2015 (9) TMI 234 - HC - Income Tax

Revenue's Appeals Dismissed: Invalid Initiation of Proceedings Under Section 153C

The High Court dismissed the appeals by the Revenue, affirming the decision that the initiation of proceedings under Section 153C against the non-existent ... Validity of proceedings u/s 153A - notice was issued under Section 153C on a date when the noticee has ceased to exist in the eyes of law - ITAT quashed proceedings - Held that:- De hors the decision in Spice Enfotainment Ltd. (2011 (8) TMI 544 - DELHI HIGH COURT) the undisputed fact is that on the date on which the notice was issued to the Respondent under Section 153C of the Act i.e. 10th September 2010 it was an entity that has ceased to exist in the eyes of law. The mere use of the noticee’s letterhead to address correspondence to the AO cannot tantamount to reviving an entity which has already ceased to exist. Further the mere fact that in the assessment order the AO has said that the Respondent had amalgamated with SAPL could not cure the fundamental defect in the very proceedings initiated under Section 153C of the Act i.e. a notice being issued to an entity which does not exist in the eyes of law. In that view of the matter, the Court is satisfied that the ITAT has committed no legal error in coming to the conclusion that the entire proceedings initiated under Section 153C of the Act stood vitiated and deserves to be quashed. - Decided in favour of assessee. Issues:Validity of initiation of proceedings under Section 153C of the Income Tax Act, 1961.Analysis:The High Court considered the legality of proceedings against a company under Section 153C of the Income Tax Act, 1961. The company had ceased to exist due to an amalgamation approved by the court under the Companies Act, 1956. The initiation of proceedings against a non-existent entity was challenged by the company. The ITAT upheld the company's contention, stating that the notice under Section 153C was issued after the company had ceased to exist. The ITAT referred to a previous decision where it was held that passing an assessment order for a non-existent entity is not a mere procedural defect. The Revenue argued that the company's authorized signatory had corresponded with the Assessing Officer without mentioning the amalgamation until later. However, the Court found that the company had ceased to exist when the notice was issued, and using the company's letterhead did not revive its existence. The Court held that the proceedings under Section 153C were vitiated and deserved to be quashed, as the notice was issued to an entity that did not legally exist.In conclusion, the High Court dismissed the appeals by the Revenue, affirming the decision that the initiation of proceedings under Section 153C against the non-existent company was invalid. The Court found no legal error in the ITAT's decision to quash the proceedings, stating that no substantial question of law arose for determination in this case.