Tax Notices Void: Court Nullifies Notices to Non-Existing Entity Post-Amalgamation, Citing Prior Set-Aside Orders.

The Court quashed and set aside the notices issued under Sections 148 and 142(1) of the Income Tax Act, 1961, to a non-existing entity, Diversey India Private Limited, which had amalgamated with the Petitioner. The Court found the Respondent's defense inadequate, noting that the Commissioner of Income Tax (Appeals) had already set aside similar re-assessment orders for prior assessment years due to the entity's non-existence. The Court emphasized that the existence of a PAN number does not justify issuing notices to a non-existing entity when the Department was aware of the amalgamation.

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Issues involved:
The issues involved in the judgment are the validity of notices issued under Section 148 and Section 142(1) of the Income Tax Act, 1961 to a non-existing entity due to amalgamation, the legal implications of such notices, and the defense raised by the Respondent regarding past re-assessment proceedings.

Issue 1: Validity of notices issued to a non-existing entity:
The Petitioner challenged the notices issued under Section 148 and Section 142(1) of the Income Tax Act, 1961 to a non-existing entity, Diversey India Private Limited (DIPL), which had amalgamated with the Petitioner. The Petitioner argued that post-amalgamation, any notice issued in the name of the amalgamating company, which has lost its existence, is without jurisdiction and bad in law. Citing the case of PCIT v. Maruti Suzuki India Ltd., it was contended that such notices are illegal and cannot be cured under Section 292(B) of the Act. The Petitioner emphasized that once a scheme of amalgamation is approved, as per Saraswati Industrial Syndicate Ltd v. CIT, the amalgamating company ceases to exist in the eyes of the law. The Petitioner's position was supported by the approval of the amalgamation scheme by the Company Court with effect from 1st April 2015, resulting in the cessation of DIPL's existence.

Issue 2: Defense raised by the Respondent:
In response, the Respondent admitted to the amalgamation of DIPL with the Petitioner and the intimation of the same to the Department. However, the Respondent's defense was based on the Petitioner's lack of protest during re-assessment proceedings for AY 2012-13 and AY 2013-14, where the notices were served in the name of DIPL. The Respondent also mentioned that the PAN of DIPL was not deactivated, implying that past actions were not objected to by the Petitioner.

Judgment:
The Court found the Respondent's defense to be inadequate, especially considering that the Commissioner of Income Tax (Appeals) had already set aside re-assessment orders for AY 2012-13 and 2013-14 due to being passed in the name of a non-existing entity, DIPL. The Court criticized the Respondent for presenting this defense in the affidavit in reply, despite the CIT(A)'s order predating the affidavit. The Court emphasized that the existence of the PAN number does not justify issuing notices to a non-existing entity, particularly when the Department was aware of the entity's amalgamation and non-existence.

Conclusion:
Consequently, the Court disposed of the Petitions by quashing and setting aside the notices under Section 148 and Section 142(1) of the Income Tax Act dated 30th March 2021, 17th June 2021, 6th December 2021, 10th January 2022, and 4th February 2022, in accordance with the prayer clauses of the respective Writ Petitions.

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