HARMAN CONNECTED SERVICES CORPORATION INDIA PVT LTD vs. DEPUTY COMMISSIONER OF INCOME TAX

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WP/11549/2023HC KarnatakaKAHC01027466202315 June 2023Author: S SUNIL DUTT YADAV5 pages
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What did the High Court hold?

The High Court held that the notice issued under Section 148A(b) and the order passed under Section 148A(d) in the name of Harman Connected Services Technologies Pvt. Ltd. were liable to be set aside. The Court noted that the fact that the entity to which the notice was issued had ceased to exist due to a merger with the petitioner company effective from 01.04.2017 was an admitted fact. Following the Apex Court's judgment in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd., the Court observed that a notice and assessment order passed in the name of a non-existing company constitutes a substantive illegality and is an order passed without jurisdiction. Accordingly, the order under Section 148A(d) and the notice under Section 148 were set aside on the ground that they were issued to a non-existent entity. The authorities were granted liberty to initiate appropriate proceedings as permissible in law against the petitioner company.

What were the facts?

The petitioner, Harman Connected Services Corporation India Pvt. Ltd. (for the merged entity Harman Connected Service Technologies Private Ltd.), filed a writ petition challenging an order dated 30.03.2023 passed by the Deputy Commissioner of Income Tax under Section 148A(d) of the Income Tax Act, 1961. This order rejected the petitioner's objections to the initiation of reassessment proceedings for Assessment Year 2019-20. The petitioner also sought to quash the notice issued under Section 148 for the same assessment year. The core of the petitioner's argument was that the entity to which the notice under Section 148A(b) was issued, Harman Connected Services Technologies Pvt. Ltd., had ceased to exist due to a merger with the petitioner company effective from 01.04.2017, prior to the issuance of the notice. The facts regarding the merger and the non-existence of the entity at the time of notice were not disputed.

What were the issues?

1. Whether the notice issued under Section 148A(b) and the subsequent order under Section 148A(d) passed in the name of a non-existent entity, due to a prior merger, are valid and passed with jurisdiction? Assessee's Contention: The assessee argued that the notice under Section 148A(b) and the order under Section 148A(d) were issued to Harman Connected Services Technologies Pvt. Ltd., which had ceased to exist as a separate entity due to its merger with the petitioner company effective from 01.04.2017. Therefore, these proceedings were substantively illegal and passed without jurisdiction. The assessee relied on the judgment of the Apex Court in Principal Commissioner Income Tax, New Delhi vs. Maruti Suzuki India Limited (2019) 107 Taxman.com 375 (SC). 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 148A(d),Section 148A(b),Section 148

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF JUNE, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 11549 OF 2023 (T-IT) BETWEEN:

HARMAN CONNECTED SERVICES CORPORATION INDIA PVT. LTD., (FOR THE MERGED ENTITY HARMAN CONNECTED SERVICE TECHNOLOGIES PRIVATE LTD.) A COMPANY INCORPORATED UNDE THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT NO.3 AND 3A, EOIZ INDUSTRIAL AREA SURVEY NOS. 85 AND 86, SADARAMANGALA VILLAGE KRISHNARAJAPURAM HOBLI WHITEFIELD, S O., RAMAGONDANHALLI BENGALURU-560066. REP. BY HEREIN BY ITS VIVEK KHEMKA DIRECTOR …PETITIONER (BY SRI. S.SURYANARAYANA SENIOR ADVOCATE FOR SMT. TANMAYEE RAJKUMAR ALONG WITH SMT. SHRUTI SINGH., ADVOCATES)

AND:

1.

DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1)(1), BMTC BUILDING, 6TH BLOCK 80 FEET ROAD, KORAMANGALA BANGALORE-560095.

2.

THE PRINCIPAL COMMISSIONER OF INCOME TAX-3 BMTC BUILDING, 6TH BLOCK

Digitally signed by SHWETHA RAGHAVENDRA Location: HIGH COURT OF KARNATAKA

80 FEET ROAD, KORAMANGALA BANGALORE-560095. …RESPONDENTS (BY SRI. M. DILIP., ADVOCATE)

THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DTD 30/03/2023 BEARING NO. ITBA/AST/F/148A/2022- 23/1051654084(1) (ANNEXURE-G) PASSED BY THE R-1 U/S 148A(d) OF THE ACT, REJECTING THE PETITIONERS OBJECTIONS AS TO THE INITIATION OF THE ASSESSMENT PROCEEDINGS FOR THE AY 2019-20 AND ETC.

THIS WRIT PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER

The petitioner Harman Connected Services Corporation India Pvt. Ltd. has called in question the validity of the order dated 30.3.2023 at Annexure-G which is an order passed by the respondent No.1 under Section 148A(d) of the Act, rejecting the petitioner’s objections for initiation of re-assessment proceedings for the Assessment Year 2019-20 and has also sought for quashing of the notice issued under Section 148 for the Assessment Year 2019-20. 2. It is pointed out that the notice under Section 148A(d) was issued on 25.1.2023 as regards the entity-Harman Connected Services Technologies Pvt. Ltd.

It is submitted that the said entity is no longer in existence as on the date of issue of notice under Section 148A(b) of the Act, by virtue of order passed under Section 233 of Companies Act whereby the said entity has merged with the petitioner company with effect from 1.4.2017.

3.

Accordingly, it is submitted that the notice under Section 148A(b) and the order passed under Section 148A(d) require to be set aside. Reliance is placed on the judgment Apex Court in case Prl. Commissioner Income Tax, New Delhi vs. Maruti Suzuki India Limited reported in 2019

Taxman.com page 375 (SC).

4.

Facts are not in dispute. The fact that 148A(b) notice was issued to Harman Connected Services Technologies Pvt. Ltd., which has ceased to exist by virtue of approval of scheme of merger with effect from the 1.4.2017 is an undisputed fact.

5.

An identical legal question was raised in WP No.9594/2023, which was disposed off on 1.06.2023, the relevant para 9 of the said order reads as follows:- 9. In light of the judgment of the Apex Court in the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. reported in (2019) 107 taxmann.com 375 (SC), it is clear that notice and assessment order passed in the name of non-existing company is a substantive illegality and is an order passed without jurisdiction. Accordingly, only on the above ground of M/s.Shankar Resources (P) Ltd., having merged with the petitioner company and was not an existing entity as on the date of issuance of notice, the notice under Section 148A (b) dated 28.01.2023 vide Annexure-D, similar identical notice dated 23.02.2023 at Annexure-F and notice dated 13.03.2023 at Annexure-H are set aside. So also, order under Section 148A (d) dated 28.03.2023 vide Annexure-K and notice under Section 148 dated 28.03.2023 vide Annexure-L are set aside.

6.

Accordingly, taking note of the admitted fact that notice was issued to a non-existent entity in the light of the observations made by the Co-ordinate Bench at para 9 reproduced above, the order at Annexure-G under Section 148A(d) and the notice under Section 148 at Annexure-H issued in the name of Harman Connected Services Technologies Pvt. Ltd., are set aside.

7.

Needless to state that the authorities are at liberty to initiate appropriate proceedings as is open in law and permissible insofar as subject matter information as contained in the notice under Section 148A(b) against the petitioner company, as permissible in accordance with law. Sd/- JUDGE

SR List No.: 1 Sl No.: 21

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