Reopening notice u/s 148 – Notice issued to non-existing entity – Notice could not be corrected u/s 292B

Reopening notice u/s 148 – Notice issued to non-existing entity – Notice could not be corrected u/s 292B

The impugned notice dated 27th March, 2021 has been issued to a non-existing entity. In the affidavit in reply, it is admitted that the notice has been issued to a non-existing entity but the respondents state that it ought to be treated as a mistake and the name in the notice could be corrected u/s 292B.

The respondents relied upon a judgment of the Delhi High Court in the case of Skylight Hospitality LLP vs. Assistant Commissioner of Income Tax, Circle-28(1), New Delhi (2018) 405 ITR 296 (Delhi) which has been subsequently affirmed on 6th April, 2018 by a two-Judge Bench of the Supreme Court.

The Court observed that this cannot be a general proposition as the Apex Court has expressly stated in Skylight Hospitality LLP (Supra) that ‘in the peculiar facts of this case, we are convinced that the wrong name given in the notice was merely a clerical error which could be corrected under section 292B of the IT Act (emphasis supplied)’.

The Apex Court in its recent judgment on this subject in Principal Commissioner of Income Tax vs. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC) has considered the judgment of Skylight Hospitality and said that it has expressly mentioned that in the peculiar facts of that case the wrong name given in the notice was merely a clerical error. In Maruti Suzuki India Ltd. (Supra) the Court has also observed that what weighed in the dismissal of the Special Leave Petition was the peculiar facts of that case. It has reiterated the settled position that the basis on which jurisdiction is invoked is u/s 148 and when such jurisdiction was invoked on the basis of something which was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation, the notice is bad in law.

The High Court noted that the Apex Court in Maruti Suzuki India Ltd. (Supra) had observed that the basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved Scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. The stand now taken in the affidavit in reply is nothing but an afterthought by the respondent after having committed a fundamental error. Therefore, the stand of the respondent that it was an error which could be corrected u/s 292B was not acceptable to this Court.

The Court followed the decision in the case of Alok Knit Exports Ltd. vs. Deputy Commissioner of Income Tax in its order dated 10th August, 2021 in WP No. 2742 of 2019.

In the circumstances, notice dated 27th March, 2021 issued u/s 148 was quashed and set aside.