Case Law Details
Informatica Business Solutions Private Limited Vs ACIT (Karnataka High Court)
In a significant ruling, the Karnataka High Court declared that reassessment notices issued to a non-existing entity are legally untenable. This decision arose from the case of Informatica Business Solutions Private Limited Vs ACIT, where the court scrutinized the validity of notices issued under Section 148 and 148A of the Income Tax Act, 1961. The judgment emphasizes the legal principle that notices should not be served on entities that have ceased to exist due to amalgamation or other reasons.
1. Background of the Case
The petitioner, Informatica Business Solutions Private Limited, challenged the validity of an order passed under Section 148A(d) of the Income Tax Act and related notices under Section 148. The contention was that the notices were addressed to M/s. Allsight Software India Private Limited, an entity that had ceased to exist following an amalgamation effective from April 1, 2019. The reassessment notice was issued for the assessment year 2020-21 on February 28, 2024, well after the amalgamation had taken effect.
2. Legal Framework and Precedents
The petitioner’s counsel cited the Supreme Court’s decision in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd., where it was held that issuing notices to a non-existing entity is invalid. The scheme of amalgamation for Allsight Software India Private Limited was confirmed on October 28, 2019, rendering it non-existent from April 1, 2019. Therefore, any notices issued in its name post this date were deemed null and void.
3. Court’s Observations and Decision
The Karnataka High Court acknowledged the petitioner’s argument that the reassessment notice was issued to an entity that no longer existed. The court noted that:
- The amalgamation scheme fixed April 1, 2019, as the effective date.
- Post this date, the entity ceased to exist, making any notices issued to it invalid.
- The income of the amalgamated entity was already included in the returns filed by the new entity.
Considering these points, the court set aside the notices issued under Section 148A(b) and the order under Section 148A(d). The court further directed that the authorities might consider the merits of the contentions raised by the petitioner, including the income already declared in the new entity’s returns.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has called in question the validity of the order at Annexure-‘E’ passed under Section 148A (d) of the Income Tax Act, 1961 (for short ‘the Act’) as well as the notice under Section 148 of the Act at Annexure-‘F’ and the notices at Annexures-C and G.
2. It is the case made out by the learned counsel appearing on behalf of the petitioner that the notice under Section 148A (b) of the Act has been issued in the name of M/s. Allsight Software India Private Limited by notice dated 28.02.2024 relating to the assessment year 2020-21. While the said entity has ceased to exist by virtue of confirmation of the order of scheme of amalgamation dated 28.10.2019 showing the appointed date from which the scheme would be effective as 01.04.2019. Accordingly, reliance is placed on the order of the Apex Court in the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd., reported in (2019) 107 com 375 (SC). It is submitted that notice to a non-existing entity is not legally tenable.
3. It is noticed that the notice under Section 148A (b) of the Act is issued on 28.02.2024 with respect to the assessment year 2020-21. The scheme of amalgamation has fixed the appointed date as 01.04.2019 and accordingly after such date, the entity to which notice is issued is deemed not to be in existence. If that were to be so, issuance of notice to M/s. Allsight Software India Pvt. Ltd., requires to be set aside on such sole ground of entity not being in existence on the relevant date of issuance of notice.
4. The Court has also taken note of the submission made on behalf of the petitioner that by virtue of the scheme of amalgamation, there would be a transfer of liability and even otherwise returns have been filed as regards the new entity, taking note of the income of M/s. Allsight Software India Pvt. Ltd., as well, and accordingly there no prejudice is caused.
5. It is further submitted that as regards such income of M/s. Allsight Software India Pvt. Ltd., return filed in the name of the petitioner has also been the subject matter for consideration as is evidenced in the assessment order at Annexure-1B1.
6. Accordingly, the notices under Section 148A (b) at Annexures-‘C’ and ‘G’ are set aside and consequently, the notice at Annexure-‘F’ as well as the order at Annexure-‘E’ are set aside.
7. The authorities may examine contentions raised on merits as well, including that the income of M/s. Allsight Software India Pvt. Ltd., which has been subsequently declared in the return of income filed in the name of the petitioner after approval of the scheme of amalgamation and that assessment orders have already been passed.
8. If that were to be so, prima-facie question of initiating further proceedings does not arise. However, liberty is reserved to the department as to take necessary action as is permissible in law, if circumstances are so made out as regards the subject matter of notice under Section 148A (b) of the Act as is permissible in law.
9. Accordingly, petition is disposed off.
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