Assessment Order Framed against Non-Existing Company Illegal and Void Ab Initio: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that an assessment order framed in the name of a non-existing company would be illegal and void ab initio.

A search & seizure operation was conducted in assessee company BJN Holdings Ltd, under Section 132 of the Income Tax Act, 1961 was carried out on 16.09. 2011.under Section 143C of the Income Tax Act was issued on 03 .07.2018 and under Section 143(2) was issued on 14.09.2018 and notice under Section 142(1) of the Income Tax Act was issued on 04.07.2018, 16.10.2018.

The entity BJN Holdings Ltd. was dissolved on 09.08.2010 under Section 273A of the Companies Act, 1931 and the entire assets and liabilities were taken over by two successor entities namely, BJN Holdings (I) Ltd and BJN Holdings (BD) Ltd. The Commissioner of Income Tax (Appeals) (CIT(A)) quashed the Assessment Orders holding that the assessment could not be conducted on a non-existing entity.

P. Praveen Sidharth, on behalf of the revenue submitted that, BJN Holdings Ltd no longer existed and it had been placed on record that the successor company to the assessee company, BJN Holdings (I) Ltd was incorporated in October, 2009 and the Indian assets of the assessee company were transferred to BJN Holdings (I) Ltd.

Further, the assessee company was dissolved on 09 .10 .2010 as per Department of Economic Development, Isle of Man the current assessment being framed on the hands of BJN Holdings (I) Ltd. would lie on them. He further submitted that, winding up of the company was never brought to the notice of the AO prior to 10 .10 .2018 and therefore the notices issued initiating the proceedings under Section 153C of the Income Tax Act were valid.

Pradeep Dinodia, on behalf of the assessee referring to the judgement of the Supreme Court in the case of Maruti Suzuki India Ltd contented that the assessment framed in the name of dissolved company B.J.N. Holdings Ltd were illegal, void ab initio and bad in law.

The two-member Bench of Saktijit Dey, (Judicial Member) and B. R. R. Kumar, (Accountant Member), quashed the assessment order and allowed the appeal, examining the judgement of Delhi High Court in Skylight Hospitality LLP, Spice Infotainment Ltd. v. Commissioner of Service Tax, PCIT Vs. Maruti Suzuki India Ltd and in PCIT Vs. ITA. The Bench further held that since the Assessing Officer had knowledge of the dissolution of the company as established from the Assessment Order itself, the order would be void ab initio.

To Read the full text of the Order CLICK HERE

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