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2021 (11) TMI 431 - HC - Income TaxValidity of reopening of assessment u/s 147 - notice to non existing entity - Curable defect u/s 292B or not? - HELD THAT - As per ALOK KNIT EXPORTS LIMITED (M/S. NIRAJ REALTORS SHARES PVT. LTD. 2021 (8) TMI 777 - BOMBAY HIGH COURT when a company is merging into another company that merging company ceases to exist. Principal Commissioner of Income Tax, who is supposed to have approved the initiating of proceedings under Section 148 also should have brought to the notice of or guided respondent no.1 that the notice ought to be issued in the name of petitioner and not Company which ceased to exist. - Decided in favour of assesse.
Issues involved:
1. Validity of notice issued to a non-existing entity. 2. Corrective measures under Section 292B of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Validity of notice issued to a non-existing entity The petitioner sought the quashing of an impugned notice dated 27th March 2021, contending that it was issued to a non-existing entity. The respondents admitted the error but argued that it could be corrected under Section 292B of the Income Tax Act, 1961. They relied on a judgment of the Delhi High Court and subsequent affirmation by the Supreme Court in a similar case. However, the court noted that the Apex Court had clarified that incorrect names in notices could only be corrected under Section 292B in specific situations where it was a clerical error. The court emphasized that jurisdiction invoked based on incorrect entities could render the notice invalid in law, as seen in previous judgments. The court concluded that issuing a notice to an entity that had ceased to exist was a fundamental error, and the subsequent attempts to correct it were deemed as an afterthought by the respondents. Issue 2: Corrective measures under Section 292B of the Income Tax Act, 1961 The respondents argued that the error in the notice could be rectified under Section 292B of the Act. However, the court found this argument unacceptable, stating that the respondents should have realized the error before issuing the notice, especially given the clear indication of the merging of companies. The court highlighted that the Principal Commissioner of Income Tax should have guided the respondents correctly. Ultimately, the court quashed and set aside the notice dated 27th March 2021 under Section 148 of the Act, based on the precedents and legal principles discussed in the judgment. In conclusion, the High Court of Bombay, in its judgment, emphasized the importance of correctly identifying entities in legal notices under the Income Tax Act, 1961. It clarified the limited scope of corrective measures under Section 292B and highlighted the legal consequences of invoking jurisdiction based on incorrect entities. The court's decision to quash the notice was based on the fundamental error of issuing it to a non-existing entity, despite the respondents' subsequent attempts to rectify the mistake.
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