Facts of the Case

The present writ petition was filed by Karida Real Estates Private Limited (successor in interest of Damian Estate Developers Private Limited) challenging the order dated 4th April 2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the consequent notice issued under Section 148 for Assessment Year 2018–19.

The petitioner contended that the reassessment proceedings were initiated in the name of a non-existent entity, namely Damian Estate Developers Private Limited, which had already amalgamated with the petitioner company with effect from 1st April 2016 pursuant to an order of the National Company Law Tribunal dated 7th February 2018.

It was further submitted that all transactions had already been duly disclosed and taxed, and the impugned order was passed without considering the petitioner’s reply dated 25th March 2022.

Issues Involved

  1. Whether reassessment proceedings initiated against a non-existent entity are legally sustainable.
  2. Whether passing an order under Section 148A(d) without considering the assessee’s reply violates principles of natural justice.
  3. Whether the requirement of “information suggesting escapement of income” under Section 148 was satisfied.

Petitioner’s Arguments

  • The reassessment proceedings are void ab initio as they were issued in the name of a non-existent entity post amalgamation.
  • Reliance was placed on Pr. Commissioner of Income Tax v. Maruti Suzuki India Limited (2019) 416 ITR 613 (SC), wherein issuance of notice to a non-existent company was held to be a substantive illegality.
  • There was no material suggesting escapement of income, as all transactions were disclosed and taxed.
  • The impugned order violated principles of natural justice as the petitioner’s reply was not considered.

Respondent’s Arguments

  • The learned counsel for the Revenue accepted notice and, on instructions, admitted that the petitioner’s reply was not taken into consideration while passing the order under Section 148A(d).

Court Order / Findings

  • The Delhi High Court observed that the impugned order and notice were issued without considering the petitioner’s reply.
  • Accordingly, the Court set aside:
    • The order passed under Section 148A(d), and
    • The notice issued under Section 148 dated 4th April 2022 for AY 2018–19.
  • The Assessing Officer was directed to pass a fresh reasoned order after considering the petitioner’s reply within eight weeks.

Important Clarification by Court

  • The Court clarified that it had not commented on the merits of the case.
  • All rights and contentions of the parties were left open for adjudication.

Sections Involved

  • Section 148 – Income Escaping Assessment
  • Section 148A(d) – Procedure before issuance of notice under Section 148
  • Principles of Natural Justice

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2217-DB/MMH02062022CW70742022_184328.pdf

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