Karnataka HC Invalidates Tax Notices to Non-Existent Company Post-Amalgamation; Allows Fresh Proceedings Against Correct Entity.

The Karnataka HC set aside notices issued to a non-existent entity following its amalgamation, citing lack of jurisdiction based on the SC precedent in Maruti Suzuki India Ltd. The court recognized the notices as a "substantive illegality" since they were addressed to a company that had ceased to exist. However, it allowed the revenue authorities to initiate proceedings against the correct entity, the petitioner with PAN No. AAECR5444G, in accordance with the law. All unresolved issues were left open, and the petition was disposed of.

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In the case before the Karnataka High Court, presided over by Hon'ble Justice S. Sunil Dutt Yadav, the petitioner, M/s. Rajdisle Private Limited (bearing PAN No. AAECR5444G), challenged notices issued by the revenue authorities under Section 148A(b) of the Income Tax Act, 1961. These notices were addressed to a non-existent entity, M/s. Rajdisle Private Limited (bearing PAN No. AAICR2909J), which had ceased to exist following an amalgamation order by the National Company Law Tribunal on 25.03.2019. The amalgamation resulted in the transfer of property rights and powers to the transferee company, RJU Enterprises Private Limited, whose name was subsequently changed to Rajdisle Private Limited.

The court referenced the legal precedent set by the Supreme Court in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd., which established that notices and assessment orders issued in the name of a non-existent company constitute a "substantive illegality" and are "without jurisdiction." This principle was upheld in similar judgments, including Coffee Day Resorts (MSM) Pvt. Ltd. v. Deputy Commissioner of Income Tax.

Consequently, the court set aside the notices issued to the non-existent entity for the assessment year 2020-21, citing lack of jurisdiction. However, the court granted the revenue authorities the liberty to initiate appropriate proceedings against the correct entity, the petitioner with PAN No. AAECR5444G, as per the law. All unresolved contentions were left open, and the petition was disposed of.

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