ITAT rules assessment on Genpact ‘void ab initio’, deletes ₹2,600-cr share-buyback addition

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has quashed assessment made in the name of Genpact India. Accordingly, it has deleted ₹2,600 crore buy back addition in the return which means no tax is to levied on this amount.

The matter was related to Assessment Year 2014-15. The Tax Department picked up Genpact’s return for scrutiny and issued a notice. Later, a revised return was filed. In the meantime, Genpact India amalgamated with Genpact India and new entity was named as Genpact India Private Limited i.e. assessee herein with effect from April 30, 2016 with the appointed date being April 1, 2015. This fact was mentioned on the assessment order.

The Assessment was completed on December 31, 2016 in the name of Genpact India (now merged with Genpact India Private Limited) and the said assessment order mentioned the Genpact India with different PAN. The order added ₹2,600 crore and it was charged to tax at 20 per cent. Aggrieved by the Assessment Order, the Assessee moved to first level of appeal (Commissioner of Income Tax – Appeal), but there it was rejected and matter moved to Income Tax Appellate Tribunal.

After hearing the matter, the Bench opined that Assessing Officer was very much aware that the amalgamating company Genpact India is no longer in existence on the date of assessment order. It relied on Supreme Court’s decision in Maruti Suzuki matter and stated that in the said case also the amalgamating company i.e. Genpact India was not in existence at the time of conducting assessment proceedings as well as on the date of passing Assessment Order.

It explained: “Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured u/s.292B (deals with Return of income, etc., not to be invalid on certain grounds) of the Act. Hence, the Assessment proceedings as well as the Assessment order itself are void ab initio.”

According to Shailesh Kumar, Partner at Nangia & Co LLP, income tax law in India is often perceived to be complicated, having various legal as well a procedural requirements involving different timelines, conditions, procedures, approval requirements, rules, forms, etc.

Many times, not only taxpayers, but also tax authorities tend to make inadvertent mistakes in understanding or applying the law. The lawmakers understood this difficulty and they specifically inserted Section 292B in the I-T Act, providing that any return of income, assessment, notice, summons or other proceedings shall not be deemed to be ‘invalid’ by reason of any defect, mistake or omission, if such return of income, assessment, notice, summons or other proceedings are in substance and in effect in conformity with or according to the intent and purpose of I-T Act.

“This order once again underscores the principle that following prescribed provisions of the law are equally important for the tax authorities, as they are for the taxpayers. If an order is passed or demand is raised without following the due process or applicable provisions, then irrespective of merits of the case or quantum of tax demand involved, the order or demand can be quashed on technical reasons,” he said.

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