No Reassessment Against PAN of Company That Became an LLP: Bombay High Court

The Bombay High Court quashed reassessment for AY 2022‑23 opened against the PAN of a company converted into an LLP in 2018, calling the proceedings incapable of compliance and a mere verification exercise.

The Bombay High Court has quashed reassessment proceedings for assessment year (AY) 2022‑23 initiated against the permanent account number (PAN) of a company that had been converted into a limited liability partnership (LLP) in November 2018, holding that a non‑existent entity could not have earned income or filed a return [Aavkar Trade Consultants LLP v. Income Tax Officer, Ward 24(1)(1), Mumbai & Ors., 2026-juristway.com-3365-HC(Bombay)-IT].

Justice B.P. Colabawalla and Justice Farhan P. Dubash heard the petition against a notice dated 26 Mar 2026 under Section 148A(1) of the Income‑tax Act, 1961, an order dated 29 Jun 2026 under Section 148A(3), and a notice under Section 148 of the same date. The case was flagged as a “non‑filer” under the Risk Management Strategy because dividends of ₹5,76,429 were reported against the old company’s PAN. The LLP had disclosed dividend income in its own return and had repeatedly informed the Department of the conversion and sought surrender of the old PAN.

The Revenue told the Court that the proceedings could be completed only in the old company’s PAN and could not be moved to the LLP’s PAN, and it did not dispute that no valid return could be filed in the old PAN.

The Court held that the company ceased to exist on conversion. Deductors reporting tax against its PAN did not revive it, and no information could suggest that its income had escaped assessment. A notice that cannot be complied with, it said, could not have been issued at all.

The Court also found that the “non‑filer” information proceeded on an incorrect premise, and that the Assessing Officer (AO) could not simply act on flagged information without dealing with the explanation placed before him. Proceedings selected on a “non‑filer” ground could not be shifted to the LLP’s PAN, where that ground did not exist.

Finally, the order under Section 148A(3) said that the claim needed detailed verification during reassessment. The Court held that reassessment cannot be opened merely to verify or to make a roving enquiry; the sine qua non under the new regime is information suggesting that income has escaped assessment. All the notices and the order were quashed.

2026-juristway.com-3365-HC(Bombay)-IT