Assessment order passed on a non-existent entity due to amalgamation is invalid considering the applicability of Section 170(2) of the Income Tax Act

 

ITAT Delhi in the case of Erstwhile United Bank of India (Now Punjab National Bank) v. DCIT, Circle-19(1), Delhi, ITA No. 2711/DEL/2024, Date of Decision: 26 March 2025 has held that assessment order passed under Section 143(3) on a non-existent entity due to amalgamation is valid, considering the applicability of Section 170(2) of the Income Tax Act

Let us have a Short Overview of the case:

Key Issue: Whether an assessment order passed under Section 143(3) on a non-existent entity due to amalgamation is valid, considering the applicability of Section 170(2) of the Income Tax Act.

Facts of the Case:
• United Bank of India (UBI) filed its original return of income on 30.10.2018, declaring a loss of ₹1,772.41 crores. A revised return was filed on 29.03.2019, increasing the loss to ₹5,031.46 crores.
• UBI was amalgamated with Punjab National Bank (PNB) on 01.04.2020 via Gazette Notification No. CG-DI-E-04032020-216535 dated 04.03.2020.
• The Assessing Officer (AO) passed the assessment order on 26.08.2021 in the name of UBI, despite being informed multiple times about the amalgamation.
• Aggrieved, the assessee filed an appeal before CIT(A), which was dismissed.

ITAT Decision:
•  The Tribunal quashed the assessment order, holding it void ab initio, as it was passed in the name of a non-existent entity (UBI).
•  The Revenue was informed multiple times about the amalgamation, but it ignored this fact and continued the assessment in the name of UBI.
•  Relying on PCIT v. Maruti Suzuki India Ltd. (2019), the Tribunal held that an assessment on a non-existent entity is a substantive illegality and not a mere procedural lapse under Section 292B.
•  Section 170(2) applies only if the successor entity (PNB) is correctly named in the assessment, which was not done in this case.
•  Since the assessment was void, the Tribunal did not examine the merits of the case.

Key Precedents Relied Upon:
1. PCIT v. Maruti Suzuki India Ltd. (2019) 107 taxmann.com 375 (SC)
2. Saraswati Industrial Syndicate Ltd. v. CIT (1990) 186 ITR 278 (SC)
3. Spice Infotainment Ltd. v. CIT (2011) 247 CTR 500 (Del), affirmed by SC in CA No. 285 of 2014
4. CIT v. Micra India Pvt. Ltd. (2015) 231 taxmann 809 (Del)
5. CIT v. Dimensions Apparels Pvt. Ltd. (2015) 370 ITR 288 (Del)
6. PCIT-6, New Delhi v. Maruti Suzuki India Ltd. (2017) 85 taxmann.com 330 (Del)
7. PCIT, Central-2 v. BMA Capfin Ltd. (2018) 100 taxmann.com (Del), SLP dismissed in SC (SLP No. 40486/2018)
8. PCIT (Central)-2 v. Mahagun Realtors (P) Ltd. (2022) 443 ITR 194 (SC)
9. International Hospital Ltd. v. DCIT (Delhi HC, ITA 116/2023, Order dated 26.09.2024)
10. Sony Mobile Communications case (cited for distinguishing Mahagun Realtors)

Distinguishing Mahagun Realtors (2022) 443 ITR 194 (SC):
•  In Mahagun Realtors, the Supreme Court upheld the assessment despite amalgamation because the assessee failed to disclose the merger.
•  Here, PNB had duly informed the AO, and all filings were made under PNB’s name.
•  The Revenue’s failure to correct the assessment invalidated the order.

The copy of the order is as under:

1742982289-XTEWaP-1-TO