2017 (12) TMI 1262 - AT - Income Tax

Validity of reopening of assessment - issue of notice against non-existent firm - Held that - It is an undisputed fact that the assessee firm was converted into a private limited company on 20.02.2008 and the notice for re-opening of the assessment for the Assessment Year 2007-08 was issued on 27.02.2012 in the name of the firm which was non-existent as on the date of issue of notice under notice 148 of the Act. In other words, the proceedings were initiated by the Assessing Officer on a non-existent firm which is null and void. - Decided against revenue

Issues Involved:

1. Validity of re-assessment order under Section 143(3) read with Section 147 of the Income Tax Act.
2. Issuance of notice under Section 148 to a non-existent entity.
3. Application of Section 292B regarding procedural defects.

Issue-wise Detailed Analysis:

1. Validity of Re-assessment Order under Section 143(3) read with Section 147:

The assessee challenged the validity of the re-assessment order dated 28.03.2013, arguing that the re-assessment proceedings initiated within a period of four years in the absence of new tangible material are bad in law. The Tribunal noted that the assessee firm was converted into a private limited company on 20.02.2008, and the notice for re-opening the assessment for the Assessment Year 2007-08 was issued on 27.02.2012 in the name of the firm, which was non-existent as of the date of the notice. Consequently, the proceedings initiated by the Assessing Officer on a non-existent firm were deemed null and void.

2. Issuance of Notice under Section 148 to a Non-existent Entity:

The Tribunal referred to the decision of the Delhi Tribunal in the case of ACIT v. M/s DLF Cyber City Developers Limited, where it was held that the issuance of a notice under Section 148 to a dead person or a non-existent firm and the completion of the assessment therein is bad in law. The Tribunal also cited the Hon'ble Delhi High Court's decision in Spice Entertainment Ltd v. CIT, which considered whether the assessment made on a non-existent person is valid. The High Court held that the assessment made on a non-existent entity is null and void, and such a defect cannot be treated as a mere procedural defect that can be cured under Section 292B.

3. Application of Section 292B Regarding Procedural Defects:

The Tribunal examined whether the provisions of Section 292B could cure the defect of issuing a notice to a non-existent entity. It was observed that Section 292B can only cure technical defects or omissions in returns, assessments, notices, or other proceedings if they are in substance and effect in conformity with the intent and purpose of the Act. However, the framing of an assessment against a non-existent entity/person is a jurisdictional defect, not a procedural irregularity. The Hon'ble Delhi High Court in Spice Entertainment Ltd v. CIT and the Hon'ble Supreme Court in CIT v. Spice Infotainment Ltd. affirmed that such a defect is not curable under Section 292B.

Conclusion:

The Tribunal concluded that the re-assessment framed pursuant to a notice under Section 148 in the name of the assessee firm, which was non-existent as of the date of issue of the notice, is null and void. Consequently, the other contentions/grounds raised by the assessee and the Revenue in both appeals did not survive.

Final Order:

The assessee's cross objection was allowed, and the Revenue's appeal was dismissed. The order was pronounced in the open court on the 20th of December, 2017.

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