2017 (8) TMI 42 - HC - Income Tax

Validity of reopening of assessment - assessment against non existent entity - amalgamation scheme adopted - Held that - The proceedings under Section 148 were itself void ab initio for the simple reason that on that day VBPPL was not in existence as a result of the order dated 20th February, 2013 of the High Court approving its amalgamation with the Petitioner with effect from 1st April, 2012. The question of revival of such proceedings at a later point in time, with there being no change to the legal position regarding VBPPL having ceased to exist, does not arise. The mere fact that prior to 20th February, 2013 (being the date of the order approving the amalgamation) VBPPL and/or the Petitioner may have responded to such notices, will to make a difference to the said legal position. The facts show that after 20th February 2013, the Petitioner lost no opportunity in reminding the AO at every stage that VBPPL no longer existed in the eye of law. Despite being made aware of this legal position, the AO persisted in continuing the proceedings against VBPPL. A second aspect of the matter is that the reassessment proceedings under Section 147 were barred by limitation since limitation for framing the assessment under Section 143(3) read with Section 147 of the Act expired on 31st March, 2014. On this ground also, the question of revival of those proceedings by the impugned letter dated 14th March, 2016 was bad in law. Thus reopning order quashed - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Legality of the proceedings initiated against a non-existent entity post-amalgamation.
3. Applicability of Section 153A and its impact on the abatement of proceedings under Section 148.
4. Limitation period for reassessment proceedings under Section 147 of the Act.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The writ petition challenges the notice dated 3rd April 2012 issued under Section 148 of the Act. The court observed that the notice was issued to Verma Buildtech & Promoters Private Limited (VBPPL), which had already amalgamated with the petitioner, BDR Builders and Developers Private Limited (BBDPL), effective from 1st April 2012. The court held that the notice was issued to a non-existent entity, making it void ab initio. The court referred to the case of Spice Entertainment Ltd. v. CIT, where it was held that the assessment in the name of a non-existing entity is void.

2. Legality of the proceedings initiated against a non-existent entity post-amalgamation:
The court noted that the amalgamation was approved by the High Court on 20th February 2013, and VBPPL ceased to exist from 1st April 2012. Despite this, the Department continued to issue notices and conduct proceedings against VBPPL. The court emphasized that any notices issued to the transferor company (VBPPL) after the amalgamation should be responded to by the transferee company (BBDPL). However, this did not mean that proceedings initiated against the transferor company before the amalgamation could be continued against the transferee company.

3. Applicability of Section 153A and its impact on the abatement of proceedings under Section 148:
The court observed that the search and seizure operation under Section 132(1) of the Act was conducted against VBPPL, a non-existent entity, on 3rd January 2014. Consequently, the proceedings under Section 153A of the Act were void ab initio. Therefore, the question of invoking Section 153A(2) to revive the abated reassessment proceedings under Section 147/148 did not arise. The court reiterated that the proceedings under Section 148, initiated with the notice dated 3rd April 2012, were void from the beginning since VBPPL ceased to exist due to the amalgamation.

4. Limitation period for reassessment proceedings under Section 147 of the Act:
The court highlighted that the reassessment proceedings under Section 147 were barred by limitation, as the period for framing the assessment under Section 143(3) read with Section 147 expired on 31st March 2014. The court held that the revival of these proceedings by the letter dated 14th March 2016 was legally untenable.

Conclusion:
The court quashed the notice dated 3rd April 2012 and the letter dated 14th March 2016 issued by the Assessing Officer under Section 148 of the Act. The writ petition was allowed, and the reassessment proceedings against the petitioner for the assessment year in question were deemed invalid. The court emphasized that the proceedings initiated against a non-existent entity post-amalgamation were void and that the limitation period for reassessment had expired, rendering any revival of such proceedings legally unsustainable.

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