A notice under section 148 issued to a non-existent entity is invalid, leading to the quashing of both the notice and the subsequent assessment order.

JUDGMENT :

B. P. Colabawalla, J.

1. Rule. Respondents waive service. With the consent parties, Rule made returnable forthwith and heard finally.

2. The present Petition challenges the notice dated 30^th March 2021 issued under section 148 of the Income Tax Act, 1961 [“IT Act”]. This notice was issued to a company called “Erangal Comtrade and Consultancy Private Limited” [hereinafter referred to as the “erstwhile company”], which ceased to exist with effect from 17^th March 2016 after its conversion into the Petitioner LLP [Erangal Comtrade and Consultancy LLP]. The impugned notice issued under section 148 seeks to reassess the income of the erstwhile company for A. Y. 2017-18. After the issuance of the section 148 notice, a draft assessment order dated 29^th March 2022, and a final assessment order dated 30^th March 2022 are also passed by the Assessing Officer against the erstwhile company. The said section 148 notice as well as the final assessment order dated 30^th March 2022 are challenged in the present Petition.

3. The basic grounds on which the challenge is laid are that:

(a) The impugned action has been taken against a non-existent entity rendering the same to be illegal and bad-in-law;

(b) That in any event, the final assessment order has been passed without first disposing of the objections filed by the Petitioner to the reasons for reopening the assessment;

(c) Even otherwise, the income which the Assessing Officer alleges has escaped assessment, has already been brought to tax by the Petitioner LLP in A.Y. 2017-18, and therefore, the Assessing Officer could never have had reason to believe that income had escaped assessment.

4. The concise undisputed facts to decide the present controversy are that originally there was a company called Erangal Comtrade and Consultancy Private Limited (the erstwhile company), which inter alia carried on the business of trading in commodities, holding of investments and earning income by way of dividends and interest thereon, and gains on the disposal thereof, and earning of rental income. The erstwhile company filed an application on 3^rd March 2016 with the Registrar of Companies in LLP form No.2 and LLP Form No.18 in terms of the Limited Liability Partnership Rules, 2009 read with the Limited Liability Partnership Act, 2008, seeking its conversion into an LLP.

5. Pursuant to the aforesaid application filed by the erstwhile company, the Registrar granted a certificate of registration in Form No.19 in terms of Rule 32(1) of the LLP Rules read with section 58(1) of the LLP Act, certifying the conversion of the erstwhile company into the Petitioner LLP with effect from 17^th March 2016. Pursuant to the grant of such certificate of conversion, the erstwhile company ceased to exist and the Petitioner LLP stood incorporated on 17^th March 2016.

6. For A.Y. 2016-17, the erstwhile company filed its return of income offering to tax, income relating to the period from 1^st April 2015 to 16^th March 2016. The Petitioner LLP filed its return of income offering to tax, income arising during the period from 17^th March 2016 to 31^st March 2016. This position is not disputed and is accepted by the revenue.

7. Thereafter, on 25^th October 2017, the Petitioner LLP filed its return of income for A.Y. 2017-18, inter alia, offering to tax interest income arising from the Fixed Deposits vested in the Petitioner LLP [from the erstwhile company upon its conversion into an LLP], including income arising on renewal of the said Fixed Deposits.

8. The aforesaid return of income filed by the Petitioner LLP was selected for scrutiny. In the