The Delhi High Court in a ruling stated that an assessment order issued in the name of the non-existent entity, following an amalgamation could not be cured u/s 292B of the Income Tax Act, 1961.
The same matter comprised of the writ petitions where the applicants contested the assessment validity and reassessment actions opted against the entities that ceased to exist following a merger. Even after informing the tax authorities about the merger, the assessment orders and notices were issued in the name of the merging entity instead of the newly formed one.
It was claimed by the applicant that the same comprises a fatal error that directed the orders and notices to void. They mentioned the decision of the Apex court in Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki (India) Limited, which cited that the proceedings against a dissolved entity are statutory invalid.
However, the respondent argued that the error was only procedural and could be improved u/s 292B, which addresses minor technical errors in tax proceedings.
The Court observed that when a company is legally dissolved following a merger, it no longer exists, rendering any legal actions taken in its name invalid. The court directed the judgment of the Supreme Court in Maruti Suzuki to stress that the initiation or continuation of tax proceedings against a dissolved entity is fundamentally defective and cannot be fixed via Section 292B.
The court stresses that the applicants duly reported the tax authorities for the amalgamation at the earliest opportunity. By not responding to this information and sending notices to a nonexistent organization, the authorities suffered the consequences of their legal mistake.
The High Court reiterated that Section 292B cannot be used to legitimize an order or notice directed at an entity that is no longer recognized by the law.
The ruling cited that the case law along with the decision in Mahagun Realtors quoted via the respondents does not revise the established norm that proceedings started against a non-existent entity are void.
Section 170 of the Income Tax Act, is concerned with the assessment of successors to a business and shall not assist the position of the respondents since the same does not cover the situations that comprise dissolved entities and once an assessment is incurred in the name of a non-existent entity then it could not get improved as a procedural peculiarity u/s 292B.
Concluded to that the division bench of Justice Yashwanth Varma and Justice Ravinder Dudeja quashed the impugned assessment and reassessment order that confirms that the initiated proceedings against a non-existent entity can not be retained under the provisions of the Income Tax Act.
| Citation | ITA 116/2023 |
| Date | 26.09.2024 |
| Counsel For Appellant | Mr Simran Mehta, Advocate. |
| Counsel For Respondent | Mr. Gaurav Gupta, SSC along with Mr. Shivendra Singh and Mr. Yojit Pareek, JSCs. |
| Delhi High Court | Read Order |
