City Corporation Limited Vs ACIT (Bombay High Court)
Income Tax notices to non-existent company were void ab initio & cannot be rectified under Section 292B: Bombay HC
Bombay High Court ruled on a set of petitions filed by City Corporation Limited (CCL) challenging reassessment notices issued under Section 148 of the Income Tax Act, 1961. These notices, dated March 31, 2023, were issued to Amanora Future Towers Pvt. Ltd. (AFTPL), a company that had merged with CCL effective April 1, 2018. The Income Tax Department had been formally notified of the merger in August 2020. Despite this, the Assistant Commissioner of Income Tax issued the notices in the name of the defunct entity, prompting CCL to seek judicial intervention. CCL argued that the notices were void ab initio as they targeted a non-existent company, relying on the Supreme Court’s precedent in Maruti Suzuki India Ltd. and other cases, which held that issuing notices to an entity that had ceased to exist is a substantive illegality rather than a procedural defect.
The tax department contended that the error was due to a technical glitch in the system, which automatically generated the notice in the name of AFTPL, even though approvals had been obtained in the name of CCL. However, the Court rejected this argument, emphasizing that the department had prior knowledge of the merger and that procedural lapses could not justify a notice issued to a non-existent entity. Citing Maruti Suzuki India Ltd., Uber India Systems (P.) Ltd., and Alok Knit Exports Ltd., the Court held that such notices were legally invalid and could not be rectified under Section 292B of the IT Act. The Court, therefore, quashed the impugned notices, reiterating that compliance with legal requirements cannot be compromised due to administrative inefficiencies.
