Opinion Of Eminent Legal Luminaries On Controversial Issues

Reassessment -Notice to non-existing company is invalid

QUERY: A company got converted and succeeded into an LLP in 2014. The Assessing Officer issued a notice u/s. 148 of the Act in the name of the company for reopening its case for the A.Y. 2011-12 within the time permissible under the law. The LLP has raised the objection against the reopening that since the company is not in existence, no proceedings lie in absence of any such provision of the Act. Will the objection succeed? Can the situation be different if the notice u/s. 148 had been issued in the name of successor i.e., LLP?
ANSWER: Yes, the objection is sustainable.
Section 58(4) of The Limited Liability Partnership Act, 2008 reads as under:
“Notwithstanding anything contained in any other law for the time being in force, on and from the date of registration specified in the certificate of registration issued under the Second Schedule, the Third Schedule or the Fourth Schedule, as the case may be, -
(a) there shall be a limited liability partnership by the name specified in the certificate of registration registered under this Act;
(b) all tangible (movable or immovable) and intangible property vested in the firm or the company, as the case may be, all assets, interest rights, privileges, liabilities, obligations, relating to the firm or the company, as the case may be, and the whole of the undertaking of the firm or the company, as the case may be, shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed; and
(c) the firm or the company, as the case may be, shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be:.
Similarly, para 6 of the Third Schedule i.e. conversion from Private Company into Limited Liability Partnership provides as under:
“Effect of registration – on and from the date of registration specified in the certificate of registration issued under paragraph 4 –
(a) there shall be limited liability partnership by the name specified in certificate of registration registered under this Act;
(b) all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed; and
(c) the company shall be deemed to be dissolved and removed from the records of the Registrar of Companies.
In BDR Builders and Developers Pvt. Ltd. v. ACIT [397 ITR 529], Delhi High Court has held that notice issued after order of the court approving amalgamation in name of non-existent transferred company is invalid. On the same logic notice issued in the name of erstwhile company is also invalid. Therefore contention of the LLP is sustainable.
Yes, if the notice u/s. 148 had been issued in the name of successor i.e., LLP the situation would have been different.
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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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