Reassessment against a non-existing entity and breach of faceless assessment procedure vitiated the assessment and consequential notices.

Reassessment against a successor company was held unsustainable where proceedings were initiated and continued in the name and PAN of a dissolved partnership firm, no notice under section 148 was issued to the company, and the company received no prior correspondence before the final order. The assessment was also held vitiated for breach of the mandatory faceless procedure under section 144B, because no draft assessment order was issued before finalisation. On these grounds, the impugned assessment, demand and penalty notices were quashed, with liberty to proceed afresh in accordance with law after addressing objections and following the prescribed procedure.

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Issues: (i) Whether reassessment and final assessment could validly be made against an assessee when the proceedings were initiated and continued in the name and PAN of a dissolved, non-existing entity and no notice under Section 148 was issued to the company; (ii) Whether the assessment order was vitiated for non-compliance with the mandatory faceless assessment procedure under Section 144B, including failure to issue a draft assessment order.

Issue (i): Whether reassessment and final assessment could validly be made against an assessee when the proceedings were initiated and continued in the name and PAN of a dissolved, non-existing entity and no notice under Section 148 was issued to the company.

Analysis: The reassessment was commenced and carried forward in the name and PAN of the erstwhile partnership firm, although the firm had already ceased to exist upon conversion into the company. The company was not served a notice under Section 148, and no prior correspondence or show-cause notice was addressed to it before the final order was passed. The assessment thus suffered from a jurisdictional defect, since proceedings against a non-existing entity could not be sustained and the company could not be assessed without proper initiation in its own name.

Conclusion: The reassessment and assessment against the company were invalid and could not be sustained on this ground.

Issue (ii): Whether the assessment order was vitiated for non-compliance with the mandatory faceless assessment procedure under Section 144B, including failure to issue a draft assessment order.

Analysis: Section 144B required the assessment to proceed in the prescribed faceless manner, including preparation and service of a draft assessment order before finalisation where variations prejudicial to the assessee were proposed. In the present case, no draft assessment order was issued and the final assessment order was passed directly. This amounted to non-compliance with a mandatory statutory procedure and constituted an independent procedural infirmity.

Conclusion: The assessment order was vitiated for breach of Section 144B.

Final Conclusion: The impugned assessment order and the consequential demand and penalty notices were quashed, while liberty was reserved to proceed afresh in accordance with law after addressing the assessee's objections and following the prescribed procedure.

Ratio Decidendi: A reassessment initiated against a non-existing entity, without a notice to the correct legal person, and a final assessment made without the mandatory draft order procedure under Section 144B, is jurisdictionally and procedurally unsustainable.

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