Published on: November 15, 2023 at 00:05 IST
The Bombay High Court has ruled that reassessment proceedings cannot be initiated against a non-existent entity merely because its Permanent Account Number (PAN) remains active.
The court quashed notices issued by the Income Tax Department to Diversey India Private Limited (DIPL) under Section 148 (reassessment) and Section 142(1) (inquiry) of the Income Tax Act, 1961. The court observed that the notices were flawed as DIPL, having been amalgamated with the petitioner, had ceased to exist.
The bench, comprising Justice K. R. Shriram and Justice Neela Gokhale, stated, ‘The fact that PAN was not deactivated would not help the Revenue because there could be cases relating to various years when the company was in existence, and it is possible those PAN numbers are picked up for scrutiny or for issuance of refund. That, in our view, will not be a sanction for the Department to issue notices to a non-existing entity, particularly when they were aware that the entity was not in existence.’
The petitioner challenged the validity of notices issued under Section 148 and Section 142(1) of the Income Tax Act, asserting that DIPL, having been amalgamated with the petitioner, no longer existed.
The court acknowledged the amalgamation and emphasized that the active PAN does not authorize the issuance of notices to an entity that no longer exists, especially when the Department was aware of the entity’s non-existence.
The court allowed the petition and quashed the notices, underscoring the principle that the existence of an active PAN does not validate proceedings against a non-existent entity, highlighting the Department’s responsibility to be cognizant of the entity’s status.