Karnataka High Court Invalidates Reassessment Against Struck-Off Entity; Rules NCLT Revival Cannot Cure Void Notice
In the realm of income tax jurisprudence, the validity of a reassessment notice serves as the foundational pillar upon which the entire assessment proceeding rests. A critical legal question arises when the revenue department initiates proceedings against a corporate entity that has ceased to exist in the eyes of the law, only for the entity to be subsequently restored. The Karnataka High Court recently addressed this complex interplay between corporate law and tax assessments in the case of Bazarclick Services Private Limited Vs ITO.
The judicial ruling, delivered on 8 July 2026, provides definitive clarity on the jurisdictional prerequisites for issuing notices under the Income Tax Act 1961. The Court determined that a notice issued to a struck-off company is a jurisdictional nullity, and the subsequent revival of the assessee by the National Company Law Tribunal (NCLT) does not retrospectively validate the defective initiation. Furthermore, the judgment reinforces the strict adherence required for monetary thresholds governing limitation periods.
Background of the Dispute
The legal controversy pertained to the Assessment Year (AY) 2016-17. The assessee, Bazarclick Services Private Limited, had its name struck off the Register of Companies by the Registrar of Companies during the calendar year 2017. Consequently, the corporate entity lost its legal existence.
Issuance of Notice to a Non-Existent Entity
Despite the assessee being legally defunct, the Income Tax Department proceeded to initiate reassessment actions. The timeline of events unfolded as follows:
- The revenue authorities secured the requisite sanction under
Section 151on 26 April 2021. - Subsequently, a reassessment notice under
Section 148was issued on 14 June 2021.
At the time this notice was generated and dispatched, the assessee company remained struck off and did not possess a valid corporate status.
NCLT Revival and Continuation of Proceedings
Acknowledging that the assessee was not legally active, the Assessing Officer (AO) filed an application before the NCLT under the provisions of the Companies Act 2013. The objective was to restore the company's name to the register, thereby enabling the tax department to bring the pending income tax proceedings to a logical conclusion.