Order u/s 148A(d) passed against non-existent entity is bad in eyes of law. Mere activation of PAN not give right to issue notice to a non-existent entity
In a recent judgment, Hon’ble High Court has held that Order u/s 148A(d) passed against non-existent entity is bad in eyes of law. Mere activation of PAN not give right to issue notice to a non-existent entity
ABCAUS Case Law Citation:
ABCAUS 3989 (2024) (05) HC
Important Case Laws relied upon:
PCIT Vs. Maruti Suzuki India Ltd., 416 ITR 613 SC
Saraswati Industrial Syndicate Ltd. Vs. CIT, 186 ITR 278 SC
Rustagi Engineering Udyog (P.) Ltd. Vs. DCIT 67 taxmann.com 284 (Del.)
Marshall Sons & Co. (India) Ltd. Vs. Income-tax Officer, [1996] 89 Taxman 619 (SC)
Principal Commissioner of Income tax Vs. Intas Pharmaceuticals Ltd. [2023] 151 taxmann.com 448 (SC)
Dhirendra Bhupendra Sanghvi Vs. Assistant Commissioner of Income Tax and others
Coffee Day Resorts (MSM) Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax and Another
In the instant case, the assessee had challenged the notice under Section148A of the Income Tax Act, 1961 (“the Income Tax Act”) as well as order under Section 148A(d) of the Income Tax Act dated 20.03.2023 for re-assessment.
The case of the petitioner was that one company and the petitioner’s Company proposed a scheme for amalgamation. The amalgamation processes was approved by National Company Law Tribunal (“NCLT”).
The proposed scheme of amalgamation was also informed to the revenue. The revenue also participated in the amalgamation proceedings before the NCLT. Post approval by the NCLT, the revenue was further informed.
But, it is the case of the petitioner that the revenue issued notice under Section 148A of the Income Tax Act against the Transferor company specifying, therein, that the PAN of the Transferor company was active.
This notice was replied by the petitioner bringing it to the notice of the revenue the factum of amalgamation. As also indicating that with effect from the appointed dated, i.e. 1st April of the financial year, all the transactions entered and appeared on the PAN of Transferor company has been duly accounted by the petitioner’s company being amalgamated company in accordance with the generally accepted accounting policy and other applicable laws.
The revenue further gave notices on two occasions to the Transferor company under Section 148A of the Income Tax Act. They were replied by the petitioner reiterating the same stand with further elaborating the facts.
Thereafter, the order under Section 148A(d) of the Income Tax Act has been passed for reopening of the assessment of the Transferor Company for the assessment year in question which was post amalgamation.
Before the Hon’ble High Court, the Revenue admitted that the factum of amalgamation had duly been informed to them. However, the case of the Revenue was that the Transferor company had become non-existent post amalgamation, but the PAN of assessee lying a-float and was active due to the non-action/failure on the part of the assessee in the surrendering the PAN.
The revenue submitted that after appointed date, various transactions were made by the PAN of the Transferor company which were not accounted for it. Therefore, notices were issued for reopening of the assessment. It was submitted that the reasons have been given in the impugned order as to why the order has been passed.
The Revenue submitted that it may reopen the assessment with regard to the new entity, as per law. In support of its contentions, the Revenue placed reliance on the judgment of the Hon’ble Karnataka High Court
The Petitioner submitted that a notice against a non-existent entity is bad and this law is well settled in a catena of decisions. It was further submitted that even if PAN of the Transferor company was active post appointed date of amalgamation, it does not give the revenue a right to proceed against it.
The Hon’ble High Court observed that the Hon’ble Supreme Court observed that there cannot be any doubt that, when two companies amalgamate and merge into one, the transferor-company loses its entity as it ceases to have its business.
The Hon’ble High Court further observed that Hon’ble Delhi High Court observed that the impugned notices issued under Section 148 of the Act were invalid as having been issued to an Assessee that had ceased to exist, must be accepted. The impugned notices are, therefore, liable to be set aside on this ground alone.
The Hon’ble High Court observed that the Hon’ble Bombay High Court had held that stand of the revenue that the reassessment was justified in view of the fact that the PAN in the name of the non-existent entity had remained active does not create an exception in favour of the revenue to dilute in any manner the principles enunciated by the Apex Court.
The Hon’ble High Court further noted that the scheme of amalgamation was sanctioned by the NCLT. The petitioner did inform the revenue of it. In view of the settled law, from the appointed date, under the scheme of amalgamation, the existence of the Transferor company had merged into the Transferee company. Mere activation of PAN number may not give a right to the revenue to issue notice to a non-existent entity.
The Hon’ble High Court opined that admittedly, in the instant case, the notice was given to the Transferor company, which was a non-existent entity, after the appointed date. The order under Section 148A(d) of the Act had been passed by the revenue against a non-existent entity. Therefore, the order was bad in the eyes of law.
Accordingly, the Hon’ble High Court allowed the petition and quashed the impugned notice and order passed under Section 148(A)(d) of the Act.
Download Full Judgment Click Here >>
- Order not in conformity of Faceless Assessment Scheme if not est? – ITAT remands case
- Extension of the validity of FCRA registration certificates till 30.09.2024
- Section 68 to 69B applicable only if assessee is required to maintain books of accounts
- When show cause notice proposed addition u/s 68, addition can not be made u/s 69A
- AO directed to consider belated reply due to illegible copy of SCN u/s 148A(b)
 passed against non-existent entity is bad in eyes of law – High Court){kind=link}