Reassessment Proceeding Initiated Against Non-existent Company is Invalid: ITAT Delhi

The Income Tax Appellate Tribunal (ITAT), New Delhi, has held that issuing notices under section 148 for reopening of assessment in the name of an erstwhile company is bad in the eyes of the law.

The assessee, Mango Infratech Solutions, was established as a private company but was later converted into a limited liability partnership with the name Mango Infratech Solutions LLP with effect from 16.10.2017.

The assessing officer, based on the information that the assessee has made an investment of Rs 11,35,68,126, issued a notice under section 148 on 30.03.2019 in the name of the erstwhile company. Even though the assessee informed the AO about the conversion, the reassessment order was still passed in the name of a non-existent entity.

The assessee appealed before the CIT(A), which gave relief and deleted the additions made by the AO. Therefore, the Revenue filed an appeal before the ITAT challenging the CIT(A)’s order.

The issue before the tribunal was whether the notice under section 148 for the reassessment proceedings can be issued by the AO in the name of a company that had ceased to exist.

The Tribunal agreed with CIT(A)’s findings, observing that once the company converted into an LLP, it was deemed to be removed from the ROC records and therefore became a non-existent entity.

The Tribunal relied on the Supreme Court ruling in the case of Pr. CIT vs. Maruti Suzuki India Ltd. (supra), holding that the notice issued under section 148 of the Act in the name of a non-existent company is not valid and the reassessment proceedings initiated in the name of such a company are bad in law.

Accordingly, the ITAT quashed the reassessment order passed by the AO and rejected the revenue’s appeal.