2023 (6) TMI 428 - AT - Income Tax

Assessment in the name of company dissolved - Whether a procedural defect or mistake curable under Section 292B? - HELD THAT - Having examined the facts of the case, the judgment of Skylight Hospitality LLP 2018 (2) TMI 1093 - DELHI HIGH COURT , Spice Infotainment Ltd. 2011 (8) TMI 544 - DELHI HIGH COURT and Maruti Suzuki India Ltd. 2017 (7) TMI 1045 - ITAT DELHI and Mahagun Realtors Pvt. Ltd. 2022 (4) TMI 347 - SUPREME COURT since the Assessing Officer is in know of the dissolution of the company as established from the Assessment Order itself, we hereby affirm the decision of the ld. CIT(A) quashing the Assessment Orders. Appeals of the Revenue are dismissed.

Summary

Issues Involved:

1. Interpretation of Section 153C of the Income Tax Act.
2. Validity of assessment orders issued in the name of a non-existing entity.
3. Applicability of Section 292B of the Income Tax Act.
4. Legal implications of company dissolution on tax assessments.

Summary:

Issue 1: Interpretation of Section 153C of the Income Tax Act

The Revenue argued that the Ld. CIT(A) erred in law by holding that the six assessment years for which assessments must be made under Section 153C should be reckoned from the assessment year relevant to the previous year in which the satisfaction under Section 153C is recorded, rather than the year in which the search is conducted or requisition is made. The Revenue contended that the Ld. CIT(A) did not consider the amendment effective from 01.04.2017, which clarifies that assessments should be for six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made. The Revenue also argued that the Ld. CIT(A)'s reasoning would lead to a peculiar situation where some assessment years prior to the search would be left out, frustrating the scheme of assessment under Section 153C read with Section 153A.

Issue 2: Validity of Assessment Orders Issued in the Name of a Non-Existing Entity

The Ld. CIT(A) quashed the assessment orders, holding that assessments cannot be conducted on a non-existing entity. The Revenue argued that the assessment order was passed in the name of the successor company, M/s. BJN Holdings (I) Ltd., and not the dissolved entity, BJN Holdings Ltd. The Revenue cited the Supreme Court judgment in the case of Maruti Suzuki India Ltd., which held that assessments in the name of a dissolved company are void ab initio. The Revenue also cited the case of Principal Commissioner of Income Tax vs. Mahagun Realtors Pvt. Ltd., where the Supreme Court held that the conduct of the assessee and the factual context could determine the validity of assessments in the name of a dissolved entity.

Issue 3: Applicability of Section 292B of the Income Tax Act

The Revenue argued that even if the assessment order was framed incorrectly in the name of the amalgamating company, it would amount to a "mistake, defect, or omission" curable under Section 292B, which allows for the correction of procedural defects. The Revenue cited the case of Skylight Hospitality LLP, where the Supreme Court held that a clerical mistake in the name of the entity could be corrected under Section 292B. However, the tribunal found that the notice under Section 143(2) was issued to a non-existent company, which is a substantive illegality and not a procedural violation curable under Section 292B.

Issue 4: Legal Implications of Company Dissolution on Tax Assessments

The tribunal examined the applicability of Section 170 of the Income Tax Act, which deals with succession to business otherwise than on death. The tribunal found that the assessing officer was informed of the amalgamation, yet issued the jurisdictional notice to the non-existent amalgamating company. The tribunal upheld the decision of the Ld. CIT(A) to quash the assessment orders, citing the Supreme Court judgment in Maruti Suzuki India Ltd., which held that assessments in the name of a non-existent entity are void ab initio.

Conclusion:

The tribunal affirmed the decision of the Ld. CIT(A) to quash the assessment orders, holding that the assessments cannot be conducted on a non-existing entity and that the procedural defects cited by the Revenue cannot cure the substantive illegality of issuing notices to a non-existent company. All appeals of the Revenue were dismissed.