In a recent judgment, the Bombay High Court has ruled against the validity of reassessment proceedings conducted by the tax department against non-existent entities, even though the PAN remained active.

The court, in its decision, emphasized that an active PAN does not provide a legitimate basis for initiating proceedings against entities that have ceased to exist.

The bench, comprising Justice K. R. Shriram and Justice Neela Gokhale, opined that the mere existence of an active PAN does not justify the Department’s issuance of notices to non-existent entities.

They pointed out that there could be instances spanning various years when a company was in existence, and the PAN numbers might be selected for scrutiny or refund issuance. However, this should not serve as grounds for the Department to target defunct entities.

The case involved a petitioner/assessee who challenged a reassessment notice on the grounds that all notices had been sent to an entity that no longer existed.

Diversey India Private Limited (DIPL) had merged with the petitioner on April 1, 2015, as per an official communication dated May 12, 2016, sent to the Assessing Officer and Principal Commissioner.

The Department argued that the defense presented by the petitioner pertained to assessment years 2012–13 and 2013–14.

Notably, when the notices u/s 148 were initially served, the petitioner did not raise any objections and participated in the reassessment proceedings. Furthermore, the PAN of the noticee was not deactivated.

The assessee contended that issuing a notice and, if applicable, an assessment order in the name of a company that no longer exists post-amalgamation is without jurisdiction and legally flawed, therefore warranting annulment.

Ultimately, the court sided with the petitioner and quashed the reassessment notices, upholding the principle that the tax department cannot pursue proceedings against entities that have undergone amalgamation and lost their legal existence.

This decision serves as an important reminder of the need for tax authorities to align their actions with the legal status of entities and not rely solely on the existence of an active PAN for reassessment purposes.