The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) struck down a reassessment proceeding initiated against a non-existent company, declaring it void ab initio and had no legal validity.
The Income tax department issued a reassessment notice under Section 148 of the Income Tax Act, 1961, to M/s Modern Trading Business Pvt—Ltd on March 21, 2021. The notice was to reopen the company’s tax assessment for the 2013-14 Assessment Year. M/s Modern Trading Business Pvt Ltd had ceased ro exist following its merger with Carron Investments Pvt. Ltd. following an order by the National Company Law Tribunal ( NCLT ) dated july 19, 2012.
The merger was communicated to the income tax department via letter for a request to deactivate the old PAN associated with Modern Trading. Despite being aware of this, the Assessing Officer (AO) proceeded to issue a reassessment notice and, later on an order under Section 147 against the assessee Carron Investments Pvt Ltd, treating it as the successor to Modern Trading.
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The assessee challenged the validity of this notice and relied on the Supreme Court ruling in PCIT v. Maruthi Suzuki, which stated that assessments made on non-existent entities are jurisdictionally invalid and cannot be rectified under Section 292B of the Act. This was countered by the revenue stating that the final assessment order was passed in the correct name and any error in the notice was a defect and could be corrected.
In an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)], the CIT(A) ordered the setting aside of the order as it found merits in the assessee’s submissions. Against this, the Revenue moved to the ITAT, where the tribunal, after hearing both sides, rejected the Revenue’s case. The tribunal emphasised that the notice under Section 148 lays the foundation for reassessment and must be legally valid.
The assessment was declared void and unenforceable because the notice was issued to a non-existent entity. The ITAT relied on the Bombay High Court’s ruling in Uber India Systems Pvt Ltd and asserted that jurisdictional defects cannot be overlooked as technical lapses.
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The two-member bench consisting of Sandeep Singh Karhail (Judicial Member) and Om Prakash Kant (Accountant Member) upheld the decision of the CIT(A). As a result, the revenue’s appeal was dismissed, and the court upheld that the assessment proceedings lacked solid legal reasoning.
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