Bazarclick Services Private Limited Vs ITO (Karnataka High Court)
Section 148 Knocked on a Non-Existent Company: Its Subsequent Revival Could Neither Resurrect the Dead Notice nor Cross Section 149’s ₹50 Lakh Threshold
Summary:
Relevant facts
In Bazarclick Services Private Limited v. Income Tax Officer, decided on 8 July 2026, the Karnataka High Court examined the validity of reassessment proceedings initiated against a company that had already been struck off from the Register of Companies when the notice u/s 148 was issued.
The dispute related to AY 2016–17. Bazarclick Services Private Limited had been struck off by the Registrar of Companies in 2017. Despite the company having ceased to exist in the eyes of law, the Income Tax Department obtained sanction dated 26 April 2021 u/s 151 & thereafter issued a reassessment notice dated 14 June 2021 u/s 148.
Recognising that the company stood struck off, the AO subsequently approached the National Company Law Tribunal seeking restoration of its name to facilitate completion of the income-tax proceedings. The NCLT allowed the Department’s application by order dated 22 March 2022, resulting in revival of the company.
However, after revival, the AO did not issue a fresh notice u/s 148. Instead, the Department continued the reassessment on the basis of the original notice dated 14 June 2021, which had been issued when the company was legally non-existent. This ultimately culminated in an assessment order dated 24 February 2026 u/s 147 r/w Sections 250 & 144B.
Consequential penalty notices were also issued u/s 274 r/w Sections 271(1)(c) & 271B.
Issues before the High Court
The principal issue was whether reassessment proceedings could lawfully be initiated through a notice issued to a company that had already been struck off & was not in existence on the date of notice.
The second issue was whether the subsequent revival of the company by the NCLT could retrospectively validate the earlier defective notice, permitting the AO to continue the proceedings without issuing a fresh notice.
An additional issue concerned Section 149. The alleged income escaping assessment was only ₹17.82 lakh, whereas the applicable monetary threshold for reopening beyond the prescribed period was ₹50 lakh. The Court therefore had to determine whether reassessment for AY 2016–17 was independently barred by limitation.
Petitioner’s submissions
The petitioner contended that the notice dated 14 June 2021 was issued when the company had already been struck off. A notice addressed to a non-existent entity was a jurisdictional nullity & incapable of commencing valid reassessment proceedings.
The petitioner emphasized that the Department itself was aware of the company’s non-existent status because the AO had approached the NCLT for its revival. Although the company was subsequently restored by the NCLT, the Department continued with the original reassessment proceedings without issuing a fresh notice after restoration.
According to the petitioner, an initiation that was void ab initio could not be cured merely because the company was revived at a later date. Jurisdiction had to exist on the date on which the statutory notice was issued.
The petitioner further submitted that the alleged escaped income amounted to only ₹17.82 lakh. Since this was substantially below the ₹50 lakh threshold contemplated u/s 149, the proceedings were also barred by limitation.
Revenue’s position
The Department’s Standing Counsel was heard on both objections. Significantly, the Revenue did not dispute that the proceedings had been continued on the strength of the notice dated 14 June 2021, which was issued when the company was not in existence.
Once this foundational fact remained undisputed, the Department could not demonstrate how a jurisdictionally invalid notice could support the subsequent assessment order. The amount of escaped income being ₹17.82 lakh was also not disputed.
Findings of the High Court
The High Court accepted both objections raised by the petitioner. It held that where a notice u/s 148 was issued to a company that did not exist on the date of issuance, the entire reassessment proceeding must fail from its inception.
The Court treated the defect as one going to the root of jurisdiction, rather than a minor procedural irregularity. Since the original initiation was void, subsequent restoration of the company could not automatically breathe validity into the notice. The AO ought not to have continued the proceedings on the basis of that notice.
The Court also considered the limitation prescribed u/s 149. For the relevant assessment year, reopening beyond the applicable period required escaped income of at least ₹50 lakh. Since the alleged escapement was merely ₹17.82 lakh, the statutory threshold was not satisfied.
Accordingly, the Court quashed the sanction u/s 151, notice u/s 148, reassessment order dated 24 February 2026 & both consequential penalty notices.
Legal reasoning
The decision rests upon the fundamental principle that a valid statutory notice is the foundation of reassessment jurisdiction. If the notice is issued to an entity that does not legally exist, there is no valid assumption of jurisdiction. Every subsequent action built upon such notice necessarily falls with it.
The NCLT’s restoration order revived the company, but it did not convert the earlier invalid notice into a valid jurisdictional instrument. The Department could not rely on subsequent revival while avoiding the requirement of taking legally permissible steps after restoration.
Section 149 provided a separate jurisdictional barrier. Even if the company’s restoration issue were ignored, the reassessment could not survive because the alleged escapement did not cross ₹50 lakh. Thus, the proceedings suffered from dual jurisdictional defects—notice to a non-existent company & failure of the monetary threshold.
Practical implications
The ruling confirms that corporate status must be verified before issuing notices u/s 148. Where a company has been struck off, the Department must first obtain restoration & thereafter initiate proceedings through a legally valid notice, subject to limitation.
For taxpayers, the judgment establishes that objections relating to non-existent entities & Section 149 limitation are jurisdictional objections that can invalidate the entire assessment. Consequential penalty proceedings cannot survive after the reassessment foundation is quashed.
The decisive takeaway is that revival cannot retrospectively repair a dead notice, while Section 149 cannot be stretched to reopen ₹17.82 lakh when the statutory entry ticket is ₹50 lakh.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner’s grievance is essentially with the Assessment Order dated 24.02.2026 for the assessment year 2016-17 under Section 147 read with Section 250 of the Income Tax Act, 1961 [for short, ‘the IT Act’]. The petitioner has also called in question the Order of Sanction dated 26.04.2021, the notice dated 14.06.2021 under Section 148 of the IT Act and other proceedings.
2. Mr. Hemant Venkatray Pai, the learned counsel for the petitioner, submits that the principal question is whether the first respondent could have concluded the assessment proceedings based on the notice dated 14.06.2021 under Section 148 of the IT Act and in support of a finding in favour of the petitioner on this question, the learned counsel emphasizes the following.
[a] The petitioner was struck off from the Register of Companies by the Registrar of Companies in the year 2017.
[b] The Assessing Officer has filed an application with the National Company Law Tribunal [NCLT] under the Companies Act, 2013 for revival of the Company to facilitate conclusion of the assessment proceedings.
[c] The NCLT has allowed this application vide the order dated 22.03.2022 and the Company is thus revived.
[d] The Assessing Officer, without issuing fresh notice, has continued the proceedings under the 148 notice dated 14.06.2021 and that the proceedings continued based on such notice must fail because the initiation is void ab initio.
3. Mr. Hemant Venkatray Pai also points out that the Assessing Officer, without issuing fresh notice, has continued the proceedings under the 148 notice dated 14.06.2021, that the proceedings continued based on such notice must fail because the initiation is void ab initio and that the alleged income that has escaped tax is in a sum of Rs.17,82,000/- which is much below the threshold contemplated under Section 149 of the Income Tax Act.
4. Mr. M. Dilip, the learned Standing counsel for the respondents, is heard in the light of these circumstances. The position that proceedings are continued based on the notice dated 14.06.2021 issued when the Company was not in existence is not in dispute and in that event, the entire proceedings must fail as it would be void from the very initiation. Further, this Court must also consider that the income alleged to have escaped is in a sum of Rs.17,82,000/- when the limitation under Section 149 of the IT Act relevant to the assessment year was Rs.50,00,000/-.
In the light of the afore, the following.
ORDER
The petition is allowed quashing the Order of Sanction dated 26.04.2021 [Annexure – A], Notice under Section 148 of the IT Act dated 14.06.2021 [Annexure – B], Assessment Order dated 24.02.2026 [Annexure – C], Notice for penalty under Section 274 read with Section 271(1)(c) of the IT Act dated 24.02.2026 [Annexure – D] and Notice for penalty under Section 274 read with Section 271B of the IT Act dated 24.02.2026 [Annexure – E].
