Gujarat High Court Sets Aside Income Tax Reassessment Notices for Non-Existent Company
The Gujarat High Court has invalidated the income tax reassessment notice targeting a non-existent entity. The Bench of Justices Biren Vaishnav and Devan M. Desai noted that the prior company, Satyasarthi Estate Organisers Private Limited, had merged with the petitioner, Anokhi Reality Private Limited. This amalgamation had been communicated to the jurisdictional officer. However, the assessment procedures persisted using the name of a non-existent entity, rendering the ultimate assessment order, also issued under this non-existent entity's name, void.
Satyasarthi Estate Organisers Private Limited, along with three other companies, was dissolved on April 1, 2009. Following this merger, the petitioner company became the transferee entity. The amalgamation was executed under the framework of a consolidation plan in accordance with the stipulations outlined in the Companies Act.
In the present case, Satyasarthi Estate Organisers Private Limited was served with notices pursuant to Section 148 of the Income Tax Act. The previous company furnished a response, notifying the officer about the PAN card's annulment due to the consolidation. In reply to the notices, the authorised officer was informed that Satyasarthi Estate Organisers Private Limited had amalgamated with the petitioner company, effective from April 1, 2019, resulting in the dissolution of the former entity.
Resolutions were formulated, addressing and settling the objections raised by the previous company. Furthermore, a notice pursuant to Section 142(1) of the Act was formally dispatched on September 3, 2021. The appellant argued that the notices issued under Section 148 of the Income Tax Act, 1961, were directed at a non-existent entity, rendering them unlawful.
The department, however, argued that the petitioner's objection was only raised on June 15, 2021, which occurred after the notice was issued on March 30, 2021.
The Court ruled that issuing notices to reopen assessment proceedings for an amalgamated company is not permissible, as the Income Tax Act does not contain any provisions to assess a non-existent company.
Given that the notices for assessment years 2014–15 to 2017–18 were directed at the defunct entity, Satyasarthi Estate Organisers Private Limited, the Court declared these notices null and void.