M/S/ IBS SOFTWARE P. LTD,TRIVANDRUM V. THE ACIT, TRIVANDRUM

ITTPA 593/COCH/2018

AI Insights

The case involves M/s. IBS Software Pvt. Ltd., the successor in interest of M/s. IBS Software Services Pvt. Ltd., which appealed against a Final Assessment Order passed by the Assistant Commissioner of Income Tax. The order was challenged on the grounds that it was issued in the name of a non-existent company following an amalgamation. The Tribunal considered the legal implications of passing an assessment order in the name of an entity that had ceased to exist due to amalgamation, referencing several judicial precedents that supported the quashing of such orders.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717219 (ITAT-COCHIN)
• Duration Of Justice: 6 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 26-12-2018
• Other Referred Cases: PCIT vs. Maruti Suzuki India Ltd., DCIT vs. Barclays Global Service Centre Pvt. Ltd., Teleperformance Global Services Pvt. Ltd. vs. ACIT, Alok Knit Exports Ltd. vs. DCIT, Vahanvati Consultants (P.) Ltd. vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Transfer pricing; International transaction; Scheme of amalgamation
• Section: 148; 143(3); 92B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER IT(TP)A No.593/COCH/2018 (Assessment Year:2014-2015) M/s. IBS Software Pvt. Ltd. (Successor in interest of IBS Software Services Pvt. Ltd.) 521-524, NILA, Technopark Campus, Karyavottam P.O., Trivandrum, Kerala-695581 [PAN:AADCI 5529 A] …………. Appellant Assistant Commissioner of Income Tax Circle-1(1), 3rd Floor, Aayakar Bhavan, Kowdiar P.O., Trivandrum, Kerala-695003. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Rajakannan, Advocate Shri Sanjit Kumar Das, CIT-DR Date Conclusion of hearing Pronouncement of order : : 19.08.2025 22.08.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal is directed against the Final Assessment Order, dated 31/10/2018, passed under Section 143(3) read with Section 144C of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], as per directions, dated 25/09/2018, issued by the Dispute Resolution Panel-2, Bengaluru (hereinafter referred to as ‘the DRP’) under Section 144C(5) of the Act for the Assessment Year 2014-2015. 2. The relevant facts in brief are that the Assessee is a company, engaged in the business of development and sale of computer Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 2 software. For the A.Y. 2014-15, Assessee filed return of income on 28/11/2014 which was revised on 31/03/2016. The case of the Assessee was selected for regular scrutiny. Since, the Assessee had entered into International Transaction with the Associated Enterprises [hereinafter referred to as ‘AEs’] a reference was made to the Transfer Pricing Officer (TPO) under Section 92CA(1) of the Act for determination of Arms Length Price (ALP) in relation to international transactions undertaken by the Assessee with the AEs. The TPO passed the Order, dated 30/10/2017, under Section 92CA(3) of the Act proposing upward adjustment of INR.16,66,23,724/-. Incorporating the aforesaid transfer pricing adjustments, the Assessing Officer passed the Draft Assessment Oder proposing certain additions/disallowances on other issues. The Assessee filed objection before the Dispute Resolution Panel (DRP), which was disposed of vide Order, dated 25/09/2018. As per the directions issued by the DRP by way of the aforesaid order, the Assessing Officer passed the Final Assessment Order under Section 143(3) read with Section 144C of the Act on 31/10/2018 in the name of ‘M/s. IBS Software Services (P) Ltd’. 3. By way of present appeal, the Assessee has challenged the above Final Assessment Order passed by the Assessing Officer, inter alia on the ground that the same has been passed in the name of non- existent entity and, therefore, the same liable to be quashed as being bad-in-law. 4. When the appeal is taken up for hearing, the Learned Authorised Representative for the Assessee pressed into service on Ground Nos. 1 & 2 raised by the Assessee which read as under: “1. That the order of the Assistant Commissioner of Income-tax, Circle-1(1), Trivandrum ('learned AO') issued under section 143(3) r.w.s. 144C of the Income-tax Act, 1961 ('the Act') to the extent prejudicial to the Appellant, is bad in law and liable to be quashed. Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 3 2. That the learned AO, erred in issuing the final assessment order under Section 143(3) r.w.s 144C of the Act on the non-existent company and thus, the assessment order under Section 143(3) r.w.s. 144C of the Act is bad in law and liable to be quashed.” 5. The contention raised on behalf of the Assessee was that the Final Assessment Order was passed on 31/10/2018 in the name of ‘M/s. IBS Software Services (P) Ltd.’. The aforesaid entity was not in existence on the said date since it is stood amalgamated into M/s. IBS Software Pvt. Ltd. by virtue of the Order, dated 19/03/2018, passed by the National Company Law Tribunal (NCLT), Division Bench, Chennai. Countering the aforesaid submissions, it was submitted by the Learned Departmental Representative that the Assessee had not taken steps for merger of PAN of the amalgamating company (i.e. in the assessee in the present case) with the PAN of the amalgamated company (i.e. M/s. IBS Software Services (P) Ltd.). Since, the PAN was in active, the AO had passed the Final Assessment Order in the name of the said entity. Therefore, no fault could be found in the Final Assessment Order passed by the Assessing Officer. In rejoinder, the Learned Authorised Representative for the Assessee submitted that vide Letter, dated 28/05/2018, intimation was sent to the AO whereby the factum of amalgamation was communicated to the Assessing Officer. Despite having received the aforesaid communication, the Assessing Officer proceeded to pass the order in the name of a non- existent entity. In the present case, the Assessing Officer and the DRP had knowledge of amalgamation order having been passed by the NCLT. 6. We have given thoughtful consideration to the rival submissions and have perused the material on record. 7. It is an admitted position that by virtue of the Order, dated 19/03/2018, passed by the NCLT ‘IBS Software Services (P) Ltd.’ Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 4 stood amalgamated with ‘IBS Software Pvt. Ltd.’. As a result, IBS Software Services (P) Ltd. seized to be in existence. The Assessee has placed on record copy of Letter, dated 28/05/2018, whereby the Assistant Commissioner of Income-tax, Circle-1(1), Trivandrum was intimated about the factum of amalgamation and the same is as under:- Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 5 8. We further note that the DRP had also taken note of the factum of amalgamation and had, therefore, passed the Order in the name of amalgamated company (i.e. IBS Software Pvt. Ltd.). This clearly also shows that intimation regarding amalgamation was available with the authorities below. Despite this, the Assessing Officer proceeded to pass the Final Assessment Order in the name of non-existent entity. We find that identical issue had come up for consideration before the Cochin Bench of the Tribunal in the case of assessee pertaining to Assessment Year 2017-18. Vide Order, dated 21/08/2024, passed in the case of IBS Software Pvt. Ltd. vs. ACIT: IT(TP)A No.03/Coch/2022, the Tribunal had quashed the final assessment order passed in the name of non-existent entity by placing reliance upon the judgment of the Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. (416 ITR 613). During the course of hearing, the Learned Authorised Representative for the Assessee had also placed reliance on the decision of Pune Bench of the Tribunal in the case of DCIT vs. Barclays Global Service Centre Pvt. Ltd. [ITA No. 46/PUN/2021 & CO No.08/PUN/2021, dated 02/01/2023] and on perusal of the same we find that rejecting identical submissions made by the Revenue, the Tribunal had quashed the notice issued under Section 148 of the Act in the name of non-existent entity holding as under: “11. We heard the rival submissions and perused the material on record. The issue that arises for our consideration is whether or not an assessment order passed in the name of amalgamating company i.e. non-existing company, is valid in the eyes of law. There is no dispute about the fact that the factum of amalgamation was put to the notice of the Assessing Officer during the course of assessment proceedings. Despite knowing very well that the amalgamating company was not inexistence at the time of passing the assessment order, still the Assessing Officer had chosen to pass an assessment order in the name of the amalgamating company i.e. M/s. Barclays Shared Services Pvt. Ltd.. The Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. 416 ITR 613 (SC) after making a reference of its earlier decision in the case of CIT vs. Spice Infotainment Ltd. 12 ITR-OL 134 (SC) and Saraswati Industrial Syndicate Ltd. vs. CIT, 186 ITR 278 (SC) held as follows :- Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 6 “33. 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 (supra) 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 (supra).” 12. The ratio that can be discerned from the above decision is that consequent upon the amalgamation, the amalgamating company ceases to exist, therefore, it cannot be regarded as a “person”. The assessment proceedings against an entity which had ceased to exist were void ab initio. The fact that the Assessee had participated in the assessment proceedings cannot operate as an estoppel against law. 13. Even the Jurisdictional High Court in the case of Teleperformance Global Services Pvt. Ltd. vs. ACIT, 435 ITR 725 (Bom.) following the dictum laid down by the Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd. (supra) and Spice Infotainment Ltd. (supra) held that an assessment order passed against non-existing company would be void. Such defect cannot be treated as a procedural defect and mere participation of an Assessee in the assessment proceedings has no effect as there is no estoppel against law. Such defect cannot be cured. The relevant para of the judgment of the Jurisdictional High Court in the case of Teleperformance Global Services Pvt. Ltd. (supra) is as under :- “22. The Supreme Court in the case of Maruti Suzuki India Ltd. (supra) had considered that income, which was subject to be charged to tax for the assessment year 2012-13 was the income of erstwhile entity prior to amalgamation. Transferee had assumed liabilities of transferor company, including that of tax. The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under section 143(2) of the Act was issued on 26-9- 2013, the scheme of amalgamation had been approved by the high court with effect from 1-4-2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of nonexisting entity is a substantive illegality and would not be procedural violation of Section 292(b) of the Act. Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 7 The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. v. CIT [1990] 53 Taxman 92/186 ITR 278. The Supreme Court has also referred to decision of Delhi high court in the case of CIT v. Spice Enfotainment Ltd. [2018] 12 ITR-OL 134 (SC) and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B. The Supreme Court had also taken note of decision in Spice Entertainment Ltd. (supra) was followed by Delhi high court in matters, viz.CIT v. Dimension Apparels (P.) Ltd. [2014] 52 taxmann.com 356/[2015] 370 ITR 288, CIT v. Micron Steels (P.) Ltd. [2015] 59 taxmann.com 470/233 Taxman 120/372 ITR 386 (Mag.); CIT v. Micra India (P.) Ltd. [2015] 57 taxmann.com 163/231 Taxman 809 and in CIT v. Intel Technology India Ltd. [2016] 380 UTE 272 Karnataka high court has held, if a statutory notice is issued in the name of non-existing entity, entire assessment would be nullity in the eye of law. It has also been so held by Delhi high court in the case of Pr. CIT v. Nokia Solutions & Network India (P.) Ltd. [2018] 90 taxmann.com 369/253 Taxman 409/402 ITR 21 23. The Supreme Court in Spice Infotainment Ltd. v. CIT [IT Appeal No. 475 of 2011, dated 3-8-2011] found that there is no reason to interfere with the impugned judgment of Delhi high court and it found no merits in the appeal and special leave petition and were dismissed accordingly. The Supreme Court had taken note of revenue resistance contending that contrary position emerges from decision of Delhi high court decision in Sky Light Hospitality LLP v. Asstt. CIT [2018] 92 taxmann.com 93/254 Taxman 390 (SC) and that it had been affirmed by the Supreme Court. However, the Supreme Court had also taken note of Sky Light Hospitality LLP (supra) was in peculiar facts of the case, where the high court had categorically concluded that there was clerical mistake within the meaning of section 292B and the case had been distinguished by decisions of Delhi, Gujarat and Madras high courts in Rajender Kumar Sehgal v. ITO [2019] 101 taxmann. com 233/260 Taxman 412/414 ITR 286; Chandreshbhai Jayantibhai Patel v. ITO [2019] 101 taxmann. com 362/261 Taxman 137/413 ITR 276; and Alamelu Veerappan v.ITO [2018] 95 taxmann.com 155/257 Taxman 72. 24. In the circumstances, though the respondents refer to decision of Delhi High Court in case of Sky Light Hospitality LLP v. Asstt. CIT [2018] 90 taxmann.com 413/254 Taxman 109/405 ITR 296 it would be of little avail for the respondents. The decision in the case of Maruti Suzuki India Ltd. (supra) Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 8 would hold sway over present facts and circumstances. 14. Subsequently, the Hon’ble Bombay High Court in the case of Alok Knit Exports Ltd. vs. DCIT, 446 ITR 748 (Bombay) after making a reference to the decision of the Hon’ble Supreme Court in the cases of Maruti Suzuki India Ltd., Spice Enfotainment Ltd. and Sky Light Hospitality LLP vs. CIT 405 ITR (St.) 12 (SC) reiterated that the assessment made in the name of non-existing company i.e. amalgamating company is not valid in law even if the Assessee participated in the assessment proceedings. And such error cannot be corrected by recourse to the provisions of section 92B of the Act. It was further held that even though PAN card of the amalgamating company is alive and active, cannot be the reason to uphold the validity of the assessment. The Hon’ble High Court had further held that the decision of the Hon’ble Supreme Court in the case of Sky Light Hospitality LLP referred supra cannot be pressed into service as the decision was rendered in the peculiar facts of the case. The relevant observations of the Hon’ble Bombay High Court in the case of Alok Knit Exports Ltd. (supra) are as under :- “6. The Apex Court in its recent judgment on this subject in Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613, considered the judgment of Sky Light Hospitality LLP (supra) of the Apex Court and said that the Apex Court has expressly mentioned that in the peculiar facts of that case wrong name given in the notice was merely a clerical error. The Apex Court in Maruti Suzuki India Ltd. (supra), has also observed that what weighed in the dismissal of the Special Leave Petition were the peculiar facts of that case. The Apex Court has reiterated the settled position that the basis on which jurisdiction is invoked is under section 148 of the Act and when such jurisdiction was invoked on the basis of something which was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation, the notice is bad in law. The Apex Court has held as under : 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 coordinate 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 Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 9 for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment. 7. This quotation squarely applies to this case at hand. In the case at hand as well, the indisputable fact is respondent no. 1 has invoked jurisdiction by issuing notice under section 148 of the Act to an entity that had ceased to exist. This is notwithstanding the fact that respondent no. 1 was aware that Niraj Realtors had ceased to exist.......... .” Again Hon’ble Bombay High Court in the case of Vahanvati Consultants (P.) Ltd. vs. ACIT, 448 ITR 258 (Bom.) reiterated the same position of law.” (Emphasis Supplied) 9. The Revenue has failed to bring on record any material to distinguish the above judicial precedents cited by the Learned Authorised Representative of the Assessee either on facts or in law. In our view, the ratio of the above judicial precedents is applicable to the facts and circumstances of the present case. Therefore, we hold that the Final Assessment Order, dated 31/10/2018, framed in the name of the amalgamating company that had ceased to exist as on the date of passing of the aforesaid order by virtue of the order passed by the NCLT cannot be sustained and the same is, therefore, quashed as being non-est in the eyes of law. Ground No. 1&2 raised by the Assessee are allowed. Since, the Final Assessment Order, dated 31/10/2018, stands quashed as aforesaid the other grounds raised by the Assessee are dismissed as having been rendered infructuous. 10. In result the appeal preferred by the Assessee is allowed Order pronounced on 22.08.2025. Sd/- sd/- (Inturi Rama Rao) Accountant Member (Rahul Chaudhary) Judicial Member कोचीन Cochin; िदनांक Dated : 22.08.2025 vr/- Printed from counselvise.com IT(TP)A No.593/Coch/2018 Assessment Year 2014-2015 10 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण कोचीन / DR, ITAT, Cochin 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, कोचीन / ITAT, Cochin Printed from counselvise.com "