Indian courts quash tax notices issued to non-existent entities

Indian courts have recently quashed reassessment notices issued by tax authorities against non-existent entities, reinforcing the principle that tax proceedings must be directed at valid legal persons.

In Chennai, the Income Tax Appellate Tribunal (ITAT) ruled that a notice issued under Section 148 against a deceased individual was void from the outset. The tribunal found that the notice, issued several years after the assessee's death, could not be cured by merely mentioning a legal heir. The proceedings, which sought to assess capital gains from a property sale, were subsequently quashed due to this fundamental jurisdictional defect.

Similarly, the Telangana High Court set aside a reassessment notice issued to Dr. Reddy’s Holdings Limited. The company had already merged with Dr. Reddy’s Laboratories Limited in an NCLT-approved merger. Despite the petitioner informing authorities that the former entity had ceased to exist, notices continued to be issued in the name of the non-existent company. The court ruled the notice was not sustainable in law.