Notices/ orders cannot be issued to an amalgamated entity even though PAN is still active: Bombay HC
Diversey India Hygiene Private Limited v The Assistant Commissioner of Income Tax Circle and Ors (WP Nos: 3034 and 3505 of 2022)
Facts:
- The Petitioner had filed two Writ Petitions, challenging the validity of notices issued under Section 148 (reassessment) and Section 142(1) (inquiry) of the Income Tax Act, 1961 (IT Act).
- The basis of the Petitioner’s challenge was the assertion that the notices were flawed since Diversey India Private Limited (DIPL), having been amalgamated with the Petitioner on April 1, 2015, ceased to exist.
- The petitioner contended that issuing a notice and assessment order in the name of a company that no longer exists post-amalgamation is without jurisdiction and legally flawed, therefore warranting annulment.
- The Respondent Income Tax Authorities acknowledged the amalgamation, communicated to the Income Tax Department (Department) on May 12, 2016.
- However, the respondents contended that the Petitioner, or the amalgamated entity, actively participated in the reassessment proceedings for the assessment years 2012-13 and 2013-14 without raising objections to the notices initially issued to DIPL. The Respondents also asserted that the PAN of DIPL remained active.
Hon Bombay HC held as below:
- The fact that the PAN was not deactivated does not enhance the Revenue’s position. The mere presence of a PAN does not grant the Department the authority to issue notices to an entity that no longer exists, particularly when they were cognizant of the entity’s non-existence.
- During existence, it is possible that the PAN numbers are picked up for scrutiny or for issuance of refund. That in our view, will not be a sanction for Department to issue notices to a nonexisting entity, particularly, when they were aware that the entity was not in existence.
- The principle that the tax department cannot pursue proceedings against entities that have undergone amalgamation and lost their legal existence, has to be upheld.
The copy of the order is as under:
