Marut Nandan & Co. Vs ITO (ITAT Delhi)
Summary: ITAT Delhi allowed the appeal of Marut Nandan & Co. and quashed the reassessment for AY 2012-13 on multiple grounds concerning jurisdiction, reassessment procedure and the merits of the addition under Section 68 of the Income-tax Act, 1961. The assessee was a partnership firm constituted on 09.08.2010 for carrying on the business of purchase and sale of shares and securities. Its business activities had ceased and the firm stood dissolved with effect from 01.04.2012. The assessee had specifically intimated the ITO, Ward-2, Hisar about the dissolution through a letter dated 28.09.2012 and requested surrender of its PAN. The communication also stated that the firm’s bank account had been closed on or before 13.04.2012 and that no assets or liabilities remained. Despite possessing this information, the AO issued a notice dated 28.03.2019 under Section 148 in the name of the erstwhile firm, followed by notices under Sections 143(2) and 142(1).
The assessee repeatedly objected that reassessment could not validly be initiated against a firm which did not exist on the date of issuance of the jurisdictional notice. The AO rejected this contention on the ground that the firm had existed during AY 2012-13 and that its subsequent dissolution was of no consequence. The AO also invoked Section 188A to state that the erstwhile partners were jointly and severally liable for the dues of the firm. The Tribunal rejected this approach. It held that a reassessment notice under Section 148 issued in the name of a non-existent entity, despite the AO having unequivocal knowledge of its non-existence, was vitiated and non est in law. Such a defect was not a mere technical irregularity. The Tribunal relied upon Pr.CIT, New Delhi vs Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC), Uber India Systems Private Limited Vs Assistant Commissioner of Income & Ors. [2024] 168 taxmann.com 200 (Bom.) and Alok Knit Exports Ltd. vs DCIT [2021] 130 taxmann.com 457 (Bom.). The principle concerning proceedings against non-existent entities, including Maruti Suzuki India Ltd. and Spice Entertainment Ltd., is also discussed in TaxGuru’s analysis of revision under Section 263.
