The Delhi bench of the Income Tax Appellate Tribunal (ITAT) quashed the reassessment, stating that the issuance of a notice in the name of a non-existing entity is a non-curable defect under Section 292B of the Income Tax Act, 1961.
A private limited company got converted into an LLP on 14.02.2015. This fact was intimated to the jurisdictional AO on 24.02.2016. A notice was issued u/s 148 consequent to some information received from the Investigation wing on 31.03.2018 in the name of erstwhile private limited company. The said fact was also brought to the notice of the AO while filing the objections to the reasons recorded. However, the AO chose to continue with the jurisdictional defect and proceeded with the reassessment.
The assessee had duly informed the AO about the change in the status of the company into LLP and the said fact was also brought to the notice of the AO while filing the objections to the reasons recorded. Hence, the AO had sufficient opportunities to rectify the mistake made by him. Despite sufficient information being made available to the AO, the revenue had chosen to continue with the jurisdictional defect and proceeded with the reassessment, which in our considered opinion, is not curable even under Section 292B of the Income Tax Act.
The assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a coordinate Bench of two judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011- 2012. In doing so, this Court has relied on the decision in Spice Enfotainment.
The two members of the tribunal comprising Amit Shukla (Judicial member) and M. Balaganesh (Accountant member) held that when a private limited company has been converted into an LLP and this fact is duly conveyed to the AO during the reassessment proceedings vide the objections filed to reasons recorded, then the notice issued under Section 148 in the name of non-existing company leads to quashing of the reassessment proceedings as this jurisdictional defect is not curable under Section 292B of the Income Tax Act, 1961. Reliance has been placed on the Supreme Court Judgement in the case of Maruti Suzuki India Ltd.
The decision by the ITAT Delhi underscores the importance of adherence to procedural requirements in income tax proceedings. Issuing a notice in the name of a non-existing entity constitutes a fundamental jurisdictional flaw, rendering subsequent proceedings void abinitio. Accordingly, the appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
