2022 (5) TMI 859 - HC - Income Tax

Reopening of assessment u/s 147 - notice in name of non-existing entity, which had merged with the Petitioner company - Responded as stated in the present case, the impugned assessment order has been passed in the name of Jindal Dyechem Industries Pvt. Ltd. (successor to Lumax Caplease Private Limited) i.e., the amalgamated entity and the issue as to whether income has escaped assessment or not is a question of fact which the petitioner can agitate in appeal proceedings. HELD THAT - Having heard learned counsel for the parties, this Court is of the view that even if the submission of learned counsel for the Respondents is accepted, then also the impugned assessment order is liable to be set aside as the Petitioner had no opportunity to deal with or respond to the show cause notice dated 28th March, 2022 as it had been issued after the date and time of compliance had expired. Consequently, the impugned assessment order is set aside on the short ground of being violative of principle of natural justice and the matter is remanded back to the Assessing Officer for fresh adjudication.

Summary

Issues:
Challenge to reassessment notice under Section 148 of the Income Tax Act, 1961 for the assessment year 2015-16 and challenge to assessment order passed under Section 147 read with Section 143(3) of the Act based on the entity's merger, violation of natural justice, and compliance date discrepancy.

Analysis:
The petitioner challenged the reassessment notice and the assessment order on the grounds that they were issued in the name of a non-existing entity, which had merged with the petitioner company. Citing the decision in Pr. Commissioner of Income Tax v. Maruti Suzuki India Limited, it was argued that issuing a notice to a non-existing company is a substantive illegality. The income alleged to have escaped assessment had already been offered for tax by the amalgamated entity in a previous assessment order.

The petitioner further contended that the assessment order was issued in violation of the principles of natural justice as they were not given an opportunity to be heard. Additionally, a discrepancy was highlighted regarding the compliance date set prior to the issuance of the notice. The court acknowledged these arguments and held that the assessment order was liable to be set aside due to the petitioner not having an opportunity to respond to the show cause notice within the stipulated time.

The respondent accepted the notice and argued that the assessment order was passed in the name of the amalgamated entity. They suggested that the issue of whether income had escaped assessment could be addressed in appeal proceedings. However, the court found that even if the respondent's submission was accepted, the assessment order would still be set aside for violating the principle of natural justice.

Consequently, the court set aside the impugned assessment order and remanded the matter back to the Assessing Officer for fresh adjudication. The petitioner was directed to file a response to the show cause notice within two weeks, and the Assessing Officer was instructed to decide the matter after a hearing, in accordance with the law.

In conclusion, the writ petition and applications were disposed of, leaving the rights and contentions of all parties open for further proceedings.