2015 (5) TMI 613 - HC - Income Tax

Court emphasizes correct entity assessment post-amalgamation, nullifies assessment against non-existent company.

COMMISSIONER OF INCOME TAX (C) -II Versus MICRA INDIA PVT LTD

The court dismissed the appeals, emphasizing the importance of correctly identifying the entity to be assessed post-amalgamation. The court held that the ... Validity of notice issued under Section 153C/143(3) - since the assessee had amalgamated with the transferee company, notice ought to have been sent to the latter, and since such notice had not been issued to the transferee company, the entire proceedings were a nullity - notice issued under Section 153C/143(3) to M/s Micra India Pvt. Ltd. was binding and could have been proceeded with further as held by ITAT - Held that:- Section 176 of the Act, which enacts provisions relating to discontinuation of business, does not apply to a case of amalgamation/dissolution. It was further held that Section 159 of the Act, which provides for tax liability to be attached to the legal representatives of a deceased person, is also inapplicable. The language of Section 159 ex-facie applies to natural persons, and cannot be extended, through a legal fiction, to the dissolution of companies. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed. Instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; the order also mentioned the transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to the assessment being completed in the name of the transferee company. According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed against a non-existent company. The ITAT's decision is, in the circumstances, justified and warranted. - Decided against revenue. Issues:1. Validity of notice issued under Section 153C/143(3) of the Income Tax Act, 1961 to a company that had amalgamated with another company.2. Applicability of Section 292B of the Act in curing procedural defects in jurisdictional matters.Issue 1: Validity of Notice under Section 153C/143(3):The case involved a dispute regarding the validity of a notice issued under Section 153C of the Income Tax Act, 1961 to a company, M/s Micra India Pvt. Ltd., which had amalgamated with another company, M/s Dynamic Buildmart (P) Ltd. The Revenue contended that the notice was valid as the assessee participated in the proceedings after receiving the notice. However, the ITAT held that the notice should have been sent to the transferee company post-amalgamation. The ITAT's decision was based on the fact that the assessment completed against the non-existent transferor company was a nullity. The court referred to various legal precedents to support the contention that post-amalgamation, the transferor company ceases to exist, and the assessment should be made on the successor company.Issue 2: Applicability of Section 292B of the Act:The Revenue argued that Section 292B of the Act neutralizes procedural defects in jurisdictional matters and that the assessee's failure to object initially should preclude challenging the assessment's validity later. However, the court rejected this argument by referring to a previous ruling that emphasized the obligation of tax authorities to substitute the successor company in place of the amalgamated company. The court noted that despite the participation during assessment, the assessing officer failed to rectify the error of assessing a non-existent company, leading to a justified decision by the ITAT to quash the assessment.In conclusion, the court dismissed the appeals, stating that no substantial question of law or liability was involved. The judgment highlighted the importance of correctly identifying the entity to be assessed post-amalgamation and the significance of following legal procedures to ensure the validity of assessments in such cases.