Navin Gems Pvt Ltd (Liquidated) Vs DCIT (Bombay High Court)
Core issue: Whether reassessment proceedings initiated under Section 148 and completed under Section 147 against a company after its dissolution by the NCLT are legally valid, and whether the jurisdictional defect of issuing a notice to a non-existent entity can be cured under Section 292B of the Income-tax Act.
Fact: The assessee-company filed its return for AY 2015-16 on 30 October 2015, declaring a loss of Rs. 5,855. The NCLT ordered winding up on 16 January 2024 and subsequently dissolved the company under Section 302 of the Companies Act, 2013, by order dated 29 July 2024. Thereafter, on 26 August 2024, the Assessing Officer issued a notice under Section 148 in the name of the dissolved company, relying on information arising from search and survey proceedings concerning the Invent Group and alleging escapement of income of approximately Rs. 49.81 crore. Subsequent notices were issued, and an ex parte reassessment order dated 27 March 2026 assessed total income at Rs. 49,80,94,145, making additions of Rs. 17.51 crore under Section 56(2)(x) and Rs. 32.30 crore under Section 68. A demand of Rs. 39,61,67,150 was raised, and consequential penalty notices were issued. The company challenged the proceedings on the ground that it had ceased to exist before the notice under Section 148 was issued.
AO / CIT finding: The Assessing Officer initiated reassessment proceedings and passed the assessment order in the name of the dissolved company, making additions under Sections 56(2)(x) and 68. The Revenue contended before the High Court that the assessee should pursue its statutory appeal before the CIT(A), which had already been filed to protect against limitation. The supplied judgment does not record a separate substantive CIT(A) decision on the merits of the reassessment.
High Court finding: The Bombay High Court held that, following the NCLT’s dissolution order dated 29 July 2024, the company ceased to exist as a juristic person. Therefore, when the notice under Section 148 was issued on 26 August 2024, there was no legal person to whom the notice could validly be issued or against whom reassessment proceedings could be initiated. The Court observed that a valid notice under Section 148 forms the foundation for assuming jurisdiction under Section 147. A notice issued to a non-existent entity renders the proceedings founded upon it invalid. Relying on the Supreme Court’s decision in PCIT v. Maruti Suzuki India Ltd., the Court held that assessment against a non-existent entity involves a substantive illegality going to the root of jurisdiction and is not a mere procedural irregularity curable under Section 292B. Consequently, the notice under Section 148 and all consequential proceedings, including the assessment order, computation sheet, demand notice and penalty notice, could not survive. The Court confined its decision to this jurisdictional issue and kept all other contentions open, including the challenges relating to approval under Section 151, natural justice and the merits of the additions.
Cases relied: Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC), holding that an assessment framed against a non-existent entity involves a substantive jurisdictional illegality that cannot be cured under Section 292B; and Whirlpool Corporation v. Registrar of Trade Marks, Mumbai & Ors. (1998) 8 SCC 1 (SC), concerning the availability of writ jurisdiction under Article 226 despite an alternative statutory remedy in appropriate cases.
Outcome: The Bombay High Court allowed the writ petition and quashed the notice under Section 148 dated 26 August 2024, the reassessment order dated 27 March 2026, the consequential demand of Rs. 39,61,67,150 and the penalty notice dated 31 March 2026. All other contentions were kept open, and no order as to costs was passed. The petitioner also undertook to withdraw its pending appeal before the CIT(A) within two weeks.
Cases Discussed
- PCIT Vs Maruti Suzuki India Ltd., (2019) 416 ITR 613 (Supreme Court) — Relied upon by the petitioner and applied by the Court to hold that assessment against a non-existent entity involves a substantive illegality that Section 292B cannot cure.
- Whirlpool Corporation Vs Registrar of Trade Marks, (1998) 8 SCC 1 (Supreme Court) — Cited by the petitioner in support of exercising writ jurisdiction despite the availability of an alternative statutory remedy.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally.
2. By this Petition, the Petitioner being a company which stood dissolved by an order dated 29th July 2024 passed by the National Company Law Tribunal, Mumbai Bench (‘NCLT’), acting through its erstwhile director Mr. Amit A. Gandhi, is challenging the Assessment Order dated 27th March 2026 (‘impugned order’) passed by Respondent No.1 under Section 147 read with Section 144 of the Income Tax Act, 1961 (‘the Act’), the Notice of Demand dated 27th March 2026 under Section 156 of the Act raising a demand of Rs.39,61,67,150/-, and the penalty notice dated 31st March 2026. The short ground on which the impugned order is assailed is that the entire reassessment proceedings, commencing with the Notice dated 26th August 2024 issued under Section 148 of the Act, were initiated and completed in the name of a company which had already been dissolved and was therefore non-existent in the eyes of law.
3. For the year under consideration, i.e. A.Y.2015-16, the Petitioner filed its Return of Income on 30th October 2015 declaring a loss of Rs.5,855/-. The return was processed by an intimation under Section 143(1) of the Act on 2nd December 2015.
4. By an order dated 16th January 2024, the NCLT ordered the winding up of the Petitioner Company and appointed a Liquidator. Subsequently, the NCLT passed an order dated 29th July 2024 dissolving the Petitioner Company under Section 302 of the Companies Act, 2013.
5. Thereafter, on 26th August 2024, Respondent No.1 issued a Notice under Section 148 of the Act in the name of ‘Navin Gems Private Limited’ and provided a copy of the approval under Section 151 of the Act along with the reasons for reopening. The reasons recorded were based on a search and survey action conducted on 8th December 2021 in the case of M/s Invent Assets Securitisation & Reconstruction Pvt. Ltd. and its related entities (‘Invent Group’) alleging that income of Rs.49,81,00,000/- has escaped assessment. The notice and the approval were sent to the personal e-mail address of another erstwhile Director of the Petitioner Company, Mr. Champakbhai P. Gandhi, which was not the e-mail address registered with the Income Tax Department.
6. Subsequently, a Notice dated 6th November 2025 under Section 142(1) of the Act and a Show Cause Notice dated 23rd February 2026 were issued, again in the name of ‘Navin Gems Private Limited’. The Show Cause Notice proposed to add Rs.17,51,00,000/- under Section 41(1) of the Act and Rs.32,30,00,000/- under Section 68 of the Act. Both notices were sent to the registered e-mail address i.e. ‘[email protected].’, which belonged to the Petitioner’s erstwhile Chartered Accountants, who did not communicate the notices to the Petitioner’s erstwhile directors. Consequently, no reply was filed.
7. The impugned order dated 27th March 2026 was passed ex-parte under Section 147 read with Section 144 of the Act, in the name of ‘Navin Gems Private Limited’ assessing the total income at Rs.49,80,94,145/- against the returned loss of Rs.5,855/- making an addition of Rs.17,51,00,000/- under Section 56(2)(x) of the Act and an addition of Rs.32,30,00,000/- under Section 68 of the Act and also initiated penalty proceedings under Section 270A of the Act. Subsequently, a computation sheet and a Notice of Demand under Section 156 of the Act for Rs.39,61,67,150/- were issued on 27th March 2026 and a penalty notice under Section 274 read with Section 271(1)(c) of the Act was issued on 31st March 2026. All of these were issued in the name of the dissolved company.
8. The Counsel for the Petitioner referred to the NCLT order dated 29th July 2024 dissolving the company from the date of the NCLT order under Section 302 of the Companies Act, 2013 and submitted that the Petitioner ceased to exist in the eyes of law from that date. The Notice under Section 148 of the Act dated 26th August 2024, the impugned order dated 27th March 2026, the computation sheet, Notice of Demand and penalty notice were all issued in the name of the Petitioner Company after it stood dissolved. The Counsel for the Petitioner submits that the assumption of jurisdiction under Sections 147 and 148 of the Act presupposes the existence of a person against whom income is sought to be assessed. A notice issued to, and an assessment framed upon, a non-existent entity is void ab initio. Such a defect goes to the root of the matter and is a substantive illegality, not a procedural irregularity that can be cured by Section 292B of the Act. In this regard reliance was placed on the judgment of the Hon’ble Supreme Court in PCIT V/S Maruti Suzuki India Ltd. [(2019) 416 ITR 613 (SC)]. Further, the Counsel for the Petitioner also pointed out that (i) the impugned order is passed ex parte, (ii) approval under Section 151 of the Act is bad in law and (iii) no effective opportunity of being heard has been provided to it. Interestingly, the Show Cause Notice proposed an addition under Section 41(1) of the Act but in the impugned order an addition has been made under Section 56(2)(x) of the Act and penalty has been initiated under Section 270A of the Act. Both Section 56(2)(x) and Section 270A of the Act have been inserted by Finance Act 2017 and Finance Act, 2016 respectively and cannot apply to the year under consideration i.e A.Y.2015-16.
9. The Counsel for the Respondent on the other hand pointed out that the Petitioner has filed an appeal before the Commissioner of Income Tax (Appeals) [‘CIT(A)’] on 23rd April 2026 and should pursue its appeal before the CIT(A) instead of seeking relief in this Petition.
10. In rejoinder, the Counsel for the Petitioner pointed out that it has filed an appeal before the CIT(A) only to save itself from limitation and undertakes to withdraw the appeal before the CIT(A) if the Petition is allowed. Further, the present case falls within the realm of the exception carved out by the Supreme Court in Whirlpool Corporation V/S Registrar of Trade Marks [(1998) 8 SCC 1 (SC)], where it was held that in spite of alternate remedy being available, this Court can excise its jurisdiction vested under Article 226 of the Constitution and quash and set aside the impugned order and consequential demand and penalty notices.
11. Though several grounds have been raised in the Petition, including breach of the principles of natural justice, the validity of the approval under Section 151 of the Act and the merits of the additions, we propose to confine ourselves to the challenge to the impugned order and the reassessment proceedings initiated and completed against a non-existent entity.
12. The NCLT vide its order dated 29th July 2024 passed under Section 302(2) of the Companies Act, 2013 has ordered that the Petitioner company stands dissolved from the date of that order. The relevant extract of the NCLT order is as under :-
“…7. In view of facts stated above, this is a fit case for dissolution of the Corporate Debtor under Section 302 of The Companies Act, 2023. Ordered accordingly. The Petitioner Company stands ‘Dissolved’ from the date of this Order…”
13. Once such an order is passed, the company ceases to exist as a juristic person. In the present case, the NCLT has in terms directed that the Petitioner Company stands dissolved with effect from 29th July 2024. Thus, on the date on which the Notice under Section 148 of the Act was issued, namely, 26th August 2024, there was no person in existence upon whom such a notice could be issued, or against whom any assessment or reassessment could be made and hence, the Revenue could not have issued the notices and orders in the name of ‘Navin Gems Private Limited’. The issuance of a valid notice under Section 148 of the Act is the foundation for the assumption of jurisdiction to assess or reassess income under Section 147 of the Act. A notice issued in the name of an entity which does not exist in law is bad in law, and the proceedings founded upon it are equally bad in law. The Hon’ble Supreme Court in Maruti Suzuki India Ltd. (supra) has held that the framing of an assessment against a non-existent entity is not a procedural irregularity but a substantive illegality which goes to the root of the matter, and that such a defect cannot be cured by invoking Section 292B of the Act.
14. Since the Notice dated 26th August 2024 issued under Section 148 of the Act is itself void, having been issued to a non-existent entity, all proceedings consequent thereto, including the impugned order dated 27th March 2026, the computation sheet and the Notice of Demand dated 27th March 2026, and the penalty Notice dated 31st March 2026, cannot survive. On this ground alone, the Notice under Section 148 of the Act and the impugned order are liable to be quashed and set aside. All other contentions are kept open to be agitated if the need so arises.
15. In view of the above, the Petition is allowed in terms of prayer clause (a), which reads thus :-
“(a) that this Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ order or direction under Article 226 of the Constitution of India calling for the records of the case leading to passing of the impugned order and after going through the same and examining the question of legality thereof quash, cancel and set aside the impugned order dated March 27, 2026 (Exhibit-K) as well as the demand and penalty notices dated March 27, 2026 and March 31, 2026 (Exhibit-M and Exhibit-N respectively);”
16. Rule is made absolute in the aforesaid terms, and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.
17. The Counsel for the Petitioner, states that, in light of this order, the Petitioner undertakes to withdraw the Appeal filed before the CIT(A) on 23rd April 2026 against the impugned order. He states that the said Appeal shall be withdrawn within a period of 2 weeks from today. The said statement is accepted as an undertaking given to the Court.
18. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
