The Bombay High Court (HC) in its recent judgement has held that notice issued under section 148 of the Income Tax Act, 1961 towards a non-existent Company is not valid.
CLSA India Private Limited, the Petitioner challenged the notice dated 31st March 2021 issued under Section 148 of the Income Tax Act 1961 (“the Act”) as also the order of assessment passed under Section 147 r/w Sections 144 and 144B of the Act on the ground that the notice under Section 148of Act was issued in the name of a non-existent company.
A notice under Section 14 of the Income Tax Act was issued in the name of Laysin BPO Pvt. Ltd. proposing to reopen the assessment on the ground that income had escaped assessment within the meaning of Section 147 of the Income tax Act.
The Petitioner, CLSA India Private Limited informed the Respondents about the non-existence of the assessee Laysin BPO Pvt. Ltd. on account of its amalgamation with the Petitioner CLSA India Private Limited.
It was stated that the factum of the amalgamation was already within the knowledge of the revenue as reflected in the order of assessment dated 16th December 2017 for the assessment year 2015-16 which shows M/s CLSA India Pvt. Ltd. as the successor of M/s Laysin BPO Pvt. Ltd.
Further stated that even for the assessment year 2016-17F return was filed by the Petitioner in which the factum of the amalgamation of Laysin BPO Pvt. Ltd. was reflected. The Petitioner states that it filed a response to the e-verification informing the Respondents yet again regarding the non-existence of the entity on account of its merger with the Petitioner.
It was evident that the notice under Section 148 of the Income Tax Act which forms the basis for reassessment proceedings was issued in the name of a non-existent entity and even though the Respondents had the knowledge regarding the non-existence of the said entity and despite having been informed the order of assessment was passed in the name of the Petitioner while at the same time mentioning the name of the assessee as Laysin BPO Pvt. Ltd.
In the case of Spice Entertainment Ltd. Vs. CST2, it was held that once the factum of amalgamation of a company had been brought to the notice of the “A.O.F despite which the proceedings are continued and an order of assessment passed in the name of non-existence company the order of assessment would not merely be a procedural defect but would render it void.”
A two-member bench comprising Justice Dhiraj Singh Thakur and Justice Kamal Khataf viewed that the PAN in the name of the non-existent entity had remained active does not create an exception in favour of the revenue to dilute in any manner the principles enunciate. While allowing the Writ petition the Court set aside the impugned notice and penalty notice.
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