In a major ruling the Uttarakhand High Court ruled that mere activation of PAN number may not give right to revenue to issue notice to non-existent entity.
The challenge in this petition is made to notice under Section148 of the Income Tax Act, 1961 (“the Income Tax Act”) as well as order under Section 148 A(d) of the Income Tax Act for reassessment of Delta Power Solutions India Pvt. Ltd. (“DPS”), for the assessment year 2019-20.
It is the case of the petitioner that the revenue issued notice dated 03.02.2020, under Section 148A of the Income Tax Act against the Transferor company specifying, therein, that the PAN of the Transferor company was active. This notice was replied by the petitioner on 10.02.2020 bringing it to the notice of the revenue the factum of amalgamation.
As also indicating that with effect from the appointed dated, i.e. 01.04.2018, all the transactions entered and appeared on the PAN of Transferor company has been duly accounted by the petitioner’s company being amalgamated company in accordance with the generally accepted accounting policy and other applicable laws.
The counsel for the petitioner submitted that the order impugned is bad in the eyes of law. In view of Section 170 of the Income Tax Act, the Transferor company cannot be assessed for the period post appointed date, as per approved scheme of amalgamation.
It was also submitted that in the process of amalgamation, the Transferor company did not vanish from the appointed date. In fact, it has to carry out the operations. But, they were to be done on behalf of the Transferee company. Whatever transactions were done post appointed date by the Transferor company, they have been accounted, as per accounting practice by the Transferee company and has been duly explained in the notices that were issued by the revenue under Section 148 A of the Income Tax Act.
The counsel also contended that even if PAN of the Transferor company is active post appointed date of amalgamation, it does not give the revenue a right to proceed against him.
The counsel for the revenue submitted that after appointed date, various transactions were made by the PAN of the Transferor company. They were not accounted for it. Therefore, notices were issued for reopening of the assessment for the assessment year 2019-20 and that the reasons have been given in the impugned order as to why the order has been passed.
A Single Bench comprising Justice Ravindra Maithani observed that “Mere activation of PAN number may not give a right to the revenue to issue notice to a non-existent entity. Admittedly, in the instant case, the notice was given to the Transferor company, which is a non-existent entity, after the appointed date, i.e. 01.04.2018. Admittedly, the order under Section 148 A (d) of the Income Tax Act has been passed by the revenue against a non-existent entity.”
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