Assessment order quashed when issued against amalgamating company that ceased to exist before order was passed

The Madras HC quashed an assessment order issued in the name of an amalgamating company that was not in existence at the time the order was passed. Following the SC precedent in Maruti Suzuki, the court held that assessment orders cannot be validly issued in the name of non-existent entities. The assessment order against the amalgamating company was therefore unsustainable and was quashed, though authorities retained liberty to proceed according to law.

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Issues Involved:

1. Validity of the assessment order made in the name of a non-existent entity.
2. Impact of participation in assessment proceedings by the amalgamated company.
3. Relevance of PAN deactivation in the context of amalgamation.

Detailed Analysis:

1. Validity of the assessment order made in the name of a non-existent entity:

The writ petition challenged the assessment order made in the name of Pharmazell Vizag Pvt. Ltd., a company that ceased to exist due to its amalgamation with Pharmazell (India) Pvt. Ltd. effective from 01.07.2018. The petitioner argued that any order made in the name of a non-existent entity is void, citing the Supreme Court's judgment in Maruti Suzuki and the Delhi High Court's decision in Spice Entertainment. The court found that the fact of amalgamation was communicated to the respondent multiple times before the draft assessment order was made. Despite this, the assessment order was issued in the name of Pharmazell Vizag Pvt. Ltd., rendering it void as per the legal precedent set by the Supreme Court in Maruti Suzuki.

2. Impact of participation in assessment proceedings by the amalgamated company:

The respondent argued that the petitioner participated in the proceedings, thus estopping them from raising the issue of the assessment being made in the name of the non-existent entity. However, the court rejected this argument, referencing the Delhi High Court's decision in Spice Entertainment, which was affirmed by the Supreme Court. The court held that participation by the amalgamated company does not cure the defect of the assessment being made in the name of a non-existent entity, as there can be no estoppel against law.

3. Relevance of PAN deactivation in the context of amalgamation:

The respondent also contended that the petitioner had not deactivated their PAN, justifying the assessment in the name of the amalgamating company. The court dismissed this argument, citing the Bombay High Court's decision in Diversey India Hygiene Private Limited, which held that the non-deactivation of PAN does not justify issuing notices to a non-existent entity, especially when the department is aware of the entity's non-existence.

Conclusion:

The court concluded that the case is covered by the Supreme Court's decision in Maruti Suzuki. The assessment order made in the name of Pharmazell Vizag Pvt. Ltd., which was not in existence on the date of the order, is unsustainable and thus quashed. The respondents are at liberty to proceed in accordance with the law. The writ petition was disposed of without costs, and the connected miscellaneous petition was closed.

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