Madras HC upholds reassessment, saves validity of notice issued u/s 148 of I-T Act by virtue of rectification u/s 292B

Read Judgment: The Principal Officer, M/s.Vedanta Limited v. Deputy Commissioner of Income-Tax 

Pankaj Bajpai

Chennai, July 31, 2021: While dismissing the petition of the assessee challenging the validity of reopening notice, the Madras High Court has ruled that mere procedural mistakes whether corrected or errors which all are rectifiable, cannot be a ground to vitiate the entire proceedings. 

Observing that every omission cannot be construed as invalid for the purpose of continuance of the proceedings under the Income Tax Act, a Bench of Justice S M Subramaniam made it clear that non-quoting of provision or mistake/error in address of a person to whom it is to be served, would not vitiate the entire proceedings in the eye of law.

These observations came with respect to reopening notice issued to an amalgamated entity. 

Going by the background of the case, the assessee company consequent to filing of its returns, stood merged with M/s.Sesa Goa Limited, as sanctioned by the Bombay High Court, Goa Bench and Madras High Court. 

In this back drop, the counsel for assessee raised a question that whether the notice issued u/s 148 of the Income Tax Act by the Revenue Department to a non-existing person, be validated. Admittedly, Section 148 notice was issued to the principal officer M/s.Sesa Sterlite Industries (India) Limited. However, no such company was in existence during the relevant point of time and at any point of time. 

Secondly, the counsel urged that the said notice u/s 148 was communicated beyond the expiry date. Thus, the very issuance of notice was beyond the period of limitation and on that ground also, the notice itself was to be set aside. Therefore, it was pleaded that for the purpose of the provisions of Income Tax Act, no valid notice was issued to the assessee. 

Justice Subramanium said that the very provision of Sec 292B is intended to validate the Return of Income, etc., wherein certain mistakes or errors are committed. 

The High Court admitted that the assessee has changed their names frequently, so also the place of registered office. In this context, there is a possibility of error, even if a letter is communicated to the AO by the assessee regarding change of name and amalgamation. The notice is addressed to the Principal Officer, M/s. Sesa Sterlite Industries Limited. However, the name of the assessee Company, prior to 2013, was M/s.Sterlite Industries (India) Limited and subsequently, it was merged with M/s.Sesa Sterlite Limited.  

“On close reading of the names, it was originally M/s. Sterlite Industries (India) Limited and subsequently, it was M/s. Sesa Goa Limited and thereafter, M/s. Sesa Sterlite Limited and finally, M/s. Vedanta Limited. Considering the first three names, the words are relatively closer and the AO has erroneously stated as M/s. Sesa Sterlite Industries (India) Limited, instead of M/s. Sterlite Industries (India) Limited. As the name ‘Sesa’ was not alien to the assessee company, it is to be construed that it is a bonofide mistake committed by the AO, while printing the address of the assessee. However, as rightly pointed out by the AO, the PAN Number was one and the same,” noted Justice Subramanium. 

Reiterating that human error is common, the High Court said that such error affecting the very provision or otherwise alone is to be invalidated and every mistake or certain omissions cannot be construed as invalid for the purpose of continuance of the proceedings under the Income Tax Act. 

In the present case, admittedly, the Personal Account Number, all along, was being mentioned correctly. Therefore, it indicates the person against whom such proceedings are initiated and thus, such errors are to be neglected and are to be corrected for the purpose of continuing the proceedings. The verifications are done mostly with reference to the Permanent Account Number and in the event of no change in the PAN, then it is to be construed that the notice was issued to the person to whom it is intended to be issued, highlighted the Court. 

The High Court clarified that the principles laid down by the Supreme Court in the case of Principal Commissioner of Income Tax Vs. Maruti Suzuki India Limited, that the assessment proceedings continued in the name of the non-existing entity would be void-ab-initio, may not have any direct application with reference to certain facts which all are specifically established in the present case. 

In view of the fact that the mistake crept in at the initial stage was identified by the department and subsequently corrected and the proceedings thereafter were continued in the name of the assessee, there is no reason to interfere with the process of reassessment already completed, concluded the High Court.