2020 (3) TMI 689 - HC - Income Tax

Reopening of assessment u/s 147 - notice against non-existing company - notice was issued in the name of the amalgamating company - HELD THAT - The jurisdiction assumed by the Assessing Officer to issue notice under Section 148 of the Act to non-existing company is substantive illegality and not the procedural violation of the nature adverted to in Section 292-B of the Act. The substantive defective notice issued against a non-existing company is not curable. On this ground alone, without adjudicating upon the other issues raised by the petitioner inasmuch as the limitation aspect, change of opinion, non-existence of tangible material and non-failure on the part of the assessee disclosing full and true material facts need not be examined. Without going into these aspects, the writ petition requires to be allowed on the ground of issuance of notice under Section 148 of the Act to the non-existing company. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act for assessment year 2011-12, overruling objections, and notice under Section 142(1) of the Act.

Analysis:
The petitioner, a software development company, filed income return for 2011-12. Scrutiny led to assessment under Section 143(3) by the second respondent. Subsequently, amalgamation occurred with another company. The notice under Section 148 challenged by the petitioner was considered beyond the limitation period and as a change of opinion without tangible material, citing the Maruti Suzuki India Ltd. case judgment.

The revenue argued that the department was unaware of the amalgamation during notice issuance. The court highlighted that the department was informed of the amalgamation previously. The revenue attempted to distinguish the Maruti Suzuki case by emphasizing the lack of communication regarding amalgamation in this scenario.

The court carefully considered arguments from both sides. The petitioner's main contention was the issuance of notice to a non-existing company post-amalgamation. Documents indicated departmental knowledge of the amalgamation. The court dismissed the revenue's argument of ignorance due to lack of specific objections raised by the petitioner.

The court referenced the Maruti Suzuki case, emphasizing that the notice issued to a non-existing entity was a substantive illegality, not a procedural defect under Section 292-B of the Act. The court ruled the defective notice against a non-existing company was not curable, leading to the quashing of the notices and overruling of objections.

In conclusion, the court allowed the writ petition, quashing the notices dated 28/3/2018, 29/11/2018, and 11/12/2018 under the Income Tax Act.