTITY. THEREFORE, IN OUR OPINION, THE ASSESSMENT PROCEEDIN GS CANNOT BE HELD TO BE INVALID AB INITIO. THE AO CAN PROCEED WI TH THE ASSESSMENT PROCEEDINGS, BY TRANSPOSING THE AMALGAMA TED COMPANY AS THE ASSESSEE AND ISSUING FRESH NOTICE U/ S 142(1) OF THE ACT AND COMPLETE THE ASSESSMENT PROCEEDINGS. AO IS DIRECTED ACCORDINGLY. 18. AS REGARDS THE GROUNDS OF APPEAL RAISED ALONG W ITH FORM NO.36 AND THE OTHER ADDITIONAL GROUNDS OF APPE AL, AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESS EE SUBMITTED THAT IF THE TWO COMPANIES CHALLENGED BY THE ASSESSE E IN ITS ADDITIONAL GROUNDS OF APPEAL ARE DIRECTED TO BE EXC LUDED FROM THE FINAL LIST OF COMPARABLES, THE ORIGINAL GROUNDS RAI SED WITH FORM NO.36 NEED NO ADJUDICATION, SINCE THE ASSESSEES MA RGIN WOULD THEREAFTER FALL WITH + OR _ 5% OF THE ARITHMATIC ME AN MARGIN OF THE REMAINING COMPARABLE COMPANIES. HE RELIED UPON THE DECISION OF VARIOUS BENCHES OF THIS TRIBUNAL FOR THE RELEVANT A .YS FOR THEIR EXCLUSION. SINCE, WE HAVE SET ASIDE THE MATTER TO T HE FILE OF THE AO FOR RECONSIDERATION OF THE ISSUES AFTER TRANSPOSING THE NAME OF THE AMALGAMATED COMPANY, WE DEEM IT FIT AND PROPER TO R EMAND THIS ISSUE ALSO THE FILE OF THE AO/TPO FOR RECONSIDERATI ON AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING. THEREFO RE, ASSESSEES APPEAL FOR A.Y 2004-05 IS TREATED AS PARTLY ALLOWED . ITA NO.1053 & 1054/HYD/2016 (A.YS 2006-07 & 2007-08 ) 19. IN THESE TWO YEARS, BRIEF FACTS ARE THAT THERE WERE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSE SSEE WITH ITS AES AND THE DETERMINATION OF THE ALP OF SUCH TRANSA CTIONS HAS ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 16 OF 22 BEEN REFERRED TO THE TPO WHO SUGGESTED CERTAIN ADJU STMENTS. THE MATTER REACHED THE TRIBUNAL AND VIDE ORDERS DATED 1 6.1.2014 IN ITA NO.115/HYD/2011 AND ITA NO.2184/HYD/2011 FOR TH E A.YS 2006-07 AND 2007-08 RESPECTIVELY, THE TRIBUNAL HAD SET ASIDE, TWO OF THE ISSUES TO THE FILE OF THE AO. THE FIRST ISSUE IS ON THE RATE OF INTEREST TO BE CHARGED ON INTEREST FREE LOAN ADV ANCED TO ITS AES AND THE SECOND ISSUE IS CORPORATE GUARANTEE FEE GIV EN BY THE ASSESSEE TO ITS AES. ITAT HAD SET ASIDE BOTH THE IS SUES TO THE TPO WITH A DIRECTION TO DECIDE THE QUANTUM OF CORPORAT E GUARANTEE RATE FOLLOWING THE METHOD ADOPTED IN GLEN PHARMACE UTICALS. WITH REGARD TO THE RATE OF INTEREST ON THE LOAN ADVANCED BY THE ASSESSEE, THE TRIBUNAL DIRECTED THE AO TO EXAMINE A ND CALCULATE THE ADDITIONAL INTEREST FOR THE RELEVANT PERIOD ONL Y INSTEAD OF CHARGING ADDITIONAL INTEREST FOR THE ENTIRE PERIOD OF ONE YEAR. CONSEQUENT TO THE SAID ORDER, THE TPO, VIDE ORDER D ATED 31.3.2015, DIRECTED THAT THE LIBOR +2% IS TO BE CAL CULATED ON THE LOAN ADVANCED AND ACCORDINGLY SUGGESTED ADJUSTMENT OF THE DIFFERENTIAL AMOUNT. AS REGARDS THE FEE ON CORPORAT E GUARANTEE IS CONCERNED, THE TPO SUGGESTED THAT THE CORPORATE GUA RANTEE FEE @ 2% IS TO BE RETAINED. PURSUANT THERETO, THE AO PASS ED THE CONSEQUENTIAL ORDER RAISING A DEMAND. AGAINST THIS ORDER, THE ASSESSEE APPROACHED THE DRP. THE DRP, VIDE ORDER DA TED 18.5.2016, OPINED THAT THE ORDER PASSED CONSEQUENT TO THE DIRECTIONS ISSUED BY THE ITAT, IS NOT AN ORDER AT T HE FIRST INSTANCE AND THEREFORE, THE DRP DOES NOT HAVE JURISDICTION A ND ACCORDINGLY IS NOT EMPOWERED TO ISSUE THE DIRECTION ON THE ISSU ES ARISING FROM THE SAID ORDER. THE DRP ALSO NOTICED THAT THE ASSES SEE HAS FILED AN APPEAL BEFORE THE CIT (A) ALSO WHICH INDICATES T HAT THE ASSESSEE IS PURSUING THE SAME REMEDY BEFORE DIFFERE NT AUTHORITIES ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 17 OF 22 AND THEREFORE, THE OBJECTIONS ARE NOT SUSTAINABLE. THE DRP FURTHER OBSERVED THAT THE ASSESSEE HAS TO FILE OBJECTIONS W ITHIN 30 DAYS OF RECEIPT OF THE DRAFT ASSESSMENT ORDER WHEREAS THE A SSESSEE HAS FILED THE OBJECTION AFTER SIX MONTHS FROM THE DATE OF RECEIPT AND THEREFORE, THE OBJECTIONS ARE NOT SUSTAINABLE. AGAI NST THIS ORDER OF THE DRP AND ALSO THE CONSEQUENTIAL ORDER OF THE AO DATED 29.5.2015, THE ASSESSEE IS IN APPEAL BEFORE US. TH E ASSESSEE HAS RAISED VARIOUS GROUNDS OF APPEAL TO STATE THAT THE CORPORATE GUARANTEE WAS NOT AN INTERNATIONAL TRANSACTION DU RING THE RELEVANT A.Y. FURTHER, IT IS ALSO ARGUED THAT EVEN WHILE PASSING THE CONSEQUENTIAL ORDER, THE AO HAS TO PASS ONLY A DRAF T ASSESSMENT ORDER AGAINST WHICH THE ASSESSEE CAN RAISE ITS OBJE CTIONS BEFORE THE DRP OR CHOOSE TO FILE AN APPEAL BEFORE THE CIT (A) AND ONLY AFTER THE ASSESSEE EXERCISES ITS OPTIONS, CAN THE A O PASS THE FINAL ASSESSMENT ORDER AND THEREFORE, THE SAID ORDER IS N OT SUSTAINABLE. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE JUDGMENT OF THE HON'BL E DELHI HIGH COURT IN THE CASE OF JCB INDIA LTD VS. DCIT REPORTE D IN 398 ITR 189 (DEL.). 20. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDER OF THE AO AS WELL AS THE DRP. 21. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE IMPUGNED ORDER BEFORE U S IS THE ORDER PASSED BY THE AO CONSEQUENT TO THE DIRECTIONS OF TH E TRIBUNAL. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL AN D WE FIND THAT THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE TPO WITH A ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 18 OF 22 DIRECTION TO RECONSIDER THE ISSUE IN ACCORDANCE WIT H ITS DIRECTIONS. AS IS EVIDENT FROM THE CONSEQUENTIAL ORDER, WHEREIN THE REPORT OF THE TPO IS REPRODUCED, THE TPO HAS APPLIED HIS MIND , HAS VERIFIED VARIOUS FACTS BEFORE PROPOSING THE ADJUSTMENTS. THE AO HAS PASSED THE CONSEQUENTIAL ORDER INCORPORATING THE AD JUSTMENTS PROPOSED BY THE TPO. WE FIND THAT WHEN THE ISSUES W ERE SET ASIDE BY THE TRIBUNAL, IT IS NOT MERELY FOR CORRECTING MA THEMATICAL ERRORS IN THE CALCULATIONS, BUT IT IS FOR RECONSIDE RING THE ISSUE IN ACCORDANCE WITH THE DIRECTIONS OF THE ITAT. WHEREVE R, THE AO/TPO EXERCISE THEIR DISCRETION AFTER VERIFICATION, AND P ASS AN ORDER, IT IS INCUMBENT UPON THEM TO GIVE THE ASSESSEE AN OPPORTU NITY TO PRESENT ITS CASE OR TO APPEAL AGAINST SUCH ORDERS. IT IS FOR THIS REASON THAT THE STATUES PROVIDE THAT THE AO SHALL P ASS A DRAFT ASSESSMENT ORDER AGAINST WHICH THE ASSESSEE CAN EIT HER CHOOSE TO FILE ITS OBJECTION BEFORE THE DRP OR CHOOSE TO FILE AN APPEAL BEFORE THE CIT (A) AND AFTER THE ASSESSEE EXERCISES ITS OP TION, THE AO CAN PASS THE FINAL ASSESSMENT ORDER IN ACCORDANCE WITH THE DIRECTIONS OF THE DRP OR THE ASSESSEE CAN FILE AN APPEAL BEFOR E THE CIT (A). AS PER SECTION 144C OF THE ACT, THE AO FIRST HAS TO PA SS THE DRAFT ASSESSMENT ORDER AND THE CHOICE IS WITH THE ASSESSE E EITHER TO APPROACH THE DRP OR THE CIT (A). ONLY IF THE ASSESS EE CHOOSES TO PREFER AN APPEAL BEFORE THE CIT (A), CAN THE AO PAS S THE FINAL ASSESSMENT ORDER. SIMILAR FACTS HAD ARISEN IN THE C ASE OF JCB INDIA LTD (CITED SUPRA) BEFORE THE HON'BLE DELHI HI GH COURT AND THE HON'BLE HIGH COURT HAS HELD THAT EVEN IN THE CA SE OF A REMAND BY THE TRIBUNAL, THE AO HAS TO PASS A DRAFT ASSESSM ENT ORDER AND NOT THE FINAL ASSESSMENT ORDER. FOR THE SAKE OF REA DY REFERENCE AND CLARITY, THE RELEVANT PORTION OF THE ORDER IS R EPRODUCED HEREUNDER: ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 19 OF 22 19. AS ALREADY NOTED, THE FINAL ASSESSMENT ORDER OF THE AO STOOD VITIATED NOT ON ACCOUNT OF MERE IRREGULARITY BUT SI NCE IT WAS AN INCURABLE ILLEGALITY. SECTION 292B OF THE ACT WOULD NOT PROTECT SUCH AN ORDER. THIS HAS BEEN EXPLAINED BY THIS COURT IN ITS DECISION DATED 17TH JULY 2015 PASSED IN ITA NO. 275/2015 (PR. COMMISSIO NER OF INCOME TAX, DELHI-2, NEW DELHI V. CITI FINANCIAL CONSUMER FINAN CE INDIA PVT. LTD.) WHERE IT WAS HELD: SECTION 292B OF THE ACT CANNOT BE READ TO CONFER J URISDICTION ON THE AO WHERE NONE EXISTS. THE SAID SECTION ONLY PROTECTS R ETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDINGS FROM ANY MISTA KE IN SUCH RETURN OF INCOME, ASSESSMENT NOTICES, SUMMONS OR OTHER PROCEE DINGS, PROVIDED THE SAME ARE IN SUBSTANCE AND IN EFFECT IN CONFORMITY WITH T HE INTENT OF PURPOSES OF THE ACT. 20. THE COURT FURTHER OBSERVED THAT SECTION 292B OF THE ACT CANNOT SAVE AN ORDER NOT PASSED IN ACCORDANCE WITH THE PRO VISIONS OF THE ACT. AS THE COURT EXPLAINED, THE ISSUE INVOLVED IS NOT ABOUT A MISTAKE IN THE SAID ORDER BUT THE POWER OF THE AO TO PASS THE ORDE R. 21. IN ALMOST IDENTICAL FACTS, IN TURNER INTERNATIO NAL (SUPRA), THIS COURT HELD IN FAVOUR OF THE ASSESSEE ON THE GROUND THAT I T WAS MANDATORY FOR THE AO TO HAVE PASSED A DRAFT ASSESSMENT ORDER UNDE R SECTION 144C OF THE ACT PRIOR TO ISSUING THE FINAL ASSESSMENT ORDER . THE FOLLOWING PASSAGES FROM SAID DECISION ARE RELEVANT FOR THE PR ESENT PURPOSES (PAGE 180 OF 398 ITR): 11. THE QUESTION WHETHER THE FINAL ASSESSMENT ORDE R STANDS VITIATED FOR FAILURE TO ADHERE TO THE MANDATORY REQUIREMENTS OF FIRST PASSING DRAFT ASSESSMENT ORDER IN TERMS OF SECTION 144C(1) OF THE ACT IS NO LONGER RES INTREGRA. THERE IS A LONG SERIES OF DECISIONS TO WH ICH REFERENCE WOULD BE MADE PRESENTLY. 12. IN ZUARI CEMENT LTD. V. ACIT (DECISION DATED 21 ST FEBRUARY, 2013 IN WP(C) NO.5557/2012), THE DIVISION BENCH (DB) OF THE ANDHRA PRADESH HIGH COURT CATEGORICALLY HELD THAT THE FAILURE TO PA SS A DRAFT ASSESSMENT ORDER UNDER SECTION 144C (1) OF THE ACT WOULD RESULT IN R ENDERING THE FINAL ASSESSMENT ORDER WITHOUT JURISDICTION, NULL AND VO ID AND UNENFORCEABLE. IN THAT CASE, THE CONSEQUENT DEMAND NOTICE WAS ALSO SE T ASIDE. THE DECISION OF THE ANDHRA PRADESH HIGH COURT WAS AFFIRMED BY THE SUPREM E COURT BY THE DISMISSAL OF THE REVENUE'S SLP (C) [CC NO. 16694/201 3] ON 27TH SEPTEMBER, 2013. 13. IN VIJAY TELEVISION (P) LTD. V. DISPUTE RESOLUT ION PANEL [2014] 369 ITR 113 (MAD.), A SIMILAR QUESTION AROSE. THERE, TH E REVENUE SOUGHT TO RECTIFY A MISTAKE BY ISSUING A CORRIGENDUM AFTER TH E FINAL ASSESSMENT ORDER WAS PASSED. CONSEQUENTLY, NOT ONLY THE FINAL ASSESS MENT ORDER BUT ALSO THE CORRIGENDUM ISSUED THEREAFTER WAS CHALLENGED. FOLLO WING THE DECISION OF THE ANDHRA PRADESH HIGH COURT IN ZUARI CEMENT LTD. V. AC IT (SUPRA) AND A NUMBER OF OTHER DECISIONS, THE MADRAS HIGH COURT IN VIJAY TELEVISION (P) LTD. V. DISPUTE RESOLUTION PANEL (SUPRA) QUASHED TH E FINAL ORDER OF THE AO ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 20 OF 22 AND THE DEMAND NOTICE. INTERESTINGLY, EVEN AS REGAR DS THE CORRIGENDUM ISSUED, THE MADRAS HIGH COURT HELD THAT IT WAS BEYOND THE TI ME PERMISSIBLE FOR ISSUANCE OF SUCH CORRIGENDUM AND, THEREFORE, IT COU LD NOT BE SUSTAINED IN LAW. 14. RECENTLY, THIS COURT IN ESPN STAR SPORTS MAURITI US S.N.C. ET COMPAGNIE V. UNION OF INDIA [2016] 388 ITR 383 (DEL .), FOLLOWING THE DECISION OF THE ANDHRA PRADESH HIGH COURT IN ZUARI C EMENT LTD. V. ACIT (SUPRA), THE MADRAS HIGH COURT IN VIJAY TELEVISION ( P) LTD. V. DISPUTE RESOLUTION PANEL, CHENNAI (SUPRA) AS WELL AS THE BO MBAY HIGH COURT IN INTERNATIONAL AIR TRANSPORT ASSOCIATION V. DCIT (20 16) 290 CTR (BOM) 46, CAME TO THE SAME CONCLUSION. IN THE DECISION OF THE GUJARAT HIGH COURT IN C-SAM (INDIA) (SUPRA), THE COURT NEGATED THE PLEA THAT NON-COMPLIANCE WITH THE TERMS OF SECTION 144C OF THE ACT IS MERELY AN IRREGULARITY. THE GU JARAT HIGH COURT HELD THAT IT WAS OF GREAT IMPORTANCE AND MANDATORY. TH E FOLLOWING PASSAGES OF THE SAID DECISION OF GUJARAT HIGH COURT ARE RELEVANT FOR THE PRESENT PURPOSES: 6. THESE STATUTORY PROVISIONS MAKE IT ABUNDANTLY C LEAR THAT THE PROCEDURE LAID DOWN UNDER SECTION 144C OF THE ACT IS OF GREAT IMPORTANCE AND IS MANDATORY. BEFORE THE ASSESSING OFFICER CAN MAKE VA RIATIONS IN THE RETURNED INCOME OF AN ELIGIBLE ASSESSEE, AS NOTED, SUB-SECTI ON (1) OF SECTION 144C LAYS DOWN THE PROCEDURE TO BE FOLLOWED NOTWITHSTANDING A NYTHING TO THE CONTRARY CONTAINED IN THE ACT. THIS NON-OBSTANTE CLAUSE THUS GIVES AN OVERRIDING EFFECT TO THE PROCEDURE 'NOTWITHSTANDING ANYTHING TO THE C ONTRARY CONTAINED IN THE ACT'. SUB-SECTION (5) OF SECTION 144C EMPOWERS THE DRP TO ISSUE DIRECTIONS TO THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. SUB-SECTION (10) OF SECTION 144C MAKES, SUCH DIRECTIONS BINDING ON THE ASSESSING OFFICER. AS PER SUB-SECTION 144C, THE ASSESSING OFFICER IS R EQUIRED TO PASS THE ORDER OF ASSESSMENT IN TERMS OF SUCH DIRECTIONS WITHOUT ANY FURTHER HEARING BEING GRANTED TO THE ASSESSEE. 7. THE PROCEDURE LAID DOWN UNDER SECTION 144C OF TH E ACT IS THUS OF GREAT IMPORTANCE. WHEN AN ASSESSING OFFICER PROPOSES TO M AKE VARIATIONS TO THE RETURNED INCOME DECLARED BY AN ELIGIBLE ASSESSES HE HAS TO FIRST PASS A DRAFT ORDER, PROVIDE A COPY THEREOF TO THE ASSESSEE AND O NLY THEREUPON THE ASSESSEE COULD EXERCISE HIS VALUABLE RIGHT TO RAISE OBJECTIO NS BEFORE THE DRP ON ANY OF THE PROPOSED VARIATIONS. IN ADDITION TO GIVING SUCH OPPORTUNITY TO AN ASSESSEE, DECISION OF THE DRP IS MADE BINDING ON THE ASSESSIN G OFFICER. IT IS THEREFORE NOT POSSIBLE TO UPHOLD THE REVENUE'S CONTENTION THA T SUCH REQUIREMENT IS MERELY A PROCEDURAL. THE REQUIREMENT IS MANDATORY AND GIVE S SUBSTANTIVE RIGHTS TO THE ASSESSEE TO OBJECT TO ANY ADDITIONS BEFORE THEY ARE MADE AND SUCH OBJECTIONS HAVE TO BE CONSIDERED NOT BY THE ASSESSING OFFICER BUT BY THE DRP. INTERESTINGLY, ONCE THE DRP GIVES DIRECTIONS UNDER SUB-SECTION (5) OF SECTION 144C, THE ASSESSING OFFICER IS EXPECTED TO PASS THE ORDER OF ASSESSMENT IN TERMS OF SUCH DIRECTIONS WITHOUT GIVING ANY FURTHER HEARI NG TO THE ASSESSEE. THUS, AT THE LEVEL OF THE ASSESSING OFFICER, THE DIRECTIONS OF THE DRP UNDER SUB-SECTION (5) OF SECTION 144C WOULD BIND EVEN THE ASSESSEE. HE MAY OF COURSE CHALLENGE THE ORDER OF THE ASSESSING OFFICER BEFORE THE TRIBU NAL AND TAKE UP ALL CONTENTIONS. NEVERTHELESS AT THE STAGE OF ASSESSMENT , HE HAS NO REMEDY AGAINST THE DIRECTIONS ISSUED BY THE DRP UNDER SUB-SECTION (5). ALL THESE PROVISIONS ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 21 OF 22 AMPLY DEMONSTRATE THAT THE LEGISLATURE DESIRED TO G IVE AN IMPORTANT OPPORTUNITY TO AN ASSESSEE WHO IS LIKELY TO BE SUBJ ECTED TO UPWARD REVISION OF INCOME ON THE BASIS OF, TRANSFER PRICING MECHANISM. SUCH OPPORTUNITY CANNOT BE TAKEN AWAY BY TREATING IT AS PURELY PROCEDURAL I N NATURE. 23. IN THE PRESENT CASE, JUST AS IN TURNER INTERNAT IONAL (SUPRA), IT IS SUBMITTED THAT, AT THE MOST, FAILURE TO PASS A DRAF T ASSESSMENT ORDER UNDER SECTION 144C OF THE ACT IS A CURABLE DEFECT A ND THAT THE COURT SHOULD NOW DELEGATE THE PARTIES TO A STAGE AS IT WA S WHEN THE TPO ISSUED A FRESH ORDER AFTER THE REMAND BY THE ITAT. 24. THIS VERY ARGUMENT OF THE REVENUE HAS BEEN NEGA TED BY THE COURT IN TURNER INTERNATIONAL (SUPRA) WHERE IT WAS OBSERV ED IN PARAS 15 AND 16 AS UNDER: 15. MR. DILEEP SHIVPURI, LEARNED COUNSEL FOR THE R EVENUE SOUGHT TO CONTEND THAT THE FAILURE TO ADHERE TO THE MANDATORY REQUIRE MENT OF ISSUING A DRAFT ASSESSMENT ORDER UNDER SECTION 144C (1) OF THE ACT WOULD, AT BEST, BE A CURABLE DEFECT. ACCORDING TO HIM THE MATTER MUST BE RESTORED TO THE AO TO PASS A DRAFT ASSESSMENT ORDER AND FOR THE PETITIONER, TH EREAFTER, TO PURSUE THE MATTER BEFORE THE DRP. THE COURT IS UNABLE TO ACCEPT THE ABOVE SUBMISSION. THE LEGAL POSITION AS EXPLAINED IN THE ABOVE DECISIONS IN UNAMBIGUOUS. TH E FAILURE BY THE AO TO ADHERE TO THE MANDATORY REQUIREMENT OF SECTION 144C (1) OF THE ACT AND FIRST PASS A DRAFT ASSESSMENT ORDER WOULD RESULT IN INVAL IDATION OF THE FINAL ASSESSMENT ORDER AND THE CONSEQUENT DEMAND NOTICES AND PENALTY PROCEEDINGS. 25. FOR ALL OF THE AFOREMENTIONED REASONS, THE COUR T FINDS NO DIFFICULTY IN HOLDING THAT THE IMPUGNED FINAL ASSESSMENT ORDER S DATED 30TH MARCH 2016 PASSED BY THE AO FOR AYS 2006-07, 2007-0 8 AND 2008 -09 ARE WITHOUT JURISDICTION ON ACCOUNT OF THE FAILURE, BY THE AO, TO FIRST PASS A DRAFT ASSESSMENT ORDER AND THEREAFTER, SUBJE CT TO THE OBJECTIONS FILED BEFORE THE DRP AND THE ORDERS OF THE DRP, TO PASS THE FINAL ASSESSMENT ORDER. THE COURT ALSO SETS ASIDE THE ORD ERS OF THE TPO DATED 30TH MARCH 2016 ISSUED PURSUANT TO THE REMAND BY THE ITAT. 22. IN VIEW OF THE SAME, THE CONSEQUENTIAL ORDERS D ATED 29.5.2015 FOR BOTH THE A.YS ARE SET ASIDE AND THE A O/TPO IS DIRECTED TO PASS THE DRAFT ASSESSMENT ORDER IN ACCO RDANCE WITH THE DIRECTIONS OF THE TRIBUNAL DATED 16.01.2014. 23. ACCORDINGLY THE GROUND OF APPEAL NO.3 IS ALLOWE D AND OTHER GROUNDS WHICH ARE ON THE MERITS OF THE ASSESS MENT ORDERS ARE NOT ADJUDICATED AT THIS JUNCTURE. ITA NOS 1052 TO 1054 OF 2016 CYIENT LTD HYDERABAD. PAGE 22 OF 22 24. IN THE RESULT, ASSESSEES APPEAL FOR A.YS 2006- 07 & 2007-08 ARE ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 25. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 29 TH DECEMBER, 2017. VINODAN/SPS COPY TO: 1 CYIENT LTD, 4 TH FLOOR, A WING, PLOT NO.11, SOFTWARE UNITS LAYOUT INFOCITY, MADHAPUR, HYDERABAD 500081 2 DCIT, CIRCLE 2(1), IT TOWERS, AC GUARDS, HYDERABAD 500004 3 CIT (A)-2 HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER