2024 (3) TMI 735 - HC - Income Tax

Reopening notice issued to a non-existent entity - scheme of amalgamation approved - a wholly owned subsidiary of Petitioner ( LSIPL ) stood amalgamated with Petitioner - notice issued to company amalgamated for non filling Return - In the affidavit-in-reply, it is stated that the notice was issued because information was received through NMS/ITBA system under Multiyear NMS which is Non-filers Monitoring System (Priority 1) that LSIPL had not filed its return of income for AY 2013-2014 and AY 2014-2015 HELD THAT - As stated that certain transactions were noticed under the PAN number of LSIPL during financial years pertaining to these assessment years, i.e., AY 2013-2014 and AY 2014-2015 and hence, for the purpose of applicability of provisions of the Act, LSIPL was not non-existing company. At the same time in the affidavit-in-reply it is further stated It is accepted that company was not required to file its income tax return from the appointed date as per scheme of amalgamation. As noted earlier, the appointed date was 1st April 2012. The entire basis of notice, which according to Respondents was issued due to non-filing of income tax return, collapses. In the circumstances, we see no reason to go into further averments made in the petitions or further grounds taken in the petitions. Assessee appeal allowed.

Summary

Issues involved: Impugning a notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-2014, alleging income tax evasion, and reassessment order based on the notice issued to a non-existent entity.

Issue 1: Notice and reassessment order issued to a non-existent entity

In Writ Petition No. 8388 of 2022, the Petitioner challenged a notice dated 27th March 2021 issued under Section 148 of the Income Tax Act for Assessment Year 2013-2014, alleging income tax evasion and a reassessment order dated 27th March 2022. The primary ground for the petition was that the notices were issued to a non-existent entity, and the assessment order was also based on a non-existent entity.

Issue 2: Scheme of amalgamation and response from the Respondents

Following a scheme of amalgamation approved by the Delhi High Court, a subsidiary of the Petitioner was amalgamated with the Petitioner, effective from 1st April 2012. Despite notifying this to the Respondent, the impugned notices were still issued, along with the reassessment order. The Respondents justified the notice by stating that information was received through the Non-filers Monitoring System that the subsidiary had not filed its income tax returns for the relevant assessment years. However, the Respondents also acknowledged that the company was not required to file returns post the amalgamation.

Issue 3: Collapse of the basis of notice

The entire basis of the notice, which was issued due to the non-filing of income tax returns by the subsidiary, was found to collapse as the subsidiary was not required to file returns post the amalgamation. Consequently, the Court found no reason to delve into further grounds presented in the petitions.

Judgment and Disposal

The petitions were allowed, and the impugned notice, reassessment order, and penalty notices were quashed, canceled, and set aside as per the prayer clause. The Petitioner was directed to withdraw the appeals against the reassessment order within two weeks to save on limitation. The petitions were disposed of accordingly.