Court quashes invalid tax notices against amalgamating company, favors transferee company for assessment

The Court quashed the impugned notices under Section 148 of the Income Tax Act issued to reopen assessments for the Assessment Year 2009-10 against the amalgamating Company. Relying on a previous ruling, the Court held that post-amalgamation, notices against the non-existent amalgamating Company were invalid. The Court recommended assessing the transferee Company instead. As a result, all petitions were successful, and the impugned notices were set aside, emphasizing that such notices against the non-existent amalgamating Company were unsustainable.

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Issues:
Challenge to impugned notice under Section 148 of the Income Tax Act for reopening assessment for the Assessment Year 2009-10 against amalgamating Company.

Analysis:
The petitions under Article 226 sought to quash notices under Section 148 of the Income Tax Act issued to reopen assessments for the Assessment Year 2009-10 against the amalgamating Company. The main contention was whether such notices against the amalgamating Company could be sustained post its amalgamation. The amalgamation took effect from 01/04/2010, and the impugned notices were issued on 21/01/2011. The petitioners argued that as the amalgamating Company ceased to exist post the amalgamation, the notices against it were invalid. The Division Bench's decision in Khurana Engineering Ltd. case was cited, emphasizing that post-amalgamation, notices against the non-existent amalgamating Company were impermissible.

The petitioners relied on the Division Bench's ruling in the Khurana Engineering Ltd. case, which held that post-amalgamation, notices against the transferor Company were invalid. The Court noted that once the amalgamation scheme was sanctioned, the amalgamating Company ceased to exist. The Division Bench recommended assessing the transferee Company and making protective assessments on both transferor and transferee Companies separately. Consequently, the impugned notices against the original assessee - amalgamating Company for the Assessment Year 2009-10 were deemed unsustainable and were quashed based on the binding precedent.

In conclusion, all petitions succeeded, and the impugned notices were quashed and set aside. The Court reiterated that post-amalgamation, notices against the non-existent amalgamating Company were untenable, aligning with the Division Bench's decision. No costs were awarded in the case.

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