Section 292B provides that no notice, assessment, or proceeding shall be considered invalid due to any error, defect, or omission if it does not impact the substance of the matter.
Section 292B Application: In the case of GPT Sons Pvt Ltd vs. Principal Commissioner of Income Tax (ITAT/195/2024), the Calcutta High Court (HC) rejected the application of Section 292B of the Income Tax Act, 1961, to a scrutiny notice issued in the name of an amalgamating company, despite the assessing authority being aware of its amalgamation.
Key Judgment Details
The division bench, comprising Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, noted that the Assessing Officer (AO) was informed of the amalgamation. Despite this, the scrutiny notice was issued in the name of the amalgamating company instead of the amalgamated entity. This led the court to dismiss the department’s plea, which argued that such an oversight was a “fixable defect” under Section 292B.
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Understanding Section 292B of the Income Tax Act
Section 292B provides that no notice, assessment, or proceeding shall be considered invalid due to any error, defect, or omission if it does not impact the substance of the matter. However, the HC ruled that the provision could not apply in this instance, as the AO was well aware of the company’s amalgamation when issuing the notice.
Arguments Presented by the Department
The department contended that:
- Neither the amalgamating company nor the amalgamated entity had officially notified the AO about the court-approved amalgamation scheme.
- The technical error of addressing the scrutiny notice to the wrong entity should not invalidate the proceedings.
To support its stance, the department cited the Supreme Court’s decision in PCIT vs. Mahagun Realtors (P) Ltd., where the notice was deemed valid as the fact of amalgamation had been suppressed from the AO.
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High Court’s Rationale
The Calcutta HC distinguished this case from the Mahagun Realtors ruling, stating that in the present instance, the AO had appended references to the amalgamation in the “reasons to believe” section of the notice. Thus, the court concluded that the AO had full knowledge of the amalgamation at the time of issuing the notice.
Consequently, the HC dismissed the department’s appeal and emphasized that the Mahagun Realtors case could not serve as a precedent in this matter due to its differing factual matrix.
Key Takeaways from the Judgment
- Knowledge of Amalgamation is Crucial: The AO’s awareness of the amalgamation invalidated the argument that the mistake was technical and correctable under Section 292B.
- Inapplicability of Section 292B: The court clarified that Section 292B cannot be used to rectify significant errors, particularly when the AO knowingly disregards the amalgamated entity’s legal identity.
- Significance of Proper Compliance: The ruling underscores the importance of correctly identifying and addressing the legal entity in tax-related notices to avoid procedural invalidation.
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Conclusion
This landmark judgment reiterates the necessity for assessing officers to exercise due diligence and issue notices in the name of the correct legal entity, particularly in cases involving amalgamations. By refusing to apply Section 292B, the Calcutta HC emphasized that errors stemming from negligence or disregard for known facts cannot be brushed aside as mere technical defects.
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