Issuance of jurisdictional notice and assessment order against a non-existing company is fundamentally void and not a mere procedural mistake

Facts of the case:

1. Suzuki Powertrain India Limited (SPIL), a joint venture between Suzuki Motor Corporation and Maruti Suzuki India Limited (MSIL) had filed its return of income for the AY 2012-13 on 28.11.2012. On 29.01.2013, a scheme of amalgamation of SPIL and MSIL was approved by the High court w.e.f. 01.04.2012 and the same was intimated to the assessing officer.

1. The case was first selected for scrutiny under Section 143(2), thereafter Transfer pricing officer passed an order under Section 92CA (3) making an adjustment of Rs. 78.97 crores in respect of royalty paid by SPIL. After numerous proceedings, final assessment order was passed in the name of SPIL (amalgamated with MSIL) on 31.10.2016 making an addition of Rs. 78.97 crores to the total income of SPIL.
2. MSIL raised an objection with the Tribunal through appeal that the assessment proceedings were continued in the name of the non-existent or merged entity SPIL and that the final assessment order which was also issued in the name of a non-existent entity, would be invalid. The Tribunal set aside the final assessment order on the ground that it was void ab initio, having been passed in the name of a non-existent entity by the assessing officer. The order of Tribunal was affirmed by Delhi High court. Matter now raised with Supreme Court

Held by the Hon’ble Supreme Court:

1. The jurisdiction in present case was fundamentally violated on the legal principle that the amalgamating company upon whom order was issued ceases to exist upon approved scheme of amalgamation. Mere participation in proceedings cannot operate as estoppel against law.
2. There is no point in holding different view than the decision taken in AY 2011-12 as well. Consistency and certainty in court decisions must be adhered to in tax litigations.

Conclusion:

The present decision highlights that the proceedings against a non-existing company shall stand fundamentally invalid, and will not be considered a mistake curable as per provisions of the Act.

Source: [2019] 107 taxmann.com 375 (SC)

Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd., Civil appeal no. 5409 of 2019, Delhi High Court