The division bench of the Delhi High Court held that re-assessment proceedings under sections 147/148 of the Income Tax Act cannot be initiated against a non-existing entity which ceases to exist by virtue of amalgamation order under section 394 of the Companies Act.
The bench was hearing a writ petition filed by the assesse-Company, BDR Builders And Developers Pvt. Ltd, against the notice issued under s. 147 of the Act. the petitioners, relying upon the decision in Omaxe Limited v. Assistant Commissioner of Income Tax, contended that the notice is void by virtue of sections 245C, 245D(4) and 245-I of the Act. it was also contended that re-assessment notice is unsustainable because it was issued to M/s. BDR Builders and Developers Pvt. Ltd. which was no longer in existence at that time.
The bench noticed that in Omaxe Limited v. Assistant Commissioner of Income Tax, it was held that where a Settlement Commission passes its final order in respect of proceedings in any given order, the matters are conclusive and final and it cannot be reopened under section 147 of the Act.
It was further noted that the impugned notice was issued against a non-existent entity i.e. M/s. Rishi Promoters which had ceased to exist by virtue of order of the same Court.
“The date of its amalgamation was in fact earlier. Apparently, the respondent-revenue was aware of this and despite that it proceeded to issue the impugned notice. The judgment in Spice Entertainment (supra) and Dimension Apparels (P)Limited (supra), though rendered after the final assessment was completed, are clear that such notice and proceedings emanating from it are unsustainable. Rustagi Engineering Udyog (P) Ltd. (supra) takes the logic further and holds that notice issued under section 147 of the Act in respect of an entity which ceases to exist by virtue of amalgamation order under section 394 of the Companies Act, would also be illegal and unsustainable.”
Read the full text of the Judgment below.
