Assessment order passed under section 143(3) in the name of a non-existent entity is legally invalid and liable to be quashed

ORDER

Amitabh Shukla, Accountant Member.- This appeal filed by the Revenue is against order dated 17.04.2026 of Ld. Commissioner of Income Tax(Appeals)-3, Noida, [hereinafter referred to as ‘ld. CIT(A)] arising out of assessment order dated 29.09.2022 passed under section 143(3) of the Income Tax Act, 1961 pertaining to Assessment Year 2020-21. The word ‘Act’ herein this order would mean Income Tax Act, 1961. The assessee has also filed Cross objection.

2. The Revenue has raised following grounds of appeal:-

“1 . Whether on the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the liability (provision) of Rs.49,34,74,2271- whereas the assessee had furnished the list of sundry creditors with closing balance of Rs.21,22,79,304/- (out of Rs.70,57,53,531/-) only during the course of assessment proceedings.

2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance of writeoff of Rs.4,70,14,82l/- for a claim” cannot be reported as an “expense”

3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) did not consider the issues raised in the remand report dt 09.04.2026 vis-i.vis the additional evidences submitted by the assessee under Rule 46A of the I.T. Rules. 1962

4. That the order of Ld. CIT(A)-3, Noida being erroneous in law and facts be set aside and order of the A.O. be restored.

3. The assessee has raised following grounds of appeal in its Cross Objection:-

That the Ld. CIT(A) erred in law and on facts in failing to adjudicate the legal ground challenging the validity of the impugned assessment order passed in the name of the respondent despite its non-existence on the date of assessment, contrary to the law laid down by the Honorable Supreme Court in Principal CIT v. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC). Consequently, the impugned assessment order is void ab initio and liable to be quashed, along with the consequential deletion of the addition of Rs. 54,04,89,048.

4. As the cross objection of the assessee in CO No.15/DDN/2026 aims to challenge the legal validity of the impugned assessment order, we would take the same first for adjudication.

5. In this case, as per the brief factual matrix Return of Income declaring income of Rs.20,78,35,600/- was filed by the assessee on 27.12.2020. The ld. AO concluded assessment determining total income at Rs.74,83,24,648/- after making additions u/s 41(1) and disallowing certain expenditure both aggregating to Rs.53 Crores approximately.

6. It is the case of the ld. Counsel of the assessee that the impugned assessment order is passed in the name of Bharat Construction a non-existent entity on the date of impugned assessment order dated 29.09.2022. The ld. Counsel submitted that it was earlier operating as a partnership firm however with effect from 19.01.2020, the said partnership firm converted into private limited company. The ld. Counsel submitted that through his letter dated 27.09.2022, it had conveyed this fact unequivocally to the ld. AO in response to his show-cause notice dated 23.09.2022. It was submitted that the ld. AO on page-4 of his order has admitted this fact. The assessee has further argued that it had raised the impugned issue through a ground of appeal before the ld. CIT(A) challenging the action of the AO by way of a legal ground. It has been submitted that the ld. CIT(A) observed in his order that since he has given relief to the assessee qua merits of the case, there was no need to adjudicate this ground. The Ld. Counsel further invited our attention to the decision of Hon’ble Apex Court in Pr. CIT v. Maruti Suzuki India Ltd.416 ITR 613 (SC) holding that no assessment can be made in respect of an entity which has ceased to exist. Reference was also invited to the decision of Hon’ble Delhi High Court in the case of Spice Infotainment Ltd. and of Hon’ble Bombay High Court in the case of J. M. Mahatre Infra Pvt. Ltd. confirming the said principle. It was accordingly requested that the impugned assessment order deserves to be set-aside and quashed.

7. The ld. DR though placed reliance upon the orders of the lower authorities could not rebut the facts narrated by the assessee hereinabove.

8. We have heard rival submissions in the light of material placed on record. It is an undisputed facts on record that the assessee had unequivocally conveyed both ld. CIT(A) as well as ld. AO about the change of its ownership thereby clearly evidencing that the assessee had ceased to exist with effect from 19.01.2020 and was therefore not in existence on 29.09.2022. The latter being the date of assessment order. We have noted the judicial precedents relied upon by the ld. Counsel which clearly prohibit assessment of a non-existent entity. Accordingly, in respectful compliance to the decision of Hon’ble Apex Court and of Hon’ble Delhi High Court and Hon’ble Bombay High Court, we set-aside and quash the assessment order dated 29.09.2022 passed in the case of assessee which was non-existent. The ground of appeal raised by assessee through its Cross Objection is therefore allowed.

9. In the result, the Cross Objection No.15/DDN/2026 in response to ITA No.329/DDN/2026 is allowed.

10. As we have allowed the Cross Objection No.15/DDN/2026 of the assessee in response to ITA No.329/DDN/2026 and quashed the assessment order dated 29.09.2022, the appeal preferred by the Revenue through ITA No.329/Del/2026 has become in-fructuous and therefore dismissed.

11. In the result, the appeal of the Revenue is dismissed and Cross Objection of the assessee is allowed.