The Income Tax Appellate Tribunal, Mumbai Bench, examined the validity of assessment proceedings initiated under Section 144C of the Income-tax Act, 1961, where the draft assessment order had been issued in the name of an entity that had ceased to exist due to amalgamation. The assessee contended that the draft assessment order, having been passed on a non-existent company despite prior intimation of amalgamation to the Assessing Officer, was void ab initio and that all consequential proceedings were liable to be quashed.

The Tribunal noted that the assessee had undergone amalgamation pursuant to a scheme approved by the jurisdictional High Court, with the appointed date being prior to the issuance of the draft assessment order. It was further observed that the Assessing Officer had been duly informed of the amalgamation, supported by statutory approvals and documentary evidence, well before the draft assessment order was passed. Notwithstanding such intimation, the draft assessment order under Section 144C read with Section 143(3) was issued in the name of the amalgamating company, which had already ceased to exist in law.

Analysing the statutory scheme of Section 144C, the Tribunal held that the issuance of a legally valid draft assessment order is a jurisdictional pre-condition for invoking the special assessment procedure applicable to eligible assessees. The draft assessment order is not a mere procedural formality but constitutes the very foundation for assumption of jurisdiction by the Assessing Officer and for the subsequent exercise of powers by the Dispute Resolution Panel. If the draft assessment order is invalid, the entire chain of proceedings, including the DRP directions and the final assessment order, is rendered unsustainable.

The Tribunal reiterated the settled legal position that an assessment framed on a non-existent entity is a nullity in the eyes of law and that such a jurisdictional defect cannot be cured by Section 292B, subsequent participation by the assessee, or by passing the final assessment order in the name of the amalgamated entity. Reliance was placed on consistent judicial precedents holding that a draft assessment order issued in the name of a non-existent person vitiates the entire proceedings.

In view of the admitted facts and the settled principles of law, the Tribunal held that the draft assessment order was void ab initio, resulting in lack of jurisdiction to proceed further under Section 144C. Consequently, the directions issued by the Dispute Resolution Panel and the final assessment order passed pursuant thereto were quashed in entirety, and the appeal of the assessee was allowed.

Source Link - https://itat.gov.in/public/files/upload/1767952423-3U374w-1-TO.pdf

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