Facts of the Case

The petitioner, Sky Light Hospitality LLP, had acquired all rights and liabilities of Sky Light Hospitality Private Limited after conversion into an LLP on 13.05.2016 under the Limited Liability Partnership Act, 2008.

The Income Tax Department issued a notice dated 30.03.2017 under Sections 147/148 for Assessment Year 2010–11 in the name of the erstwhile private limited company, despite the fact that the company had ceased to exist after conversion.

The reassessment proceedings were initiated on the basis of a Tax Evasion Petition alleging escapement of income relating to property transactions with DLF Retail Developers Ltd., unexplained capital contribution of Rs.35 crores, and land acquisition at Bikaner.

The petitioner challenged both the reassessment notice and the order rejecting objections.

Issues Involved

  1. Whether a reassessment notice issued under Section 148 in the name of a non-existing company is void ab initio?
  2. Whether Section 292B can cure a defect relating to misdescription of the assessee?
  3. Whether the “reasons to believe” recorded by the Assessing Officer established a valid live nexus for reopening assessment?

Petitioner’s Arguments

1. Notice issued to non-existent entity is void

The petitioner contended that the notice was issued to Sky Light Hospitality Pvt. Ltd., which had ceased to exist after conversion into LLP, making the notice invalid.

2. Section 292B not applicable

It was argued that issuance of notice to the correct assessee is a jurisdictional requirement and cannot be treated as a curable defect.

3. Absence of valid reasons to believe

The petitioner argued that the reasons recorded were merely suspicion and lacked the live nexus necessary for invoking Section 147.

Respondent’s Arguments

1. Mere procedural defect

The Revenue argued that the notice was intended for the petitioner and the wrong description was a technical mistake.

2. Protection under Section 292B

It was submitted that Section 292B protects such notices where substance and intent remain intact.

3. Sufficient material for reopening

The Revenue relied upon the Tax Evasion Report and other materials showing escapement of income.

Court Findings / Observations

1. Validity of “Reasons to Believe” upheld

The Court held that there existed sufficient material showing a live link between available information and the belief that income had escaped assessment.

2. Wrong name in notice was a curable defect

The Court found that the Assessing Officer was fully aware of the company’s conversion into LLP and the error in the notice was merely a mistake in description.

3. Section 292B applied

The Court held that since the petitioner clearly understood that the notice was meant for it and no prejudice was caused, Section 292B protected the notice.

4. Distinction from Spice Infotainment case

The Court clarified that the present case involved only a defective notice, unlike Spice Infotainment where the final assessment order itself was passed against a non-existent entity.

Court Order / Final Decision

The Delhi High Court dismissed the writ petition and upheld the reassessment notice issued under Sections 147/148 of the Income Tax Act, holding that the defect in the name of the assessee was curable under Section 292B and did not invalidate the proceedings.

Important Clarification

  • A notice issued in the wrong name due to misdescription may not be invalid if the intended assessee is identifiable and no prejudice is caused.
  • Section 292B protects procedural defects but not substantive illegality.
  • Distinction must be maintained between defective notice and void assessment order against a non-existent entity.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice where income has escaped assessment
  • Section 151 – Sanction for issue of notice
  • Section 292B – Return of income, etc., not to be invalid on certain grounds
  • Section 127 – Power to transfer cases
  • Section 56, Limited Liability Partnership Act, 2008 – Conversion of company into LLP

 Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:841-DB/CSH02022018CW108702017.pdf

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