Amalgamation and tax recovery: attachment of director's bank account quashed where liability vested in transferee, not dissolved transferor.

Assessment of tax recovery against a non-existent amalgamating company and attachment of a director's bank account were challenged on the basis that liabilities under a scheme of amalgamation vest in the transferee, not the dissolved transferor; the court reasoned that liability for the assessment periods could not be attributed to the transferor and therefore freezing the director's account was unsustainable, leading to relief against the attachment. The court further held that recourse to directoral liability provision for private companies was inapplicable where the transferor had amalgamated and the tax authority could proceed against the amalgamated entity, so such action could not be sustained.

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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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