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
