Pre-merger tax liability survives amalgamation and remains enforceable against the amalgamated company despite the transfer of business.

Where tax liability had accrued before amalgamation, a subsequent merger did not render the assessment order against the amalgamating company a nullity. The court noted that under section 2(1B) of the Income-tax Act, the assets and liabilities of the amalgamating company vest in the amalgamated company, and the liability for the earlier assessment year had already arisen before the merger took effect. On these facts, the assessment remained valid and the resulting liability was enforceable against the amalgamated company as successor.

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Issues: Whether an assessment order passed against an amalgamating company for an earlier assessment year becomes a nullity on account of a subsequent amalgamation and whether the resulting liability can be enforced against the amalgamated company.

Analysis: The definition of amalgamation under section 2(1B) of the Income-tax Act, 1961 shows that the assets and liabilities of the amalgamating company vest in the amalgamated company by virtue of the merger. The assessment year in question related to a period prior to the effective amalgamation, and the liability had already accrued before the merger. The assessee had not brought the amalgamation to the notice of the revenue during the assessment proceedings and had also filed a return for the subsequent assessment year separately. On these facts, the assessment order could not be treated as a nullity merely because the amalgamating company had ceased to exist. The liability under the assessment order stood transferred to the amalgamated company.

Conclusion: The question was answered in the negative. The assessment order was not a nullity, and the liability was enforceable against the amalgamated company.

Final Conclusion: The revenue's challenge succeeded, and the dismissal of its appeal below was set aside.

Ratio Decidendi: Where a tax liability has accrued before amalgamation, a subsequent merger does not render an assessment order void; the liability survives and is enforceable against the amalgamated company as successor to the amalgamating company.

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