Section 148 Reassessment order passed in case of non-existent entity is void

Case Name: Teleperformance Global Services Private Limited vs ACIT (Bombay High Court)

Written Petition No 950 of 2020
Date of judgment/order: 09.04.2021
Related Assessment Year – 2012-13
Court: Bombay High Court

The Hon’ble Bombay High Court has in case of writ petition filed by Teleperformance Global Services Private has held that assessment order passed against a non-existent company is void.

M/s Tecnovate Esolutions Pvt Ltd (TSPL) was registered company engaged in business of providing back office services/remote data entry services for customers in and outside India. Under order dated 11.02.2011 a scheme of amalgamation of aforesaid company with M/s Intelnet Global Services Pvt ltd, was approved with effect from 01.04.2010 and since then TSPL ceased to exist. Subsequently, M/s Intelnet Global Services Pvt Ltd amalgamated with M/s Serco BPO Pvt Ltd. Thereafter there has been change in the name with effect from 11.01.2016 from M/s Secro BPO Pvt Ltd to M/s Intelnet Global Services Pvt Ltd. There has been further change in name from Intelnet Global Services Pvt Ltd to Teleperformance Global Services Pvt Ltd (TGSPL) w.e.f 12.02.2019.

Notice u/s 148 of the Act for AY 2012-13 was issued to TSPL directing to file return of income within 30 days stating that there is reason to believe that income chargeable to tax had escapement, without realising that said company was non-existent entity. In response to notice TSPL filed a letter that w.e.f 01.04.2010 TSPL has been amalgamated and since then the said company do not exist and as such there is no question of filing return of income for AY 2012-13. The then company M/s Intelnet Global Services Pvt Ltd had duly filed return of income for all the subsequent years and submitted that the above notice u/s 148 was issued on misconception and appears to be an inadvertent error. The AO without considering the reply or even the telephonic conversation passed assessment order on 31.12.2019 for AY 2012-13 under section 144 r.w.s 147 of the Act, in the name of TSPL computing taxable income of Rs. 14,50,95,452/-. Aggrieved by the order, the TSPL filed writ petition challenging the notice issued u/s 148 and assessment order passed u/s 144 r.w.s 147.

The Hon’ble Bombay High Court has observed as under;-

The Supreme Court in the case of Maruti Suzuki (supra) had considered that income, which was subject to be charged to tax for the assessment year 2012-13 was the income of erstwhile entity prior to amalgamation. Transferee had assumed liabilities of transferor company, including that of tax. The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under Section 143(2) of the Act was issued on 26.9.2013, the scheme of amalgamation had been approved by the high court with effect from 1.4.2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292 (b) of the Act. The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. Vs.CIT8. The Supreme Court has also referred to decision of Delhi high court in the case of CIT Vs. Spice Enfotainment Ltd.9and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B.

The Supreme Court had also taken note of decision in Spice Entertainment (supra)was followed by Delhi high court in matters, viz. CIT Vs. Dimensions Apparels (P.) Ltd.10, CIT Vs. Micron Steels (P) Ltd.11; CIT Vs. Miscra India (P). Ltd.12 and in CIT Vs. Intel Technology India Ltd.13 Karnataka high court has held, if a statutory notice is issued in the name of nonexisting entity, entire assessment would be nullity in the eye of law.

The decision in the case of Maruti Suzuki (supra) would hold sway over present facts and circumstances”.