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2024 (12) TMI 1329 - AT - Income TaxNotice u/s 148 as issued on a non-existent entity - whether curable defect u/s 292B - HELD THAT - Hon ble Jurisdictional High Court in Uber India Systems Pvt. Ltd. 2024 (10) TMI 1001 - BOMBAY HIGH COURT decided the writ petition, challenging the issuance of notice u/s 148A(b), order passed u/s 148A(d) and subsequent notice issued u/s 148, in favour of the taxpayer on the basis that there was neither a legal basis nor jurisdiction with the Revenue to issue such notices and order on non-existing entity. Accordingly, the Hon ble Jurisdictional High Court held such notices to be illegal, invalid and non-est. The present case, it is discernible from the record that the Revenue has not disputed the fact that the notice under section 148 of the Act was issued on a non-existing entity, even after the intimation by the assessee regarding the fact of the merger. Revenue has emphasized on the fact that such an error is a curable defect u/s 292B of the Act and since the assessment order has been passed in the correct name, therefore, the assessment has rightly been made in the present case. Decided in favour of assessee.
Issues Involved:
1. Validity of notice issued under section 148 of the Income Tax Act on a non-existent entity. 2. Applicability of section 292B to cure defects in the notice issued under section 148. 3. Consideration of precedents from higher courts regarding notices issued to non-existent entities. Detailed Analysis: 1. Validity of Notice Issued Under Section 148: The primary issue in this case was whether the notice issued under section 148 of the Income Tax Act to a non-existent entity was valid. The entity in question, M/s Modern Trading Business Pvt. Ltd., had merged with M/s Carron Investments Pvt. Ltd. as per the order of the National Company Law Tribunal (NCLT) dated 21.07.2017. Despite the merger and the subsequent intimation to the Income Tax Department on 21.03.2018, the notice under section 148 was issued on 31.03.2021 to the non-existent entity, M/s Modern Trading Business Pvt. Ltd. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the assessment completed on a non-existent entity is void ab initio, referencing the Supreme Court's decision in PCIT vs. Maruti Suzuki India Ltd., which established that jurisdictional notices issued to non-existent entities are fundamentally flawed. The CIT(A) quashed the assessment order on this basis. 2. Applicability of Section 292B: The Revenue argued that the error in issuing the notice to a non-existent entity was curable under section 292B of the Income Tax Act, which allows for rectification of procedural defects. However, the Tribunal, following the decision in Maruti Suzuki India Ltd., emphasized that a notice under section 148 is foundational to the reassessment proceedings and must be validly issued. The Tribunal noted that the Supreme Court in Maruti Suzuki had clarified that such defects are not merely procedural and cannot be cured under section 292B. Therefore, the notice issued to a non-existent entity was not a curable defect, leading to the quashing of the reassessment proceedings. 3. Consideration of Precedents: The Tribunal considered various judicial precedents, including the decision of the Delhi High Court in Skylight Hospitality LLP vs. ACIT and the Supreme Court's decision in Mahagun Realtors (P.) Ltd. The Revenue relied on these cases to argue that the defect was curable. However, the Tribunal distinguished these cases based on their facts. In Skylight Hospitality, the Supreme Court had dismissed the Special Leave Petition on the grounds of peculiar facts, noting that the error was clerical. In Mahagun Realtors, the Supreme Court found against the taxpayer due to the lack of intimation about the merger. In contrast, in the present case, the taxpayer had duly informed the department about the merger, and there was no suppression of facts. The Tribunal also referenced the Bombay High Court's decision in Uber India Systems Pvt. Ltd., which reinforced that notices issued to non-existent entities are illegal and void. In conclusion, the Tribunal upheld the CIT(A)'s decision to quash the reassessment proceedings, emphasizing that the notice under section 148 was void ab initio as it was issued to a non-existent entity. The appeal by the Revenue was dismissed, and the order of the CIT(A) was affirmed.
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