2018 (3) TMI 1879 - AT - Income Tax

Validity of reopening of the assessment - Order u/s 143(3) passed in the name of a non-existent entity - HELD THAT - In the present case, it is evident that the assessment order, notice of demand, confirmation and penalty notices are also in the name of the entity which does not exist as on that date. Accordingly, in view of the above settled position of law, hold that the reassessment proceedings and the assessment order passed in consequence thereto is bad in law and the same is quashed.

Summary

Issues Involved:
1. Validity of reopening of assessment and assessment order passed in the name of a non-existent entity.

Analysis:
The appeal was filed against the order passed by the CIT(A) after the assessment was reopened due to an alleged escapement of income. The AO made an addition to the assessee's income, which led to the appeal before the CIT(A). The CIT(A) dismissed the appeal on the grounds of reopening of assessment being bad in law and on merit. Subsequently, the assessee appealed against the CIT(A)'s decision, raising 10 grounds of appeal. One of the key issues raised was regarding the reassessment being framed on a non-existent entity, Nirvana Lifestyle Private Limited, which had amalgamated with another company and ceased to exist legally.

The Ld. AR argued that the assessment proceedings were flawed as the notice under Section 148 was issued in the name of a company that no longer existed, citing a Delhi High Court order regarding the amalgamation of the company with another entity. The Ld. AR contended that the entire process of issuing the notice and the reassessment order was legally invalid due to this discrepancy. The Ld. AR further referenced a Supreme Court judgment to support the argument that assessments on non-existing entities cannot be cured by procedural provisions.

The Ld. DR, on the other hand, asserted that since the assessee company received the amount in question during the relevant year, the assessment should be upheld regardless of the subsequent merger and non-existence of the company at the time of reassessment. However, the ITAT Delhi, in its detailed analysis, found that the notice for reopening and the subsequent assessment were indeed issued in the name of a non-existent entity, Nirvana Lifestyle Pvt. Ltd., which had amalgamated with another company as per a Delhi High Court order. The tribunal concluded that the proceedings were legally flawed and ordered the quashing of the reassessment. The ITAT relied on established legal principles and the Supreme Court's judgment to support its decision.

In light of the above findings, the ITAT allowed the appeal of the assessee, quashed the reassessment proceedings, and held that the assessment order passed in consequence was invalid. As a result, the other grounds raised by the assessee were deemed academic and not adjudicated upon. The detailed analysis and legal reasoning provided by the ITAT led to the favorable outcome for the assessee in ITA No. 4793/DEL/2017, with the order pronounced on 09.03.2018.