Notice issued to non-existent company after its amalgamation is not valid under Income Tax

The Hon'ble Bombay High Court in CLSA India Private Limited v. the Deputy Commissioner of Income-Tax [Writ Petition No. 2462 of 2022 dated February 10, 2023] has set aside the notice under Section 148 of the Income Tax Act, 1961 ("the IT Act"), the order of assessment and the consequential demand and penalty notice, on the ground that the same was issued in the name of a non-existent company, on account of its amalgamation. 

Facts

This petition has been filed by the CLSA India Private Limited ("the Petitioner") challenging the notice dated March 31, 2021 ("the Impugned Notice") issued under Section 148 of the IT Act and also the order of assessment dated March 31, 2022 ("the Impugned Order") passed under Section 147 read with Section 144 and Section 144B of the IT Act, for the assessment year 2017-18, on the ground that the same was issued in the name of a non-existent company i.e. Laysin BPO Pvt. Ltd. In reply to the Impugned Notice, the Petitioner informed the Revenue Department ("the Respondent") about the non-existence of the Laysin BPO Pvt. Ltd on account of its amalgamation with the Petitionervide order dated April 16, 2016 and therefore, sought to drop the proceedings against the non-existent company. Despite that, the Impugned Order was issued in the name of the Petitioner while at the same time, mentioning the name of the assessee as Laysin BPO Pvt. Ltd.

Issue

Whether the Impugned Notice and the Impugned Order issued to a non-existent company is maintainable?

Held

The Hon'ble Bombay High Court in Writ Petition No. 2462 of 2022 held as under:

• Opined that, as the PAN was in the name of the non-existent company, it does not create an exception to dilute the principles of reassessment.
• Set aside the Impugned Notice and the Impugned Order and consequential demand and penalty notice. 

Relevant Provisions

Section 148 of the IT Act

"Issue of notice where income has escaped assessment.

Before making the assessment, reassessment or re-computation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.

Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section.

Explanation 1.-For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,-

(i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court.

Explanation 2.-For the purposes of this section, where,-

(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or

(ii) a survey is conducted under section 133A, other than under sub-section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or

(iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or under section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee,

the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.-For the purposes of this section, specified authority means the specified authority referred to in section 151."