2023 (8) TMI 726 - HC - Income Tax

Court upholds challenge to tax notice issued to non-existing entity, restrains further action pending next hearing.

The Court held in favor of the petitioner, allowing the writ petition to proceed despite the absence of a Board Resolution. The challenge to a notice ... Reopening of assessment against company ceased to exist - Absence of a Board Resolution accompanying the writ petition - HELD THAT:- This Court finds itself unable to sustain the same bearing in mind the fact that the decision in State Bank of Travancore [2011 (2) TMI 1270 - SUPREME COURT] was rendered in the context of a suit and was thus governed by the provisions of the Code of Civil Procedure, 1908. The present is a writ petition which is duly accompanied by a Power of Attorney and thus the Court finds no ground to hold against the petitioner on this score. The facts which obtain in the present writ petition clearly appear to be identical and raise the question of whether a company which ceases to exist consequent to a Scheme of Arrangement coming to be approved by the National Company Law Tribunal [NCLT] could be proceeded against u/s 148A of the Income Tax Act, 1961. Matter requires consideration. Till the next date of listing, the respondents shall stand restrained from taking further steps pursuant to the impugned show cause notices dated 23 March 2023 and 14 March 2023 marked as Annexures P-11 and P-12. Issues involved:The issues involved in the judgment are the preliminary objection regarding the absence of a Board Resolution accompanying the writ petition, the challenge to a notice issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2017-18, and the question of whether a company that ceases to exist due to a Scheme of Arrangement approved by the National Company Law Tribunal can be proceeded against under Section 148A of the Income Tax Act, 1961.Preliminary Objection:The Department contended that in the absence of a Board Resolution accompanying the writ petition, it should not be entertained, citing the decision in State Bank of Travancore vs. Kingston Computers India Pvt. Ltd. This Court, however, found that the said decision was in the context of a suit governed by the Code of Civil Procedure, 1908, whereas the present writ petition was accompanied by a Power of Attorney, thus holding in favor of the petitioner.Challenge to Notice under Section 148:A notice issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2017-18 was challenged as being void ab initio due to being issued in the name of a non-existing entity. Citing the decision in Pr. Commissioner of Income Tax v. Maruti Suzuki India Limited, it was argued that such issuance is a substantive illegality. The Court issued notice to the respondents and restrained them from taking further steps pursuant to the impugned show cause notices dated 23 March 2023 and 14 March 2023 until the next date of listing.Company Ceasing to Exist under Scheme of Arrangement:The facts of the present writ petition raised the question of whether a company ceasing to exist following approval by the National Company Law Tribunal under a Scheme of Arrangement could be proceeded against under Section 148A of the Income Tax Act, 1961. The Court noted the similarity of the issues with a previous case and deemed the matter to require consideration, scheduling it for further hearing on 12.09.2023.