2023 (5) TMI 1391 - AT - Income Tax

Reopening assessment against non-existent amalgamated company held invalid under section 148 following Maruti Suzuki precedent

GPT Sons Pvt. Ltd. (for GPT Venture Pvt. Ltd. since amalgamated) Versus Deputy Commissioner of Income-tax, Central Circle 3 (1), Kolkata

GPT Sons Pvt. Ltd. (for GPT Venture Pvt. Ltd. since amalgamated) Versus Deputy Commissioner of Income-tax, Central Circle 3 (1), Kolkata - TMI Issues Involved:1. Jurisdictional Validity of Notice Issued under Section 148 to a Non-Existent Entity.2. Legality of Reassessment Proceedings and Addition of Rs. 9.55 Crores as Unexplained Cash Credit under Section 68.Detailed Analysis:1. Jurisdictional Validity of Notice Issued under Section 148 to a Non-Existent Entity:The primary issue addressed was whether the notice issued under Section 148 of the Income Tax Act to a non-existent entity due to amalgamation was valid. The entity in question, GPT Ventures Pvt. Ltd. (GVPL), had amalgamated with GPT Sons Pvt. Ltd. (GSPL) prior to the issuance of the notice. The Tribunal examined whether the issuance of the notice to GVPL, which had ceased to exist, constituted a jurisdictional error.The Tribunal noted that the amalgamation had been sanctioned by the Hon'ble High Court of Calcutta, effective from April 1, 2011. Despite this, the Assessing Officer issued a notice dated March 30, 2018, to GVPL. The Tribunal emphasized that the scheme of amalgamation, once approved, attains statutory force and is binding in rem, not just between the transferor and transferee companies but also against all statutory authorities, including the Income Tax Department.The Tribunal relied on several judicial precedents, including the Hon'ble Supreme Court's decision in the case of Maruti Suzuki India Ltd., which held that jurisdiction invoked on a non-existent entity is fundamentally flawed. The Tribunal concluded that the issuance of notice under Section 148 to a non-existent entity is a substantive illegality, not a procedural defect curable under Section 292B of the Income Tax Act.2. Legality of Reassessment Proceedings and Addition of Rs. 9.55 Crores as Unexplained Cash Credit under Section 68:The second issue pertained to the reassessment proceedings and the addition of Rs. 9.55 Crores as unexplained cash credit under Section 68 of the Income Tax Act. The reassessment was based on information that the assessee had routed back its unaccounted money through accommodation entries provided by a shell entity, Instyle Trading Pvt. Ltd. (ITPL).The Tribunal observed that the reasons recorded for initiating reassessment proceedings were based on statements obtained during a search operation, which suggested that the funds received by GVPL were its own unaccounted money. However, the Tribunal did not delve into the merits of this addition, as it had already determined that the reassessment proceedings were void ab initio due to the jurisdictional defect.The Tribunal noted that the Assessing Officer's assumption of jurisdiction was invalid because the notice was issued to a non-existent entity. Consequently, the reassessment order, being founded on an invalid notice, was annulled. The Tribunal did not address the substantive merits of the addition under Section 68, as the jurisdictional issue was dispositive of the appeal.Conclusion:The Tribunal allowed the appeal, holding that the reassessment proceedings initiated in the name of a non-existent amalgamated company were without jurisdiction, void ab initio, and liable to be annulled. The Tribunal's decision underscores the legal principle that jurisdictional defects in the issuance of notice cannot be cured and render subsequent proceedings invalid.