QUEST GLOBAL ENGINEERING SERVICES PRIVATE LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX

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WP/102092/2022HC KarnatakaKAHC02007000202212 September 2024Bench: JYOTI MULIMANI5 pages
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What did the High Court hold?

The High Court held that the proceedings initiated under Section 148A(b), the order passed under Section 148A(d), and the notice issued under Section 148 of the Income Tax Act, 1961, were irregular and liable to be set aside. The Court observed that the notice under Section 148A(b) was issued to Quest Global Engineering Services Private Limited but showed the defunct PAN of the erstwhile company, Quest Global Engineering Private Limited. Furthermore, the Section 148A(d) order was passed against Quest Global Engineering Private Limited, and the Section 148 notice was issued to Quest Global Engineering Services Private Limited, again using the defunct PAN of Quest Global Engineering Private Limited. The Court emphasized that Quest Global Engineering Private Limited was non-existent due to the prior amalgamation. Consequently, the Court quashed the order dated 05.04.2022 passed under Section 148A(d) and the notice dated 05.04.2022 issued under Section 148. The ratio decidendi is that tax proceedings initiated against a non-existent entity using its defunct PAN, even if the surviving entity is also named, are vitiated by irregularity.

What were the facts?

The petitioner, Quest Global Engineering Services Private Limited (merged entity), was involved in a scheme of amalgamation approved by the National Company Law Tribunal on 17.10.2017, with an appointed date of 01.04.2016. The petitioner filed its return for Assessment Year 2018-19, incorporating transactions of amalgamating companies. The case was selected for scrutiny, and a notice under Section 143(2) was issued. Due to the amalgamation, the case was transferred to the Assistant Commissioner of Income Tax. On 30.09.2021, a draft order under Section 143(3) read with Section 144C(1) was passed. Subsequently, on 15.03.2022, a notice under Section 148A(b) was issued, to which the petitioner responded. On 05.04.2022, the Assistant Commissioner passed an order under Section 148A(d) and issued a notice under Section 148. The petitioner filed a writ petition challenging these actions.

What were the issues?

1. Whether the proceedings initiated under Section 148A(b), the order passed under Section 148A(d), and the notice issued under Section 148 of the Income Tax Act, 1961, are irregular and liable to be set aside, considering that the notices and orders were issued using the defunct PAN of an erstwhile amalgamating company (Quest Global Engineering Private Limited) instead of the PAN of the petitioner (Quest Global Engineering Services Private Limited), which was the surviving entity post-amalgamation. Assessee's Contention: The petitioner argued that the entire proceedings were irregular and liable to be set aside because the notices and orders were issued against a non-existing entity (Quest Global Engineering Private Limited) by using its defunct PAN, despite the amalgamation having taken place and Quest Global Engineering Services Private Limited being the surviving entity. Revenue's Contention: The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 143(3),Section 144C(1),Section 148A(b),Section 148A(d),Section 148

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC-D:13067 WP No. 102092 of 2022

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 12TH DAY OF SEPTEMBER, 2024 BEFORE THE HON'BLE MS. JUSTICE JYOTI MULIMANI WRIT PETITION NO. 102092 OF 2022 (T-IT) BETWEEN:

QUEST GLOBAL ENGINEERING SERVICES PRIVATE LIMITED (FOR THE MERGED ENTITY M/S. QUEST ENGINEERING AND SOFTWARE TECHNOLOGIES PRIVATE LIMITED), NO.437/A, PLOT NO.2, AEQUS SPECIAL ECONOMIC ZONE, HATTARAGI VILLAGE, HUKKERI TALUKA, BELAGAVI, KARNATAKA-591 245, REPRESENTED BY ITS DIRECTOR, MR. RAMAN SUBRAMANIAN, AGE: 59 YEARS. …PETITIONER (BY SRI. K.R.PRADEEP AND SMT. GIRIJA.G.P., ADVOCATES)

AND:

1.

ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, BELAGAVI, FEROZ KHIMJIBHAI COMPLEX, OPP. CIVIL HOSPITAL, DR. AMBEDKAR ROAD, BELAGAVI-590 001.

2.

PRINCIPAL COMMISSIONER OF INCOME TAX, HUBBALLI, C.R. BUILDING, NAVANAGAR, HUBBALLI-580 025. …RESPONDENTS (BY SRI. M.THIRUMALESH., ADVOCATE)

Digitally signed by THEJASKUMAR N Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC-D:13067 WP No. 102092 of 2022

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.

THIS WRIT PETITION IS LISTED FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, AN ORDER IS MADE AS UNDER: ORAL ORDER Sri.K.R.Pradeep., counsel for the petitioner and Sri.M.Thirumalesh., counsel for the respondents have appeared in person. 2. The short facts are these: On 17.10.2017, the National Company Law Tribunal, Bangalore Bench in C.P (CAA) No.42/BB/2017 approved the scheme of amalgamation between (1) Quality Engineering and Software Technologies Private Limited and (2) Quest Global Engineering Private Limited with (3) Quest Global Engineering Services Private Limited with appointed date of 01.04.2016. An intimation of the merger was given to the Assessing Officer. The petitioner filed a return of income for the Assessment Year 2018-19 including the transactions of the amalgamating companies. The case of the petitioner was selected for complete scrutiny and a notice under Section 143(2) of the

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NC: 2024:KHC-D:13067 WP No. 102092 of 2022

Income Tax Act, 1961 was issued, since the case pertained to the amalgamation of companies, the case was transferred to the office of the first respondent. On 30.09.2021, the first respondent passed a draft order under Section 143(3) R/w Section 144C (1) of the Act in the case of the petitioner for the Assessment Year 2018-19. On 15.03.2022, a notice under clause (b) of Section 148A of the Act was issued by the first respondent seeking compliance on or before 25.03.2022. In response to the notice, the petitioner replied inter-alia intimating the merger status. The reply filed by the petitioner about financial statements for specific items as mentioned in the notice. On 05.04.2022, the first respondent passed an order under Section 148A(d) of the Act along with an issue of notice under Section 148 of the Act. Hence, the petitioner has filed the captioned Writ Petition under Articles 226 and 227 of the Constitution of India on several grounds as set out in the Memorandum of Writ Petition. 3. Heard the arguments and perused the Writ papers and the statement of objections with care.

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NC: 2024:KHC-D:13067 WP No. 102092 of 2022

4.

A perusal of the entire writ papers reveals that a notice under Section 148A(b) of the Act was issued to Quest Global Engineering Services Private Limited showing the defunct PAN Number AACQ1782C of erstwhile company i.e., Quest Global Engineering Private Limited. However, 148A(d) order is passed against Quest Global Engineering Private Limited and 148 Notice is issued to Quest Global Engineering Services Private Limited by showing the defunct PAN Number AACQ1782C of Quest Global Engineering Private Limited. It is pivotal to note that Quest Global Engineering Private Limited was non-existing, since the amalgamation had already been taken place. Therefore, the entire proceedings i.e., issuance of notice under Section 148A(b), Order passed under Section 148A(d) and the notice issued under Section 148 of the Act are irregular and liable to be set-aside and so, they are set-aside. 5. The Writ of Certiorari is ordered. The Order dated 05.04.2022 passed by the first respondent under Section 148A(d) of the Income Tax Act, 1961 in DIN & NOTICE No.ITBA/AST/F/148A/2022-23/1042524776(1) for the Assessment Year 2018-19 vide Annexure-B and the notice dated 05.04.2022 issued by the first respondent under Section

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NC: 2024:KHC-D:13067 WP No. 102092 of 2022

148 of the Income Tax Act, 1961 in DIN & NOTICE No.ITBA/AST/S/148_1/2022-23/1042527695(1) for the Assessment Year 2018-19 vide Annexure-A are quashed. 6. Resultantly, the Writ Petition is allowed.

Sd/- (JYOTI MULIMANI) JUDGE TKN LIST NO.: 2 SL NO.: 30.2

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