The Delhi High Court while considering an appeal filed by the department against Sony Mobile Communications India, a two-judge bench of the Delhi High Court has referred the matter to the bench of the Chief Justice due to difference of opinion.
The Respondent-Assessee company, Sony Mobile Communications India is primarily engaged in the business of importing, buying, selling and distributing a wide range of mobile phones in India and of providing related post sale support services.
On the Respondent-Assessee filing the return of income for the assessment years 2009-10 and 2010-11, since the Respondent- Assessee had undertaken international transaction with its Associated Enterprises (AEs), the AO referred the matter to the Transfer Pricing Officer (TPO) for determination of the Arm’s Length Price (ALP) of the international transaction entered into by the Respondent-Assessee with its AE.
The TPO determined upward adjustment of Rs.56,30,78,638/-. The Respondent-Assessee approached Dispute Resolution Panel (DRP), which declined to interfere with the transfer pricing adjustment made by the AO and the Respondent-Assessee thereafter approached the ITAT and the ITAT gave part relief to the Respondent-Assessee.
The Respondent- Assessee made an application before the ITAT under Rule 11 of the ITAT Rules, 1963, seeking admission of the additional ground of appeal i.e. that the assessment order passed under Section 143(3) read with section 144C of the Act is void ab initio, as the assessment was undertaken in the name of non-existent entity.
The ITAT held that the assessment framed by the AO on a non-existent company is a nullity in the eyes of law and void and the provisions of section 292B cannot rescue the department. Therefore, the order is unsustainable and accordingly the same is quashed.
The Appellant-Revenue urged till the issuance of notice under Section 143(2) of the Act, the name of the assessee had not changed and the notice was issued in the correct name and the error, even if any in the name of the Respondent-Assessee in the assessment order, is an error which is within the jurisdiction of the AO and which is correctable.
The division bench of Justices Rajiv Sahai Endlaw and Sanjeev Narula had expressed two different views on the issue.
Justice Rajiv Sahai Endlaw held in favor of the assessee and observed that the defect cannot be treated as a procedural one and once it is found that the assessment is framed in the name of a non- existent entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Income Tax Act, 1961 and, thus the assessment orders framed by the AO on a non-existent company were a nullity in the eyes of law and void and the provisions of Section 292B could not rescue the appellant department.
However, Justice Sanjeev Narula was of the opinion that if the legal effect of such an order results in a nullity, then the filing of the appeal by the Assessee in the name of the defunct entity would not cure the legal defect. “For this reason, it has been held to be not a mere procedural irregularity, but a jurisdictional defect,” he said. In the light of the above different views, the Court referred the matter before the Chief Justice and posted the case on 27th July 2021. “The tradition of this Court is, that in the event of difference of opinion, between Judges of the Division Bench, on whether a notice of appeal is to be issued, notice is to be issued. Since the difference of opinion here, is on whether a substantial question of law arises, we are of the view that as per the said tradition, the question of law has to be framed and appeal admitted. Further, since the date of hearing, the roster of this Court has changed,” the Court concluded.
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