In a recent ruling, the Division Bench of the High Court of Bombay has held that an order for re-assessment passed against a non-existing entity is out of Jurisdiction. For this reason, the Court invalidated both the notice and order passed against the assessee while allowing the Writ petition filed against the Revenue.
The Assessing Officer issued a Notice u/s 148 of the Income Tax Act, 1961 seeking to reopen the Assessment for A. Y. 2008–09 to the Assessee, M/s. Addler Security Systems Pvt. Ltd. who discontinued the business. On receipt of the reopening notice, the Chartered Accountant of the erstwhile M/s. Addler Security Systems Pvt. Ltd., had originally accepted the same but immediately thereafter by letter dated 5th May, 2015 pointed out that the company M/s. Addler Security Systems Pvt. Ltd. is no longer in existence as it has been dissolved. Consequent thereto, the Assessing Officer has also issued a notice u/s 142(1) of the Act to one of the petitioner who was the Director of erstwhile M/s. Addler Security Systems Pvt. Ltd. (since dissolved). In response, the Director of the erstwhile M/s. Addler Security Systems Pvt. Ltd., pointed out that the company has already been dissolved and it is no longer in existence. Notwithstanding the above, the Assessing Officer by an order dated 28th March, 2016 has passed an order 143(3) r/w Section 147 of the Act framing the assessment in case of M/s. Addler Security Systems Pvt. Ltd. (since dissolved) for Assessment Year 2008-09. The same was challenged before the High Court through a Writ Petition.
The division bench comprising of Justice M.S Sanklecha and Justice A K Menon struck down both the impugned notice and order on sole ground that the same was issued in respect of a non-existing entity.
The Court was observed that “the impugned notice has been issued in respect of a non existing entity as M/s. Addler Security Systems Pvt. Ltd., which stands dissolved, having been struck off the Rolls of the Registrar of Companies much before its issue. Consequently, the assessment has been framed also in respect of the non existing entity. This defect in issuing a reopening notice to a non existing company and framing an assessment consequent thereto is a issue which goes to the root of the jurisdiction of the Assessing Officer to assess the non existing company. Thus, prima facie, both the impugned notice dated 24th March, 2015 and the Assessment Order dated 28th March, 2016, are without jurisdiction.”
Read the full text of the order below.
