2024 (11) TMI 650 - HC - Income Tax

Reopening of the assessment against non existing entity - as per revenue assessee company was amalgamated with GPT Ventures Pvt. Ltd. was never disclosed to the assessing officer and they came to know only on 2024 - HELD THAT - Revenue submission appears not to have been raised any such fact before the learned Tribunal. Nonetheless, we considered the said submission and we found the said submission to be factually incorrect as the assessing officer was aware of the amalgamation even at the time when proceedings were initiated under Section 147 of the Act pursuant to the notice dated 6.12.2018. Apart from that in the reasons to believe which was appended to the notice the assessing officer has specifically referred to the details regarding the amalgamation. Therefore, the submission of the revenue cannot be accepted as it is factually incorrect. Assessee had filed the return in the name of the company prior to its amalgamation - This issue was also considered by the learned Tribunal and after taking note of the decision of this Court in the case of I. K. Agencies (P) Ltd. 2011 (3) TMI 690 - CALCUTTA HIGH COURT the contention was rejected since the fact that the real assessee subsequently filed its return with objection that such notice is invalid cannot cure the defect which goes to the root of the jurisdiction to reopen the proceedings. Further it was held that the said provision cannot cure the defect of the nature involved in the case where no notice at all has been issued by the real assessee responsible for payment of its dues. As in the instant case as pointed out earlier the fact of amalgamation was well within the knowledge of the assessing officer as early as in the year 2018. So far as filing of return in the name of the assessee company prior to its amalgamation was an event which could not be avoided by the assessee and in any event mere filing of such return cannot be taken to be a ground to cure the inherent defect which goes to the root of the matter. Decided against revenue.

Summary

Issues:
Validity of reopening assessment due to notice sent to non-existing entity, Curable defects under section 292B of the Income Tax Act, 1961, Reopening assessment in the name of amalgamated company, Filing return in the name of amalgamated company, Application of judgments in similar cases.

Analysis:
The High Court of Calcutta considered an appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal. The main issues raised included whether the Tribunal erred in granting relief to the assessee without considering various factors. These factors included the failure to inform the Assessing Officer (AO) about the scheme of amalgamation, not applying for deactivation of PAN of the amalgamating company, filing the return in the name of the amalgamated company, and the technical defect in issuing notices. The Court focused on the validity of reopening the assessment, particularly in cases where notices were sent to non-existing entities.

The revenue contended that the amalgamation of the assessee company was not disclosed to the AO until a later date. However, the Court found that the AO was aware of the amalgamation even before initiating proceedings under Section 147, as details regarding the amalgamation were mentioned in the reasons to believe attached to the notice. Therefore, the revenue's submission was deemed factually incorrect.

Regarding the issue of filing the return in the name of the company prior to its amalgamation, the Court referred to precedents and held that such actions could not cure defects that affected the jurisdiction to reopen proceedings. The Court emphasized that the failure to issue notices by the real assessee responsible for payment of dues could not be cured by subsequent actions, such as filing returns with objections.

The Court also considered the judgment in PCIT Vs. Mahagun Realtors Pvt. Ltd. provided by both parties. It was noted that in the cited case, the assessee had suppressed the fact of amalgamation, unlike the present case where the AO was aware of the amalgamation early on. Therefore, the Court concluded that the judgment in the cited case did not apply to the circumstances of the present case.

Ultimately, the Court dismissed the appeal, answering the substantial questions of law against the revenue. The judgment highlighted the importance of disclosing relevant information to the AO and the limitations on curing defects that impact the jurisdiction to reopen assessments.