Facts of the Case

The petitioner, Vandana Griha Nirman Limited (VGNL), challenged an assessment order dated 24.05.2023 passed by the Assessing Officer (AO) for AY 2015–16.

The core issue arose because:

  • The assessment order was passed in the name of M.A. Market Services Pvt. Ltd. (MAMS).
  • However, MAMS had already ceased to exist due to amalgamation with the petitioner company VGNL.
  • This amalgamation was approved by the National Company Law Tribunal (NCLT) on 18.11.2022.
  • Despite having knowledge of this amalgamation, the Revenue proceeded against the non-existent entity.

The case also involved allegations of:

  • Fund transfers of ₹1.70 crore involving entities like Topline Fabrics Pvt Ltd and Northgate Lithotripter Pvt Ltd.
  • Alleged non-genuine transactions and money laundering activities.

 Issues Involved

  1. Whether an assessment order passed against a non-existent entity is legally valid?
  2. Whether the Revenue can continue proceedings despite knowledge of amalgamation of the entity?
  3. Whether such defect is curable or goes to the root of jurisdiction?

 Petitioner’s Arguments

  • The assessment order is void ab initio as it was passed against a non-existent entity (MAMS).
  • The Revenue had prior knowledge of amalgamation through NCLT proceedings.
  • Any proceedings initiated against a non-existent entity are without jurisdiction and unsustainable in law.
  • Reliance on settled law that such defects are not procedural but jurisdictional.

 Respondent’s Arguments

  • The Revenue relied on material available on record and the findings of the Assessing Officer.
  • It was argued that:
    • Transactions involving entities like Northgate were not genuine.
    • The stock transactions could not be verified and lacked authenticity.
  • However, no substantial justification was provided for initiating proceedings against a non-existent entity despite knowledge.

 Court’s Findings / Order

  • The fundamental flaw in the assessment order was that it was passed against a non-existent entity.
  • The Revenue was aware of the amalgamation, yet failed to take corrective steps.
  • Such an error is jurisdictional in nature, not merely procedural.

Final Order

  • The impugned assessment order dated 24.05.2023 was quashed.
  • All consequential proceedings were set aside.
  • The Assessing Officer was granted liberty to proceed afresh in accordance with law.

 Important Clarification

  • The Court clarified that:
    • While the current proceedings were invalid, the Revenue is not barred from initiating fresh proceedings, provided they are done in compliance with law and against the correct entity.
  • The ruling reinforces that:
    • Assessment against a non-existent entity is null and void, irrespective of the merits of the case.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS24072023CW96872023_151659.pdf

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