Cyberstar Infocom LLP Vs ITO (ITAT Bangalore)
Bangalore ITAT Quashes Reassessment Orders Passed on Non-Existent Company After Conversion into LLP
he Bangalore ITAT quashed reassessment orders for four assessment years, holding that an assessment framed in the name of a company after its conversion into an LLP is void ab initio, where the Assessing Officer had been duly informed of the conversion before completion of the reassessment.
The assessee, Cyberstar Infocom Pvt. Ltd., had been converted into Cyberstar Infocom LLP on 27 April 2018. The LLP informed the jurisdictional Assessing Officer of the conversion by letter dated 28 May 2018, enclosing the MCA Certificate of Registration on Conversion and requesting that the change in status be recorded. Despite this, the Assessing Officer issued notices under section 143(2) and ultimately passed reassessment orders under sections 143(3) read with 147 in the name of the erstwhile private limited company.
The CIT(A) upheld the assessments by relying on the Supreme Court’s decision in Sky Light Hospitality LLP, treating the error as a curable defect under section 292B. The Tribunal, however, held that such reliance was misplaced because Sky Light Hospitality dealt only with the validity of a notice issued in the name of a non-existent entity, whereas the present case involved assessment orders themselves being passed in the name of a non-existent entity.
The Tribunal observed that a private limited company and an LLP are distinct legal entities, governed by different statutes and taxed differently. Since the Department had been specifically informed of the conversion and had acknowledged the relevant documents, the Assessing Officer was required to issue jurisdictional notices and complete the reassessment in the name of the LLP. Passing the reassessment order in the name of the dissolved company constituted a substantive jurisdictional defect, not a procedural irregularity curable under section 292B.
The Tribunal distinguished the Supreme Court’s decision in Mahagun Realtors Pvt. Ltd., noting that, unlike in that case, the assessee here had promptly intimated the conversion to the Department and there was no suppression of facts. Following the Supreme Court’s ruling in Maruti Suzuki India Ltd., the ITAT held that the reassessment orders passed in the name of the non-existent company were void ab initio and accordingly quashed them. The remaining grounds were left open as academic.
Cases Discussed
- PCIT vs. Mahagun Realtors Private Ltd. (SC), (2022) 443 ITR 194 (SC)
- PCIT vs. Maruti Suzuki India Limited (SC), (2019) 416 ITR 613 (SC)
- Sky Light Hospitality LLP vs. ACIT (SC), (2018) 303 CTR 130 (SC)
- Sky Light Hospitality LLP vs. ACIT (Delhi HC), (2018) 405 ITR 296 (Delhi)
- PCIT vs. Shri. Jai Shiv Shankar Traders Private Ltd. (Delhi HC), (2016) 383 ITR 448 (Delhi)
- CIT vs. Rajeev Sharma (Allahabad HC), (2011) 336 ITR 678 (Allahabad)
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The assessee has filed the present appeals against the separate impugned orders of even date 24.06.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”), by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment years 2011-12 to 2013-14 and 2015-16.
2. Since all the appeals pertaining to the same assessee involving similar issues, which arise out of a similar factual matrix, these appeals were heard together as a matter of convenience and are being decided by way of this consolidated order.
3. During the hearing, the learned Authorised Representative (“learned AR”) submitted that for the assessment years 2011-12 to 2013-14 and 2015-16, the assessment orders were passed on a non-existent entity, and therefore, the same are void ab initio. The assessee has raised identical grounds in all these appeals, raising the jurisdictional issue on the aforesaid aspect, and the same are reproduced as follows for ready reference: –
“2. Grounds with regard to order passed in the name of a non-existing entity
a) The order of assessment is void-ab-initio for the reason that the order was passed in the name of M/s. Cyberstar Infocom Pvt. Ltd. whereas the entity was converted into a Limited Liability Partnership as on the date of order of assessment which fact was on the records of the Department under the facts of the case.
b) The learned CIT(A) failed to appreciate that the order passed in the name of a non-existent company is illegal and cannot be treated as a mere procedural error curable under section 292B on the facts of the case.”
4. The brief facts of the case pertaining to this issue, as emanating from the record, are: M/s. Cyberstar Infocom Private Limited (hereinafter also referred to as “erstwhile entity”) was incorporated as a Private Limited Company and was engaged in the trading of networking cables and equipment. For the assessment years 2011-12 to 2013-14, the original return of income filed by the M/s. Cyberstar Infocom Private Limited was selected for scrutiny, and an assessment was completed under section 143(3) of the Act. While for the assessment year 2015-16, the return filed was only processed vide intimation issued under section 143(1) of the Act. Subsequently, on the basis of the information received from the JCIT (OSD) (International Taxation), Circle – 1(2), Bangalore, that M/s. Cyberstar Infocom Private Limited was found to be an assessee in default for non-deduction of tax under section 195 of the Act on the payment made towards purchase from the Permanent Establishment of a foreign company, notice under section 148 of the Act was issued, and proceedings under section 147 of the Act were initiated. In the meanwhile, pursuant to an application made to the Registration of Companies for conversion of the Private Limited Company into a Limited Liability Partnership (“LLP”), M/s. Cyberstar Infocom Private Limited was converted to Cyberstar Infocom LLP, i.e. the assessee in the present case. On 28.05.2018, the assessee, i.e. Cyberstar Infocom LLP, filed a letter with DCIT, Circle – 2(1)(1), Bangalore, intimating the conversion of Private Limited Company into LLP and also furnished the certificate dated 27.04.2018 issued by the Ministry of Corporate Affairs, Government of India, certifying the conversion. Vide the aforesaid letter, the assessee also requested to take note of the change in the status from Private Limited Company to LLP. However, despite the aforesaid intimation, notice under section 143(2) of the Act was issued in the name of the erstwhile entity for the assessment years 2011-12 to 2013-14 and 2015-16. After considering the submissions filed by the assessee, the Assessing Officer (“AO”), i.e. DCIT, Circle – 2(1)(1), Bangalore, passed the order under section 143(3) r.w.s. 147 of the Act in the name of the erstwhile entity.
5. In its appeal before the learned CIT(A), the assessee specifically raised a ground challenging the validity of the assessment order being passed in the name of the erstwhile entity despite specific intimation in respect of a change in the status of the assessee from a Private Limited Company to an LLP. The learned CIT(A), vide impugned order placing reliance upon the decision of the Hon’ble Supreme Court in Sky Light Hospitality LLP vs. ACIT, reported in (2018) 303 CTR 130 (SC), held that the assessment proceedings cannot be terminated on the basis that the company cease to exist as mere conversion into LLP would not invalidate the assessment proceedings and wrong name mentioned is merely a clerical error, which could be corrected under section 292B of the Act. Accordingly, the learned CIT(A) dismissed the specific ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us.
6. During the hearing, the learned AR by placing reliance upon the decision of the Hon’ble Supreme Court in PCIT vs. Maruti Suzuki India Limited, reported in (2019) 416 ITR 613 (SC), submitted that where the erstwhile entity was converted into an LLP and thereby lost its legal existence, assessment order passed subsequently in the name of non-existent entity is a jurisdictional defect, which cannot be cured under section 292B of the Act. The learned AR submitted that as for the assessment years 2011-12 to 2013-14 and 2015-16, the assessment orders were passed in the name of a non-existent entity, the same are void ab initio. As regards the reliance placed by the learned CIT(A) on the decision of the Hon’ble Supreme Court in Sky Light Hospitality LLP (supra), the learned AR submitted that in the said case, only a re-assessment notice was issued in the name of the erstwhile entity and the same was held to be a curable error under section 292B of the Act.
7. On the other hand, the learned Departmental Representative (“learned DR”) submitted that the AO assumed the jurisdiction vide notice issued under section 148 of the Act, which was issued in the correct name, i.e. Cyberstar Infocom Private Limited. The learned DR submitted that the conversion of a Private Limited Company into an LLP occurred after the issuance of a notice under section 148 of the Act. Thus, the learned DR submitted that, as the reassessment proceedings were validly initiated against an existing entity and the conversion occurred only during the pendency of validly instituted proceedings, the same will not render the proceedings void by a subsequent change in the assessee’s legal form. Further, the learned DR submitted that after the conversion of the Private Limited Company into an LLP, all the assets, interests, rights, and liabilities of the erstwhile entity stand transferred to and vested in the LLP, and therefore the successor is fully answerable in law. By vehemently relying upon the order passed by the learned CIT(A), the learned DR submitted that in Sky Light Hospitality LLP (supra), a similar defect was found to be a curable defect under section 292B of the Act, which does not render the entire proceedings to be null and void. The learned DR also placed reliance upon the decision of the Hon’ble Supreme Court in PCIT vs. Mahagun Realtors Private Ltd., reported in (2022) 443 ITR 194 (SC), and submitted that the decision in Maruti Suzuki Private Limited (supra) was distinguished by the Hon’ble Supreme Court in the said decision.
8. We have considered the submissions and judicial pronouncements relied upon by both sides, as well as perused the material available on record. In the present case, the assessee was formed as a Private Limited Company, and for the assessment years 2011-12 to 2013-14 and 2015-16, it filed its returns of income in the same status. The assessment proceedings under section 143(3) of the Act were also concluded in some of these years. Subsequently, on the basis of the information received that the assessee has been found to be an “assessee in default” under section 201(1) of the Act, reassessment proceedings under section 147 of the Act were initiated. In the present case, it is an undisputed fact that till the issuance of notice under section 148 of the Act, the assessee was running its business as a Private Limited Company. On 27.04.2018, pursuant to an application by the assessee, it was converted from a Private Limited Company to an LLP. From the perusal of the documents placed on record, we find that a specific intimation in this regard was made by the assessee vide its letter dated 28.05.2018, which was filed before DCIT, Circle – 2(1)(1), Bangalore, on 31.05.2018. Accordingly, the assessee requested its Jurisdictional AO to take note of the change in the status of the assessee from a Private Limited Company to an LLP. We find that along with the said letter, the assessee also furnished a Certificate of Registration on Conversion issued by the Ministry of Corporate Affairs, Government of India. We find that despite the specific intimation regarding the change in its status from Private Limited Company into an LLP, the AO issued statutory notice under section 143(2) of the Act for the assessment years 2011-12 to 2013-14 and 2015-16 in the name of the erstwhile entity, i.e. M/s. Cyberstar Infocom Private Limited. It is evident from the record that for these years, the assessment proceedings were also concluded in the same name and assessment orders under section 143(3) r.w.s. 147 of the Act were passed in the name of the erstwhile entity instead of the assessee, which is now an LLP.
9. Before proceeding further, it is important to note that a Private Limited Company and an LLP have separate legal identities. Additionally, both are governed by different statutes and are taxed differently under the Act. Therefore, without doubt, after the conversion, the assessee possesses a completely distinct legal existence.
10. From the perusal of the impugned order passed by the learned CIT(A), it is evident that a specific ground raised by the assessee challenging the validity of the assessment order in the name of the non-existing entity was dismissed, placing reliance upon the decision of the Hon’ble Supreme Court in Sky Light Hospitality LLP (supra). We find that the Hon’ble Supreme Court in Maruti Suzuki India Limited (supra), in paragraph 27 of the judgment, specifically noted the fact that the decision in Sky Light Hospitality LLP (supra) was rendered in its own peculiar facts. The said aspect was further elaborated by the Hon’ble Supreme Court in Maruti Suzuki Limited (supra) by taking into consideration facts noted by the Hon’ble Delhi High Court in Sky Light Hospitality LLP vs. ACIT, reported in (2018) 405 ITR 296 (Delhi). Therefore, we are of the considered view that the reliance placed by the learned CIT(A) on the decision of the Hon’ble Supreme Court in Sky Light Hospitality LLP (supra) is completely misplaced. It is further pertinent to note that in Sky Light Hospitality LLP (supra), the validity of the notice issued under section 148 on the non-existing entity was challenged. However, in the present case, the assessee is challenging the validity of the assessment order passed in the name of a non-existing entity.
11. Insofar as the decision of the Hon’ble Supreme Court in Mahagun Realtors Private Limited (supra), on which the reliance has been placed by the learned DR, we find that in the facts of that case, no intimation regarding the fact of amalgamation was filed before the Revenue and the taxpayer in that case also suppressed the fact of amalgamation in the return filed under section 153A of the Act post-amalgamation. From the careful perusal of the aforesaid decision, we find that the Hon’ble Supreme Court also took into consideration the conduct of the taxpayer before all forums, commencing from the date of the search, consistently representing itself as the assessee. Thus, in these peculiar facts, the Hon’ble Supreme Court in Mahagun Realtors Private Limited (supra) decided the issue against the taxpayer. However, in the present case, as noted in the foregoing paragraphs, soon after the conversion of the Private Limited Company into LLP on 27.04.2018, the assessee filed a letter on 31.05.2018, intimating the fact of conversion and also requested the Jurisdictional AO to take the change in status on record. In the present case, no material has been brought on record before us to controvert the aforesaid factual position. Thus, we are of the considered view that the decision of the Hon’ble Supreme Court in Mahagun Realtors Private Limited (supra) is distinguishable on facts and therefore is not applicable to the present case.
12. As regards the contention of the learned DR that the jurisdiction under section 147 of the Act was validly assumed as the notice under section 148 of the Act was issued on the existing entity, and therefore any conversion occurring during the pendency of the validly instituted proceedings will not render the assessment order void, it is pertinent to note that even though the Act specifically provides procedure for initiating reassessment proceedings and notice issued under section 148 of the Act is a jurisdictional requirement. However, the notice issued under section 143(2) of the Act, pursuant to the return filed by the assessee in compliance with the notice issued under section 148 of the Act, is also held to be a jurisdictional pre-condition by various Hon’ble Courts. In this regard, gainful reference can be made to the decision of the Hon’ble Allahabad High Court in CIT vs. Rajeev Sharma, reported in (2011) 336 ITR 678 (Allahabad), wherein the Hon’ble High Court held that after receipt of return in response to the notice issued under section 148, it shall be mandatory for the AO to serve a notice under section 143(2) of the Act. We find that similar findings were rendered by the Hon’ble Delhi High Court in PCIT vs. Shri. Jai Shiv Shankar Traders Private Ltd., reported in (2016) 383 ITR 448 (Delhi). Therefore, we are of the considered view that merely because notice under section 148 of the Act was issued on the existing entity, at the time of issuance of such notice, the same shall not absolve the AO from also issuing notice under section 143(2) of the Act on an existing entity, as the notice under section 143(2) of the Act is also a jurisdictional precondition for completing the assessment under section 147 of the Act. In any case, in the present appeals before us, the assessment order was also passed on a non-existent entity. At this stage, it is pertinent to note that the Hon’ble Supreme Court in Maruti Suzuki India Ltd. (supra), in similar circumstances, held that where the jurisdictional notice and the assessment order are in the name of a non-existent entity, the same results in a substantive illegality and not a procedural violation, which can be cured under section 292B of the Act.
13. We find that the decisions of the Coordinate Benches in Serendipity Infolabs Pvt Ltd vs. DCIT, in ITA No. 2428/Bang/2018, and Sri Veeranna Murthy Raghavendra Deekshith vs. ITO, in ITA No. 1072/Bang/2024, relied upon by the learned DR, were rendered in a different factual matrix. Thus, these decisions are not applicable to the present case. Further, the decision of the Coordinate Bench in Vodafone Mobile Services Ltd vs. ACIT, in ITA No. 40 and 41/Hyd/2018, was passed on 30.05.2018, i.e. prior to the decision of the Hon’ble Supreme Court in Maruti Suzuki India Ltd. (supra). Thus, we are of the considered view that the same has no relevance after the Hon’ble Supreme Court has settled the legal position on this issue in Maruti Suzuki India Ltd. (supra).
14. Therefore, respectfully following the decision of the Hon’ble Supreme Court in Maruti Suzuki India Ltd. (supra), we are of the considered view that the assessment orders passed by the AO for the assessment years 2011-12 to 2013-14 and 2015-16 in the name of a non-existing entity are void ab initio. Accordingly, the same are quashed. As a result, Ground No. 2 raised by the assessee in its appeals for the assessment years 2011-12 to 2013-14 and 2015-16 is allowed.
15. Since the relief has been granted to the assessee on this short issue and the assessment orders have been quashed, the other grounds raised by the assessee in these appeals are rendered academic, and therefore, are kept open.
16. In the result, the appeals by the assessee for the assessment years 2011-12 to 2013-14 and 2015-16 are allowed.
Order pronounced in the open court on 05-Aug-2026.
