Bharat Serums and Vaccines Limited Vs DCIT: Bombay HC Quashes Section 154 Demand Where Department Could Produce No Records
Case Overview
In a striking instance of administrative failure within the income tax machinery, the Bombay High Court quashed a demand of Rs. 46,84,750/- that had been raised against the petitioner ostensibly pursuant to an order dated 31 March 2021 under Section 154 of the Income-tax Act, 1961. What made this case particularly extraordinary was the Department's own admission before the Court that it possessed no records — no notice, no order, no file — to support the demand that had been sitting on the Income Tax Portal against the assessee.
The judgment serves as a sobering reminder of how demands can appear on the portal without any corresponding legal process having been followed, and how assessees can find themselves chasing a ghost order through RTI applications and repeated representations, only to be met with silence or illegible documents.
Material Facts of the Case
Background of the Assessee Entity
The assessee before the Court was Bharat Serums and Vaccines Limited — though this entity had come into existence through a corporate restructuring. The erstwhile Bharat Serums and Vaccines Limited had merged with Aksipro Diagnostics Private Limited pursuant to an order dated 2 August 2021 passed by the National Company Law Tribunal, Mumbai. Following the merger, Aksipro Diagnostics Private Limited changed its name to Bharat Serums and Vaccines Limited, as evidenced by the certificate of incorporation dated 10 November 2021 issued by the Registrar of Companies, Mumbai.
Assessment History for AY 2013-14
For Assessment Year 2013-14, the erstwhile entity had filed its return of income on 30 November 2013, declaring total income of Rs. 36,47,36,323/- computed under Section 115JB of the Income-tax Act, 1961. Income under the normal provisions of the Act was returned as Nil.
The case was selected for scrutiny. An assessment order dated 29 March 2016 was passed under Section 143(3) of the Act, determining book profits at Rs. 37,16,67,868/- after making an addition of Rs. 69,31,645/- under Section 14A of the Act. The erstwhile entity challenged this assessment by filing an appeal before the Commissioner of Income Tax (Appeals).
Discovery of the Mysterious Demand
When the assessee reviewed its Income Tax Portal in April 2021, it found a demand of Rs. 46,84,750/- appearing against the erstwhile entity. The demand appeared to have been raised pursuant to an order dated 31 March 2021 under Section 154 of the Income-tax Act, 1961 for Assessment Year 2013-14.
The assessee was caught completely off guard. No communication regarding any rectification proceedings had ever been received. No show cause notice had been issued. No intimation of any suo motu action under Section 154 had been served. Most tellingly, the alleged order itself was not even visible on the portal — only the pending demand entry was reflected.