The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the revisionary order passed under Section 263 of the Income Tax Act, 1961 in the name of a non-existent entity is void ab initio and cannot give rise to any valid collateral proceeding.
The assessee filed its return of income declaring a total loss of Rs.6,04,635/-. The return was originally processed under Section 143(1) of the Income Tax Act. Thereafter, the case of the assessee was reopened under Section 147 of the Income Tax Act based on information received from Investigation Wing that the assessee is beneficiary of Rs.4,95,00,000/- received from four entities, and accordingly, the income has escaped assessment.
The assessee was converted into a Limited Liability Partnership(LLP) and the same has been intimated to the Assessing Officer (AO) by registered post. Consequently, M/s. Madhuban Dealers Pvt. Ltd. stood wound up and dissolved with a new entity coming into existence as M/s. Madhuban LLP.
The Commissioner of Income Tax (CIT) issued notice under Section 263 of the Income Tax Act in the name of M/s. Dadhuban Dealer Pvt. Ltd. a non-existent entity by observing that assessment framed under Section 144/147 of the Income Tax Act is erroneous and prejudicial to the interest of revenue as the AO has failed to make proper inquiries/verification in terms of clause (a) to explanation (2) of Section 263 of the Income Tax Act in respect of receipt of money amounting to Rs.4,95,00,000/- from four entities.
The Authorized Representative submitted that the notice issued under Section 263 of the Income Tax Act and consequent order passed under Section 263 of the Income Tax Act is invalid and void ab initio on the ground that the original notice 263 of the Income Tax Act and revisionary were in the name of a non-existent entity.
It was submitted that if the original revisionary order itself was illegal, without jurisdiction, the same cannot give rise to any valid collateral proceeding in the second round as well. Therefore, he prayed that the impugned order under Section 263 of the Income Tax Act is illegal and invalid and deserved to be quashed.
The Two-member bench comprising of Rajesh Kumar (Accountant member) and Sonjoy Sarma (Judicial member) held that the revisionary proceedings under Section 263 of the Income Tax Act were initiated by the CIT, Kolkata, and the revisionary order was framed in the name of non-existent entity despite the fact having been brought to the knowledge of the AO and the fact was very much available in the assessment records.
Therefore, the original revisionary order passed under Section 263 of the Income Tax Act was itself void ab initio and invalid. Thus, the appeal of the assessee was allowed.
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