2021 (12) TMI 714 - HC - Income Tax

Validity of reopening of assessment u/s 147 - notice against company non existing - notice to company had ceased to exist having been amalgamated with petitioner - HELD THAT - The notice issued under Section 148 of the said Act to a non existing company is bad in law and therefore, even the order disposing of the objections passed will also be bad in law. The Principal Chief Commissioner is directed to hold an enquiry against the concerned officers as to why despite being brought to their notice that Vadinar Power Company Limited is a non existing entity having been amalgamated with petitioner notices were continued to be issued in the name of Vadinar Power Company Limited and even the order disposing of the objections came to be passed in the name of Vadinar Power Company Limited resulting in the notice under Section 148 of the said Act itself being quashed. The Principal Chief Commissioner, after holding an enquiry, may take such action as required against the erring officers, if found guilty.

Summary

Issues:
Impugning order rejecting objections for Assessment Year 2014-2015 under Section 148 of the Income Tax Act due to notice issued to a non-existing company.

Analysis:
The petitioner challenged an order dated 4th December 2019, which rejected objections raised for the Assessment Year 2014-2015 under Section 148 of the Income Tax Act. The main ground of challenge was that the notice was issued to a non-existing company. The petitioner argued that as per previous court judgments, including one by the Apex Court and a recent one by the High Court, such notices are bad in law. The petitioner provided evidence of amalgamation between Vadinar Power Company Limited and the petitioner, formerly known as Essar Oil Limited. Despite clear notifications of the amalgamation, the respondents continued to issue notices to the non-existing company, Vadinar Power Company Limited. The petitioner repeatedly informed the authorities about the amalgamation, even providing details of the merged entity, Nayara Energy Limited. However, the notices and the order rejecting objections were consistently issued in the name of the non-existing company, Vadinar Power Company Limited.

The High Court found that issuing a notice under Section 148 of the Income Tax Act to a non-existing company was indeed bad in law. Therefore, the order rejecting objections was also deemed invalid. The court allowed the petition and issued a Writ of Certiorari to quash the notice dated 31st March 2019 and the order dated 4th December 2019. Additionally, the Principal Chief Commissioner was directed to conduct an inquiry against the officers responsible for continuing to issue notices in the name of the non-existing company despite being informed of the amalgamation. The inquiry was to be completed within six weeks, and necessary action was to be taken against the erring officers. A copy of the order was to be sent to relevant authorities for information and further action. The petition was disposed of based on the above findings and directions.