A division bench of the Delhi High Court recently held that search warrant and notice for re-assessment proceedings issued under section 148 of the Income Tax Act, 1961 is invalid if the same was issued to a non-existent entity.
The petitioners, BDR Builders & Developers Pvt Ltd, engaged in real estate activities, approached the High Court against the re-assessment order passed against them by the Assessment officer. They amalgamated with a Company named Verma Buildtech & Promoters Private Limited (VBPPL) with the approval of the High Court.
As per the scheme of amalgamation, any notices to the Transferor companies under the Act that may be issued hereafter will be responded to by the Transferee company (Petitioners).
Subsequent to amalgamation, the department conducted search and seizure which was followed by issuing notice for re-assessment in the name of VBPPL.
Before the High Court, the petitioners contended that the warrant issued and the panchnama drawn up in the name of VBPPL was non est since the entity in whose name it was issued was non-existent.
A bench of Justices S. Muralidhar and Prathibha M Singh agreed with the submissions of the petitioners and held that not only was the initial notice under Section 148 of the Act issued to a non-existent entity even the search under Section 153A took place against a non-existent entity. “Both the warrant of authorisation and the panchnama were drawn in the name of VBPPL on 3rd January, 2014 by which date even the order of the High Court approving the amalgamation of the VBPPL with the Petitioner had been passed. Clearly, therefore, the entire proceedings under Section 153A of the Act were void ab initio. Therefore, the question of invoking Section 153 A (2) of the Act to revive the abated re-assessment proceedings under Section 147/148 of the Act did not arise.”
Read the full text of the Judgment below.
