🏛 ITAT Ahmedabad Landmark Ruling -Section 263 Order Passed in Name of Non-Existent Company Held Void
- Mayur Bhadani
- 4d
- 3 min read
Section 263 Order Passed in Name of Non-Existent Company Held Void
Case: Kamuthi Solar Power Ltd. (Merged) vs PCIT
Forum: ITAT Ahmedabad
Assessment Year: 2020-21
📌 Introduction
In a significant ruling delivered on 13 February 2026, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, quashed a revisionary order passed under Section 263 of the Income-tax Act, 1961, on the ground that it was issued in the name of a company that had already ceased to exist due to amalgamation.
This judgment reinforces a crucial legal principle: orders passed in the name of a non-existent entity are void ab initio (invalid from inception).
📖 Background of the Case
Kamuthi Solar Power Limited was engaged in the business of solar power generation.
Key Financial Facts:
Income from transfer of carbon credits: ₹1.11 crore
Revised return filed
Carbon credit income set off against business losses
Final assessed income: Nil
The assessment was completed under Section 143(3) after due consideration of the revised return and explanations furnished by the assessee.
⚖️ Why Did PCIT Invoke Section 263?
The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263 alleging:
Improper verification of land advances written off (₹35.14 lakh)
Incorrect tax treatment of carbon credit income under Section 115BBG
Accordingly, the PCIT set aside the assessment and directed fresh verification.
⚠️ The Crucial Legal Twist – Amalgamation
Before the 263 order was passed:
The company had merged with another entity.
NCLT approval date: 19.03.2024
Effective date of merger: 01.10.2022
The department had been formally informed of the merger.
Legally, once amalgamation takes effect, the amalgamating company ceases to exist.
Despite being informed, the PCIT passed the Section 263 order in the name of the old company.
🏛 ITAT’s Observations
The Tribunal made the following important observations:
1️⃣ Company Ceases to Exist After Merger
Upon amalgamation, the transferor company loses its legal existence.
2️⃣ Order in Name of Non-Existent Entity is Void
An assessment or revision order passed in the name of a non-existent company is not a minor procedural defect — it is a substantive illegality.
3️⃣ Reliance on Supreme Court Judgment
The Tribunal relied on the landmark ruling of the Supreme Court in: PCIT v. Maruti Suzuki India Ltd. The Apex Court had clearly held that proceedings against a non-existent entity are void ab initio.
✅ Final Outcome
Section 263 order quashed
Assessee’s appeal allowed
No fresh assessment required
The Tribunal did not even need to go into the merits of the case once it found the jurisdictional defect.
🎯 Why This Ruling Is Important for Businesses
This case highlights the importance of legal identity in tax proceedings.
Key Legal Principles:
✔ Jurisdiction must be valid
✔ Proceedings must be against an existing legal entity
✔ Technical defects affecting jurisdiction can invalidate entire proceedings
✔ Section 263 powers are wide but not unlimited
💼 Practical Lessons for Companies
If your business has undergone:
Amalgamation
Demerger
Conversion (Firm to LLP / Company)
Strike off
Name change
You must:
Immediately update PAN and income tax records
Intimate the Assessing Officer in writing
File copy of NCLT or relevant approval order
Verify legal name mentioned in every notice
Failure of the department to issue notice in the correct legal name can invalidate proceedings.
📊 Special Note on Carbon Credit Taxation
Although the Tribunal quashed the order on jurisdictional grounds, the case also involved interpretation of Section 115BBG relating to taxation of carbon credit income.
This area continues to evolve, and businesses engaged in renewable energy should carefully structure the tax treatment of such income.
🧠 Conclusion
The Kamuthi Solar Power ruling reiterates a powerful compliance lesson:
In taxation, legal existence is fundamental.An order against a non-existent entity is no order in the eyes of law.
Corporate restructuring must always be properly reflected in tax records, and businesses must remain vigilant regarding jurisdictional defects.
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