The Karnataka High Court has quashed the Income Tax reassessment notice issued to non-existing entities. The court held that the authorities may examine contentions raised on merits after approval of the scheme of amalgamation and assessment orders have already been passed.
Informatica Business Solutions Private Limited, the petitioner/assessee has questioned the validity of the order passed under Section 148A(d) of the Income Tax Act, 1961, as well as the notice under Section 148. A notice under Section 148A(b) has been issued in the name of M/s. Allsight Software India Private Limited by notice dated February 28, 2024, relating to the assessment year 2020–21.
The entity has ceased to exist by virtue of confirmation of the order of scheme of amalgamation dated October 28, 2019, showing the appointed date from which the scheme would be effective as April 1, 2019.
The petitioner contended that under the scheme of amalgamation, there would be a transfer of liability, and even otherwise, returns have been filed as regards the new entity, taking note of the income of M/s. Allsight Software India Pvt. Ltd. as well, and no prejudice is caused.
The single bench of Justice S. Sunil Dutt Yadav has observed that the notice under Section 148A(b) of the Act was issued on February 28, 2024, with respect to the assessment year 2020–21. The scheme of amalgamation has fixed the appointed date as April 1, 2019, and the entity to which the notice is issued is deemed not to be in existence.
While quashing the order and the notice, the court held that the authorities may examine contentions raised on merits as well, including that the income of M/s. Allsight Software India Pvt. Ltd. has been subsequently declared in the return of income filed in the name of the petitioner after approval of the scheme of amalgamation and assessment orders have already been passed.
The court held that the liberty is reserved to the department to take necessary action as is permissible in law if circumstances are so made out as regards the subject matter of notice under Section 148A(b) as is permissible in law.
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