2023 (12) TMI 1379 - HC - Income Tax

Tax Notice Void: Issued to Non-Existent Company After Merger, Court Rules Participation Can't Fix Legal Flaw.

M/s PMP Auto Components Pvt Ltd Versus Deputy Commissioner of Income Tax-7 (2) (1) & Ors

The court quashed the notice issued under Section 148 of the Income Tax Act 1961 for AY-2009-2010, finding it invalid as it was addressed to a ... Validity of reassessment proceedings against non existing entity - whether it is defect which is curable u/s 292B? - HELD THAT:- It is settled law that the said defect is not curable. This court in Alok Knit Exports Ltd. [2021 (8) TMI 777 - BOMBAY HIGH COURT] while dealing with submissions of Revenue held that human errors and mistakes cannot and should not nullify proceedings which were otherwise valid and no prejudice has been caused, relying on judgment of Maruti Suzuki India Ltd [2019 (7) TMI 1449 - SUPREME COURT] held that the basis on which jurisdiction is invoked is under Section 148 of the Act and when such jurisdiction was invoked on the basis of something which was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation, the notice is bad in law. It has been time and again held that the notice issued to a non existing entity is not valid. Decided in favour of assessee. Issues:Impugning a notice under Section 148 of the Income Tax Act 1961 for AY-2009-2010, based on the belief that income has escaped assessment. Primary objection raised is that the notice was issued to a non-existing entity due to amalgamation. Other grounds include reopening based on change of opinion and lack of fresh material. Respondents argue the defect is curable under Section 292B of the Act, citing human error. The court refers to a judgment emphasizing that errors should not nullify valid proceedings. The court holds that the notice issued to a non-existing entity is invalid.Analysis:The petitioner challenged a notice issued under Section 148 of the Income Tax Act 1961 for AY-2009-2010, alleging that income had escaped assessment. The primary objection raised was that the notice was issued to a non-existing entity due to an amalgamation with the petitioner. The petitioner contended that this rendered the reassessment proceedings invalid. Additionally, objections were raised regarding the reopening being based on a change of opinion and lacking fresh material. The Assessing Officer did not address the objection regarding the notice being issued to a non-existing entity in the order disposing the objections. Respondents argued that the defect was curable under Section 292B of the Act, citing it as a human error. However, the court referred to a judgment stating that human errors should not nullify valid proceedings.The court emphasized that the notice issued to a non-existing entity is not valid. The court referred to a judgment highlighting that errors and mistakes, even if considered human errors, cannot nullify proceedings that are otherwise valid and do not cause prejudice. The court held that the notice issued to a non-existing entity due to an approved scheme of amalgamation was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist. The court further cited a decision where the jurisdictional notice was issued in the name of the amalgamating company despite being informed of its non-existence. The court concluded that participation in proceedings by the appellant could not operate as an estoppel against law in such circumstances.The court quashed and set aside the impugned notice dated 29th March 2014 and the order dated 19th March 2015. The court did not delve into the other grounds raised in the petition. The rule issued on 4th August 2015 was made absolute, and the petition was disposed of accordingly.