2021 (8) TMI 1260 - HC - Income Tax

Reopening of assessment u/s 147 - Notice in the name of a non-existing company - notice in the name of company merged - HELD THAT - As the notice issued under Section 148 of the Act to a non-existing company is bad in law. Petition therefore is allowed. Whether clerical error which is rectifiable under Section 292-B? - It cannot be a clerical error because in the affidavit-in-reply it is admitted that the order dated 7th November 2014 of this Court with respect to the merger of ECD Electrons and Electrolysis Pvt. Ltd. into Lenient Finvest Pvt. Ltd. and the subsequent order of Lenient Finvest Pvt. Ltd. merging with petitioner under an approved scheme cleared by the National Company Law Tribunal Mumbai was available with respondents still respondents persisted with issuing the notice to ECD Electrons and Electrolysis Pvt. Ltd. a non existent company. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 due to issuance to a non-existing respondent company.

Analysis:
The petitioner sought to set aside a notice dated 31st March 2019 and an order dated 13th September 2019 issued under Section 148 of the Income Tax Act, 1961. The petitioner contended that the notice was served on a non-existing respondent company, as the company had undergone mergers resulting in its dissolution. It was argued that the notice was legally invalid based on precedents, including the case of Principal Commissioner of Income Tax, New Delhi Vs. Maruti Suzuki India Ltd. The petitioner highlighted that the company in question had ceased to exist due to mergers approved by the National Company Law Tribunal. The Assistant Commissioner of Income Tax had also issued an order against the petitioner, recognizing the merger and change in entity. Despite this knowledge, the respondents proceeded with the notice to the non-existent company. The respondents claimed it was a clerical error, but the court disagreed, emphasizing the awareness of the merger orders. The court agreed with the petitioner's position, citing the Maruti Suzuki India Ltd. case, and declared the notice to the non-existing company as legally flawed.

The court found that the notice issued under Section 148 of the Act to a non-existing company was indeed invalid in law. Consequently, the petition was allowed, and the impugned notice and order were quashed and set aside. The court issued a Writ of Certiorari under Article 226 of the Constitution of India to examine the legality of the notice and order, leading to their cancellation. The petition was disposed of with no order as to costs.