Gujarat High Court Quashes Income Tax Reassessment Notices Against Non-Existent Entity

The Gujarat High Court has quashed the income tax reassessment notice against a non-existent entity.

The bench of Justice Biren Vaishnav and Justice Devan M. Desai has observed that the erstwhile company Satyasarthi Estate Organisers Private Limited amalgamated with the petitioner Anokhi Reality Private Limited. The jurisdictional officer was informed of the amalgamation. The assessment proceedings were continued in the name of a non-existent entity, and the final assessment order, which was also issued in the name of a non-existent entity, would be invalid.

Satyasarthi Estate Organisers Private Limited, along with three other companies, ceased to exist with effect from April 1, 2009. Subsequent to the amalgamation, with the petitioner company was the transferee company. The amalgamation was effectuated under the scheme of amalgamation in accordance with the provisions of the Companies Act.

Satyasarthi Estate Organisers Private Limited received notices under Section 148 of the Income Tax Act. The erstwhile company submitted a reply informing the officer of the cancellation of the PAN card due to the merger. In response to the notices, the competent officer was informed that since Satyasarthi Estate Organisers Private Limited had merged with the petitioner company with effect from April 1, 2019, the company ceased to be in existence.

Orders were passed, disposing of objections raised by the erstwhile company. A notice under Section 142(1) of the Act was also issued on September 3, 2021.

The appellant contended that the notices under Section 148 of the Income Tax Act, 1961, were issued to a non-existent entity, and therefore they were illegal.

The department contended that it was only on June 15, 2021, that the petitioner raised an objection, and that happened to be after March 30, 2021, the date of issuance of the notice.

The court held that notices for reopening the assessment proceedings in the case of an amalgamated company are impermissible as there is no provision in the Income Tax Act to make an assessment on a non-existent company.

"Since the notices for the assessment years 2014–15 to assessment years 2017–18 have been issued to the non-existing entity, viz. Satyasarthi Estate Organisers Private Limited, such notices are quashed and set aside," the court said.

Case Title: Anokhi Realty Private Limited vs. Income Tax Officer 2023 LiveLaw (Guj) 132 [Special Civil Application No. 17613 Of 2021]

Case Citation: 2023 LiveLaw (Guj) 132

Counsel For Petitioner: Nupur D Shah

Counsel For Respondent: Varun K. Patel

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