The Bombay High Court allowed a writ petition challenging the notice dated 31st March 2021 issued under Section 14 of the Income Tax Act, 1961 on the ground that the notice under Section 14 of the Act was issued in the name of a non-existent company.
The Court observed that once the factum of amalgamation of a company had been brought to the notice of the A.O., the order of assessment would not be merely a procedural defect but would render it void.
Brief Facts:
A notice was issued under Section 148 of the Income Tax Act, 1961. By the notice, the assessment for the year 2017-18 was sought to be reopened, on the ground that the income chargeable to tax had escaped assessment within the meaning of Section 147 of the Act.
In response to the said notice, the Petitioner herein, CLSA India Private Limited, informed the Respondents about the non-existence of the assessee Laysin BPO Pvt. Ltd. on account of its amalgamation with the Petitioner CLSA India Private Limited. The Respondents stood informed and therefore sought the dropping of the proceedings initiated against the said non-existent entity.
It was stated that the factum of the amalgamation was already within the knowledge of the revenue as reflected in the order of assessment dated 16th December 2017 for the assessment year 2015-16 which shows M/s CLSA India Pvt. Ltd. as the successor of M/s Laysin BPO Pvt. Ltd. It is further stated that even for the assessment year 2016-17, the return was filed by the Petitioner in which the factum of the amalgamation of Laysin BPO Pvt. Ltd. was reflected.
Observations of the Court
The Court observed that the notice under Section 14 of the Act which formed the basis for reassessment proceedings was issued in the name of a non-existent entity and even though the Respondents had the knowledge regarding the non-existence of the said entity and despite having been informed, the order of assessment was passed in the name of the Petitioner while at the same time, mentioning the name of the assessee as Laysin BPO Pvt. Ltd.
The Court referred to Spice Entertainment Ltd. V/s. CST [2012 (280) ELT 43 (Delhi)], in which it was held that once the factum of amalgamation of a company had been brought to the notice of the A.O., despite which the proceedings are continued and an order of assessment passed in the name of non-existence company, the order of assessment would not be merely a procedural defect but would render it void.
Further, the Court remarked that the fact that the PAN in the name of the non-existent entity had remained active does not create an exception to dilute in any manner the principles enunciated hereinabove.
The decision of the Court:
The Bombay High Court, allowing the petition, held that the impugned notice dated 31st March 2021, the order of assessment dated 31st March 2022 as also the consequential demand notice, and the penalty notice dated 31st March 2022 are set aside.
Case Title: CLSA India Private Limited vs Deputy Commissioner of Income Tax & Ors.
Coram: Hon’ble Justice Dhiraj Singh Thakur and Hon’ble Justice Kamal Khata
Case no.: WRIT PETITION NO. 2462 OF 2022
Advocate for the Petitioner: Mr. Paras Savla
Advocate for the Respondent No.1: Mr. Suresh Kumar
Read Judgment ;
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