2021 (7) TMI 1204 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - assessment proceedings were continued in the name of the non-existing company - HELD THAT - The notice under Section 148 was issued in a wrong name. However, close reading of the name of the Company would reveal that the first word 'Sesa' is not alien to the petitioner Company and the very same word is used by the petitioner subsequently. The said mistake was pointed out by the petitioner. The department issued a corrigendum, wherein again they have committed a mistake. The reason stated by the department is that the Company is having the habit of frequently changing their names as well as their registered office and the said conduct of the Company created confusion in the department and therefore, the mistake cannot be a ground to vitiate the entire proceedings. However, in the present case, the Assessing Officer has taken steps to correct the mistake and in letter dated 06.08.2015, the Deputy Commissioner of Income Tax, narrated the entire facts and circumstances for the mistake earlier committed by the department and thereafter, the proceedings were conducted in the correct name of the petitioner and the final assessment order was passed. The petitioner was provided with an opportunity to defend their case in the manner prescribed and there is no dispute between the parties that the assessment order was passed by following the procedures contemplated. This Court is of the considered opinion that, in the present case, the proceedings were continued and the assessment order has already been passed and subsequently, the Writ Petitions are filled, challenging the draft assessment order as well as the final assessment order. In view of the fact that the mistake crept in at the initial stage was identified by the department and subsequently corrected and the proceedings thereafter were continued in the name of the petitioner, there is no reason to interfere with the process of reassessment already completed and it is for the petitioner to redress their grievances, if any exist, by preferring an appeal, in the manner prescribed under the Act. This Court do not find any infirmity or perversity as such, for the purpose of undoing the processes undertaken already, pursuant to the impugned notices issued under Section 148 of the Act and consequently, the Writ Petition stands dismissed.

Summary

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act to a non-existing entity.
2. Timeliness of the notice issued under Section 148.
3. Applicability of Section 292B of the Income Tax Act to correct errors in the notice.
4. Applicability of Section 170 of the Income Tax Act regarding succession of business.
5. Exhaustion of statutory appeal remedies before filing a writ petition.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued to a Non-Existing Entity:
The petitioner challenged the validity of the notice issued under Section 148 of the Income Tax Act, arguing that it was addressed to a non-existing entity. The petitioner, Vedanta Limited, formerly known as Sterlite Industries (India) Limited, had merged with Sesa Goa Limited and subsequently with Vedanta Limited. The notice was issued to the principal officer of Sesa Sterlite Industries (India) Limited, a non-existent entity at the time of issuance. The court referenced the Supreme Court's judgment in Principal Commissioner of Income Tax Vs. Maruti Suzuki India Limited, where it was held that a notice issued to a non-existing entity is fundamentally flawed and invalid. The court found that the notice was indeed issued to a non-existing entity, making the subsequent proceedings invalid.

2. Timeliness of the Notice Issued:
The petitioner contended that the notice under Section 148 was issued on the last date of the limitation period, 31.03.2015, but was communicated and received after the expiry date. The court noted that the notice was acknowledged by the petitioner on 04.04.2015 and franked by the postal department on 01.04.2015, indicating that the issuance was beyond the period of limitation. Therefore, the notice was invalid on the grounds of timeliness as well.

3. Applicability of Section 292B of the Income Tax Act:
The respondent argued that the errors in the notice could be rectified under Section 292B of the Income Tax Act, which allows for the correction of mistakes, defects, or omissions in notices if they are in substance and effect in conformity with the Act. However, the court held that issuing a notice to a non-existing entity is a substantive illegality, not a procedural error, and cannot be cured under Section 292B. The court emphasized that the error was not merely typographical but substantive, affecting the validity of the entire proceedings.

4. Applicability of Section 170 of the Income Tax Act:
The respondent argued that under Section 170, the successor company (Vedanta Limited) would be liable for the tax obligations of the predecessor (Sterlite Industries). The court acknowledged this provision but clarified that it applies when the predecessor cannot be found. In this case, the issue was not about the liability transfer but the validity of the notice itself, which was issued to a non-existing entity. Therefore, Section 170 did not apply to validate the notice.

5. Exhaustion of Statutory Appeal Remedies:
The respondent contended that the petitioner should have exhausted the statutory appeal remedies before filing a writ petition. The court noted that the petitioner had indeed raised substantial legal grounds questioning the validity of the notice and the subsequent proceedings. Given the fundamental nature of the errors, the court found it appropriate to entertain the writ petition directly.

Conclusion:
The court concluded that the notice under Section 148 was invalid as it was issued to a non-existing entity and beyond the limitation period. The errors were substantive and could not be cured under Section 292B. Consequently, all subsequent proceedings, including the assessment order, were invalid and non-est in law. The writ petition was allowed, and the impugned notice and proceedings were set aside. The court dismissed the writ petition and closed the connected miscellaneous petition, with no order as to costs.