2025 (3) TMI 1460 - AT - Income Tax

Reassessment proceedings against non-existent company which is already amalgamated with another company - HELD THAT - Notice u/s 148 of the Act has been issued in the name of the non-existent company and it is established principle of law that assessment framed in the name of non-existent company based on an issuance of notice is of no consequence. As mentioned herein before Hon ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Pvt. Ltd. 2019 (7) TMI 1449 - SUPREME COURT held that the amendment made in the name of Suzuki Power Train India Ltd. is in resulting since the entity has been amalgated with the Maruti Suzuki India Ltd. Revenue relied upon the case of Mahagun Realtors (P) Ltd. 2022 (4) TMI 347 - SUPREME COURT does not apply in this case as amalgamation was complete and notice u/s 148 was issued and also that prior information regarding amalgamation was submitted before competent authority. Hence assessment framed in the instant case in the name of non-existing camp suffers from vice of jurisdictional effect and which cannot be cured. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The primary issues considered by the Appellate Tribunal in this judgment are:

Whether the assumption of jurisdiction under Sections 147 and 148 of the Income-tax Act, 1961, by issuing a notice to a non-existent company due to its prior amalgamation, is valid.
Whether the reassessment framed based on such a notice is legally sustainable.
Whether the ex-parte order passed by the CIT (Appeals) without providing the assessee a reasonable opportunity to be heard is valid.
Whether the addition of Rs. 17,62,037/- to the income of the assessee is justified.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Jurisdiction Assumed under Sections 147/148

Relevant Legal Framework and Precedents: The legal framework involves Sections 147 and 148 of the Income-tax Act, which deal with the reassessment of income. The precedents include the Supreme Court's judgment in PCIT vs. Maruti Suzuki India Ltd. and the Delhi High Court's decision in CIT vs. Sony Mobile Communication India Pvt. Ltd.
Court's Interpretation and Reasoning: The Tribunal noted that the notice under Section 148 was issued to a non-existent company, BEC Finance Pvt. Ltd., which had already amalgamated with BEC Impex International Pvt. Ltd. in 2004. The Court relied on the principle that a jurisdictional notice issued to a non-existent entity is fundamentally flawed.
Key Evidence and Findings: The Tribunal found that the amalgamation was duly communicated to the tax authorities, and the notice was still issued in the name of the non-existent company.
Application of Law to Facts: The Tribunal applied the principles established in Maruti Suzuki, which held that jurisdictional notices issued to non-existent entities are invalid.
Treatment of Competing Arguments: The Revenue argued that the company continued business activities and had an active PAN. However, the Tribunal found these arguments insufficient to validate the notice.
Conclusions: The Tribunal concluded that the assumption of jurisdiction under Sections 147/148 was invalid.

2. Validity of Reassessment Based on Invalid Notice

Relevant Legal Framework and Precedents: The Tribunal referred to the principle that any reassessment based on an invalid notice is itself invalid.
Court's Interpretation and Reasoning: The Tribunal reasoned that since the notice was issued to a non-existent entity, the reassessment order lacked jurisdiction and was therefore void.
Key Evidence and Findings: The Tribunal highlighted that the notice was issued despite prior intimation of amalgamation.
Application of Law to Facts: The Tribunal applied the legal principle that reassessment orders based on invalid notices are unsustainable.
Treatment of Competing Arguments: The Tribunal dismissed the Revenue's reliance on the company's continued business activities as irrelevant to the jurisdictional issue.
Conclusions: The reassessment order was declared invalid.

3. Validity of Ex-Parte Order by CIT (Appeals)

Relevant Legal Framework and Precedents: The Tribunal considered the principles of natural justice, which require a fair hearing before an adverse decision.
Court's Interpretation and Reasoning: The Tribunal found that the CIT (Appeals) failed to provide the assessee a reasonable opportunity to be heard, rendering the order arbitrary.
Key Evidence and Findings: The Tribunal noted the lack of adequate notice or opportunity for the assessee to present its case.
Application of Law to Facts: The Tribunal applied the principles of natural justice, emphasizing the need for a fair hearing.
Treatment of Competing Arguments: The Tribunal did not find any substantial justification from the Revenue for the ex-parte order.
Conclusions: The ex-parte order was deemed unjust and invalid.

4. Justification of Addition of Rs. 17,62,037/-

Relevant Legal Framework and Precedents: The Tribunal reviewed the provisions related to income addition under the Income-tax Act.
Court's Interpretation and Reasoning: The Tribunal noted that the addition was made without proper inquiry and was excessive.
Key Evidence and Findings: The Tribunal found insufficient evidence to justify the addition, especially given the jurisdictional flaws.
Application of Law to Facts: The Tribunal applied the principle that additions must be based on substantial evidence and proper jurisdiction.
Treatment of Competing Arguments: The Tribunal found the Revenue's justification for the addition inadequate.
Conclusions: The addition was unjustified and was ordered to be deleted.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation."
Core Principles Established: Notices issued to non-existent entities due to amalgamation are invalid, and any reassessment based on such notices is void. The principles of natural justice require a fair hearing.
Final Determinations on Each Issue: The Tribunal allowed the appeal, declaring the jurisdictional notice and subsequent reassessment invalid, the ex-parte order unjust, and the income addition unjustified.

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