Income Tax Reassessment Proceedings Cannot Be Initiated Against Non-Existent Entity Merely Because Its PAN Is Active: Bombay HC
The Bombay High Court noted that reassessment proceedings cannot be initiated against a non-existent entity solely based on the fact that its PAN remained active.
The Court quashed the notices issued by the Income Tax Department to Diversey India Private Limited (DIPL) under Section 148 (reassessment) and Section 142(1) (inquiry) of the Income Tax Act, 1961 (IT Act). The Court observed that the notices were flawed since DIPL having been amalgamated with the Petitioner ceased to exist.
The Bench comprising Justice K. R. Shriram and Justice Neela Gokhale observed, “The fact that PAN was not deactivated would not help the Revenue because there could be cases relating to various years when the company was in existence and it is possible those PAN numbers are picked up for scrutiny or for issuance of refund. That in our view, will not be a sanction for Department to issue notices to a nonexisting entity, particularly, when they were aware that the entity was not in existence”.
Advocate Sunil Moti Lala appeared for the Petitioner and Advocate Suresh Kumar appeared for the Respondent.
The Petitioner filed two Writ Petitions, challenging the validity of notices issued under Section 148 (reassessment) and Section 142(1) (inquiry) of the Income Tax Act, 1961 (IT Act). The basis of the Petitioner's challenge was the assertion that the notices were flawed since Diversey India Private Limited (DIPL), having been amalgamated with the Petitioner on April 1, 2015, ceased to exist.
In response, the Respondents acknowledged the amalgamation, communicated to the Income Tax Department (Department) on May 12, 2016. However, they contended that the Petitioner, or the amalgamated entity, actively participated in the reassessment proceedings for the assessment years 2012-13 and 2013-14 without raising objections to the notices initially issued to DIPL. The Respondents also asserted that the PAN of DIPL remained active.
The Court noted that the fact that the PAN was not deactivated does not enhance the Revenue's position. The Court observed that the mere presence of a PAN does not grant the Department the authority to issue notices to an entity that no longer exists, particularly when they were cognizant of the entity's non-existence.
Accordingly, the Court allowed the Petition and quashed the notices.
Cause Title: Diversey India Hygiene Private Limited v The Assistant Commissioner of Income Tax Circle and Ors (2023:BHC-OS:13662-DB)
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