Loading judgment…
Facts
The assessee, Kalna Regulated Market Committee, failed to file an income tax return for A.Y. 2018-19. Its case was reopened under Section 147 based on information of cash deposits and interest income. The Assessing Officer completed the assessment under Section 144, making additions for unexplained cash deposits and income from other sources. The assessee argued that it had been dissolved in October 2014 and its operations and bank accounts were transferred to Purba Burdwan Zilla Regulated Market Committee, rendering the assessment against a non-existent entity void.
Held
The Tribunal found that Kalna Regulated Market Committee was indeed dissolved in October 2014, and its functions and bank accounts were transferred to Purba Burdwan RMC. Citing Supreme Court and High Court precedents, the Tribunal held that assessment and reassessment proceedings initiated against a non-existent entity are void ab initio. Consequently, the assessment order dated 20.03.2023 and the penalties levied under Sections 271AAC(1) and 270A were quashed/deleted.
Key Issues
Whether an assessment and reassessment order passed against a non-existent entity is valid; and whether penalties consequent to such an order can be sustained.
Sections Cited
250, 147, 144, 69A, 133(6), 271AAC(1), 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey
order
: November 18, 2025 ORDER
Per Pradip Kumar Choubey, Judicial Member:
The captioned appeals filed by the assessee are directed against the separate orders all dated 21.01.2025 of the National Faceless Appeal Centre [‘CIT(A)’] passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2018–19. is pertaining to the quantum addition and & 1348/Kol/2025 are relaying to levying of penalty u/s 271AAC(1) & 270A of the Income Tax Act (hereinafter referred to as the ‘Act’) respectively.
At the outset, it reveals that the captioned appeals have been filed after a delay of 84 days and for the said delay, the assessee has filed condonation petitions. We find that the reasons cited in the petition for to 1348/Kol/2025 Kalna Regulated Market Committee the said delays are bona fide and accordingly, the delays in filing the appeals are hereby condoned and we proceed to dispose of the appeals on merits. First we take 2025 for narration of facts. facts of the case are that the assessee had not filed return of income for A.Y. 2018-19. The case was reopened u/s 147 on the basis of information that the assessee had deposited cash in its bank account with Axis Bank Limited amounting to Rs. 2,09,88,370/- and had received interest income of Rs 9,33,126/-. The source of the above cash deposit remained unexplained as the assessee had not filed return of income and did not comply during scrutiny proceedings. The Assessing Officer completed the assessment u/s 144 by making an addition of Rs. 2,09,88,370/- u/s 69A and Rs.9,33,126/- as Income from other sources and completed on a total income of Rs.58,89,461/-.
Aggrieved by the said order, the assessee filed an appeal before the CIT(A) wherein the appeal of the assessee has been dismissed on the ground that the assessee failed to submit any documentary evidence that the company ceased to exist for the relevant assessment year.
Aggrieved and dissatisfied, the assessee is in appeal before us. The ld. AR challenged the very impugned order thereby submitting that the ld. CIT(A) as well as Assessing Officer has erred in not appreciating that Kalna Regulated Market Committee, an artificial juridical person being a statutory body formed under the provisions of the West Bengal Agricultural Produce Marketing (Regulation) Act, 1972, was dissolved by Notification No. 1367-AM/P/5A-17/2013 dated 17/10/2014 and all its bank accounts and operations were duly transferred or subsumed into Burdwan Zilla Regulated Market Committee (now Purba Burdwan Zilla Regulated Market Committee). The ld. AR therefore submits that the to 1348/Kol/2025 Kalna Regulated Market Committee initiation of assessment/reassessment proceedings u/s 147/ 148 of the Act against the non-existent Kalna Regulated Market Committee for transactions pertaining to Purba Burdwan Zilla Regulated Market Committee for the Financial Year 2017-18 relevant to Assessment Year 2018-19 is factually incorrect and void ab initio. The ld. AR further submits that both the lower authorities have failed to appreciate that both the cash deposits of Rs.2,09,88,370/- and the interest income of Rs. 9,33,126/- belonged to or received by the Purba Burdwan Zilla Regulated Market Committee derived from agricultural activities like market fee, toll fee, rent, market levy, subscription fee, etc. were duly recorded in books of account and Audited Financial Statements were prepared for the year under consideration and the said transactions were not in fact pertained to Kalna Regulated Market Committee as the said committee was dissolved in October, 2014. His submission is that the Ld. CIT(A) was failed to consider the evidences submitted by the assessee and failed to do any enquiry by issuing notice u/s 133(6) of the Act to the respective Banks in which the cash deposit of Rs.2,09,88,370/- was made to verify the said account was maintained and regulated by Purba Burdwan Zilla Regulated Market Committee which was dissolved in October, 2014. The ld. AR also submits that the impugned order of the ld. CIT(A) is erroneous and the same may be dismissed.
Contrary to that, the ld. DR supports the impugned order.
Upon hearing the submissions of the counsels of the respective parties and we have perused the material available on record and find that the assessee i.e. "Kalna Regulated Market Committee" since dissolved was a regulated market committee situated in Burdwan district (presently Purba Burdwan) of West Bengal formed under the West Bengal State Agricultural Marketing Board constituted under the West Bengal Agricultural Produce Marketing (Regulation) Act, 1972 and before to 1348/Kol/2025 Kalna Regulated Market Committee its dissolution, the assessee was exclusively engaged in the agricultural activities of regulating and promoting agricultural marketing in the district. We also find that vide Notification No. 1367-AM/ P/5A-17/2013 dated October 17, 2014, the said Market Committees in respect of the said market areas dissolved. We also find that also on 17th October 2014 as per Notification No. 1379-AM/P/5A-17/2013, "Burdwan Zilla Regulated Market Committee" with PAN No.“AAALB1301P" was regulated. It is pertinent to mention here that subsequently, "Purba Burdwan Zilla Regulated Market Committee" came into existence on 1st September 2017 and Burdwan Zilla Regulated Market Committee and Purba Burdwan Zilla Regulated Market Committee are collectively referred to as “Purba Burdwan RMC" having PAN: AAALB1301P and Kalna Regulated Market Committee as "Kalna RMC/the assessee" having PAN: AAAJK1202A. We also find that the entire function of the assessee stood transferred into Purba Burdwan RMC and all the bank accounts operated by the assessee prior to its cessation were not closed but transferred to Purba Burdwan RMC. We note that during the F.Y. 2017- 18, cash deposits for a sum of Rs.2,09,88,370/- was collected from farmers and rural area people and deposited into one SB-Govt. Organisations A/c maintained with Axis Bank in the name of Purba Burdwan RMC and the said deposits were duly recorded in the books of account and Audited Financial Statements of Purba Burdwan RMC was submitted and details of the SB-Govt. Organisations Account maintained with Axis Bank in the name of Purba Burdwan RMC and SBI has also provided the interest certificate for the relevant assessment year in the name of Burdwan RMC (now Purba Burdwan RMC) were submitted. It is important to note here that in a similar case of the assessee for the A.Y. 2017-18, the Assessing Officer called for information u/s 133(6) of the Act from Axis Bank and the Assessing Officer concluded that the assessee being Kalna RMC was dissolved by to 1348/Kol/2025 Kalna Regulated Market Committee the order of the Govt. of West Bengal dated 17.10.2014 and all the Bank accounts once had been operated by the erstwhile Kalna RMC were later maintained by the Purba Burdwan RMC and the said incomes were duly reflected in the Balance Sheet of the Burdwan Zilla Regulated Market Committee for the F.Y. 2016-17 which was audited under Statutory Audit and by passing an order u/s 144 dated 15.10.2019 assessed the income of the assessee at NIL but in the A.Y. 2018-19, under similar circumstances, the Assessing Officer made the said addition without getting any information u/s 133(6) from the banks and without verifying the details submitted by the assessee rather only relying on statement of 26AS of the dissolved entity. It is pertinent to mention here that tax consultant of the assessee inadvertently filed an appeal against the order passed for the F.Y. 2016-17 and learned CIT(A) in its order has noted that the fact although Kalna RMC was dissolved in October 2014 but the bank accounts once operated by it were not closed but later transferred to Purba Burdman RMC (PAN AAALB1301P). During the F.Y.2016-17, cash deposit made in the said accounts belonged to Purba Burdman RMC and all the said transactions were also reflected in the balance sheet of the Purba Burdman RMC for the F.Y. 2016-17 which was duly audited. The banks wrongly reported it against the PAN of the dissolved appellant. The learned CIT(A) passed order by dismissing the appeal infructuous. 7.1 Going over the above discussion there is no doubt that Kalna Regulated Market Committee has been dissolved much earlier and it was in the knowledge of the lower authorities. Now coming to the judicial pronouncement the Hon’ble Apex Court in the case of PCIT v. Maruti Suzuki India Ltd reported in [2019] 416 ITR 613 (SC) has held that assessment/reassessment order was issued in the name of company which is ceased to exist due to amalgamation is void ab initio and this to 1348/Kol/2025 Kalna Regulated Market Committee position was earlier established by the Delhi High Court in Spice Enfotainment Ltd. v. Commissioner of Income-tax, in [(2012) 247 CTR 500 (Del)] where it was held that an assessment made in the name of an amalgamating company after its cessation is invalid. Going over the discussion made above and keeping in view the judicial pronouncements, we do not find any hesitation to hold that order dated 20.03.2023 u/s 147 r.w.s. 144 passed by Assessing Officer is unsustainable in the eyes of law as it was passed against a non-existent committee i.e void so the same is hereby quashed. 8.
& 1348/Kol/2025 – Both the appeals are consequent to the assessment order dated 20.03.2023 and we have quashed the same vide therefore, the very basis of which the impugned penalties levied u/s 271AAC(1) & 270A of the Act respectively has now no legs to stand over, therefore, the impugned penalties are hereby deleted. 9. In the result, all the captioned appeals of the assessee are allowed.
Kolkata, the 18th November, 2025.