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2021 (8) TMI 777 - HC - Income TaxReopening of assessment u/s 147 - notice issued to a non-existent company - Curable defect u/s 292B or not? - HELD THAT - The indisputable fact is respondent no.1 has invoked jurisdiction by issuing notice under Section 148 of the Act to an entity that had ceased to exist. This is notwithstanding the fact that respondent no.1 was aware that Niraj Realtors had ceased to exist. Respondent no.1, we say was aware because the notice under Section 148 of the Act was issued for the Assessment Year 2011-2012 in the name of petitioner for re-opening the assessment of Niraj Realtors We would have expected respondent no.1 to have atleast applied his mind and looked for documents which were already on file to see whether Niraj Realtors existed before issuing notice under Section 148 of the Act. Respondents records would have indicated that Niraj Realtors ceased to exist and his predecessor/colleague has issued notice for the Assessment Year 2011-2012 alongwith the reasoning in the name of petitioner. Therefore, the stand of respondent today that it was an error which could be corrected under Section 292B of the Act is not acceptable to this Court - Decided in favour of assessee.
Issues:
Impugning a notice under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2012-2013 and subsequent order rejecting objections raised by the petitioner. Detailed Analysis: 1. Impugning Notice and Objections: The petitioner challenged a notice issued under Section 148 of the Act for the Assessment Year 2012-2013. The notice was issued to a non-existent entity, Niraj Realtors, which had merged with the petitioner, Alok Knit Exports Pvt. Ltd. The petitioner raised objections regarding the legality of the notice, citing various judicial pronouncements. Respondent no.1 rejected the objections, stating that the notice was valid as it was issued before the merger, and the PAN number of Niraj Realtors was still active. 2. Legal Errors and Corrections: The respondent argued that the error in issuing the notice could be corrected under Section 292B of the Act, citing human error. However, legal precedents highlighted that such errors could not nullify valid proceedings. The Delhi High Court and the Apex Court judgments emphasized the importance of correct legal procedures and the consequences of errors in notices. 3. Jurisdictional Issues and Legal Principles: The Apex Court's judgment in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd. clarified that notices issued in the name of entities that no longer exist are fundamentally flawed. The court emphasized that jurisdiction must be invoked correctly based on legal principles, especially in cases of mergers where the amalgamating entity ceases to exist. The court reiterated that participation in proceedings cannot override legal principles. 4. Court's Decision and Rationale: The Court found that the respondent's actions were based on a fundamental error, as Niraj Realtors had ceased to exist post-merger. The Court criticized the lack of due diligence in issuing the notice and rejected the argument that the error could be corrected under Section 292B. The Court allowed the petition, quashing the notice and subsequent order, emphasizing the need for accurate legal procedures in invoking jurisdiction under Section 148 of the Act. In conclusion, the judgment highlighted the importance of legal accuracy in issuing notices under the Income Tax Act, especially in cases involving mergers and changes in entity status. The Court's decision underscored the necessity for adherence to legal principles and due diligence to avoid fundamental errors in tax proceedings.
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