Facts of the Case

The present writ petition pertains to Assessment Year 2019-20. The petitioner challenged the validity of reassessment proceedings initiated by the Income Tax Department.

The grievance arose from the fact that:

  • Notices under Section 148A(b), order under Section 148A(d), and notice under Section 148 were issued in the name of S-Cube Futuretech Pvt. Ltd.,
  • However, S-Cube had already been amalgamated with the petitioner (Bentley Systems India Pvt. Ltd.) pursuant to an order of the NCLT dated 21.12.2018, with an appointed date of 01.01.2018.

Despite this:

  • The Assessing Officer proceeded on the basis of transactions linked to the PAN of the erstwhile entity,
  • Ignoring the fact that the entity no longer existed in law.

 Issues Involved

  1. Whether reassessment notices issued under Sections 148A(b), 148A(d), and 148 are valid when issued in the name of a non-existent entity (post-amalgamation)?
  2. Whether such proceedings are legally sustainable when the Revenue was already aware of the amalgamation?
  3. Whether reassessment can continue based on transactions linked to the PAN of an erstwhile entity?

 Petitioner’s Arguments

  • The notices were void ab initio, as they were issued in the name of a company that had ceased to exist due to amalgamation.
  • The amalgamation was duly recognized, and even the Revenue had acknowledged it through an order under Section 127 transferring jurisdiction.
  • The petitioner had filed a reply clarifying:
    • The merger had taken place,
    • Returns were filed with merged financials,
    • All transactions were duly accounted for.
  • Therefore, proceedings against a non-existent entity are unsustainable in law.

 Respondent’s Arguments

  • The Assessing Officer relied on:
    • Transactions linked to the PAN of S-Cube Futuretech Pvt. Ltd.,
    • Allegation that certain income (₹76,41,016/-) had escaped assessment.
  • The Revenue contended that these transactions had not been properly considered by the petitioner.

 Court’s Findings / Order

The Delhi High Court observed:

  • The notices were indeed issued concerning an entity that had already ceased to exist due to amalgamation.
  • Instead of entering into detailed adjudication, the Court held that the appropriate course would be:

Order:

  • Notice dated 02.03.2023 under Section 148A(b) – Set Aside
  • Order dated 30.03.2023 under Section 148A(d) – Set Aside
  • Notice dated 31.03.2023 under Section 148 – Set Aside

However, the Court granted liberty to the Assessing Officer:

  • To recommence proceedings in accordance with law,
  • By issuing notice to the correct entity i.e., the amalgamated company (petitioner).

 Important Clarification

  • Proceedings initiated against a non-existent entity are legally flawed, even if based on valid underlying transactions.
  • However, such defects do not bar fresh proceedings, provided they are initiated correctly against the existing entity.
  • The Court adopted a balanced approach—protecting procedural legality while preserving the Revenue’s right to reassess.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS30052023CW76382023_183554.pdf

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