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of <h1>Amalgamation and tax recovery: attachment of director's bank account quashed where liability vested in transferee, not dissolved transferor.</h1> Assessment of tax recovery against a non-existent amalgamating company and attachment of a director's bank account were challenged on the basis that ... Assessment and recovery against a non-existing amalgamating company - Effect of a scheme of amalgamation on identity and liabilities of transferor and transferee - Attachment of bank account for tax recovery - Liability of directors under Section 44(6) of the Maharashtra Value Added Tax Act, 2002 - Freezing of bank account to recover tax dues - Writ jurisdiction under Article 226 of the Constitution of India - HELD THAT:- Admittedly the impugned action of freezing of the petitioner’s bank account was resorted to enforce an order passed against Urdhwa Chemicals, a non-existing company. Also, the petitioner had resigned as a Director on 2 May, 2017, hence qua the assessment order, which is for the period 2016-17 and 2017-18, the petitioner in any event could not be held liable for discharging the tax debt of the said company, as by virtue of the amalgamation order, such liability itself could not have been attributed to Urdhwa Chemicals. On the basic premise as noted by us above, the freezing of the bank account of the petitioner cannot be sustained. This apart, this is a case where the respondent has clearly erred in taking recourse to provisions of sub-section (6) of Section 44, inasmuch as sub-section (6) would be applicable in regard to the liability to pay taxes only in respect of a private company, whether existing or not or under liquidation. It would certainly not cover a situation as in the present case where the company has stood amalgamated with another entity and when it is available for the tax authorities to proceed against the new amalgamated entity. Thus, even taking recourse to sub-section (6) of Section 44, no action could have been taken. In the light of the above discussion, the petition needs to succeed. Issues: (i) Whether the freezing of the petitioner's bank account and recovery action under the Maharashtra Value Added Tax Act, 2002 could be sustained where the assessment and recovery were directed against an amalgamating company that had ceased to exist; and whether Section 44(6) of MVAT, 2002 could be invoked to fasten liability on the petitioner as a former director.Analysis: The Court examined the scheme of amalgamation showing that the appointed date pre-dated the assessment period and that the transferor company had ceased to exist by operation of the NCLT-approved scheme. The Court applied precedent holding that a jurisdictional notice or assessment issued in the name of a non-existing/amalgamating entity is legally impermissible and the assessment is void. The Court further considered the scope of Section 44(6) of the MVAT Act and concluded that subsection (6) applies to liability in respect of a private company that is existing, wound up, or under liquidation and does not permit proceeding against a person where the correct course was to proceed against the transferee/amalgamated entity; accordingly Section 44(6) could not justify attaching the petitioner's bank account in the facts of the case.Conclusion: The freezing of the petitioner's bank account and recovery action were unsustainable and the invocation of Section 44(6) did not justify the action; the petition is allowed (in favour of the assessee).
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