2026 (3) TMI 562 - HC - Income Tax

Amalgamation effect: Notices or assessments issued in the name of a dissolved transferor, after intimation, are jurisdictionally void.

Where an amalgamating (transferor) company has ceased to exist pursuant to a sanctioned scheme of amalgamation and that fact was duly intimated to tax ... Proceedings in the name of a non-existent entity - Validity of notices, assessment order and consequential notices issued in the name of the amalgamating (transferor) company after its amalgamation - HELD THAT:- The Court held that where the amalgamation of the transferor company into the resultant company had been duly intimated to the tax authorities before and during the assessment proceedings, issuance of notices and framing of assessment in the name of the amalgamating company which had ceased to exist constituted a jurisdictional error. The Court applied the principle that an amalgamating company loses its corporate existence on an approved scheme of amalgamation and relied on settled authorities to conclude that continuing proceedings in the name of a non-existent entity is void. Court distinguished the decision in Mahagun Realtors [2022 (4) TMI 347 - SUPREME COURT] on its facts (absence of prior intimation and participation by the resultant company) and found decisions relied on by the Revenue inapplicable where the PAN and legal identity of the entity no longer subsisted; accordingly the notices u/s 142(1), the show cause and the assessment under Section 143(3) read with Section 144B, and the consequential notices under Section 156 and penalty notices under Section 274 read with Section 270A issued in the name of the non-existent transferor company were invalid. The Court clarified that its conclusion was confined to the procedural defect of proceedings being taken in the name of a non-existent entity and did not preclude the Revenue from initiating fresh proceedings against the amalgamated company if legally entitled to do so. [Paras 13, 15, 17, 18, 20] Final Conclusion: The Writ Petition was allowed: the assessment order the notice of demand and the penalty notice issued in the name of the amalgamating company were quashed as void for being made in the name of a non-existent entity; the Revenue remains free to initiate fresh proceedings against the amalgamated company if legally permissible. Issues: Whether notices, show cause notices, assessment order and consequential demand and penalty notices issued and framed in the name of an amalgamating company which had ceased to exist on the relevant date are void and liable to be quashed.Analysis: The issue was examined in light of settled propositions that on sanction of a scheme of amalgamation the amalgamating/transferor company ceases to exist and that proceedings conducted in the name of a non-existent entity where the fact of amalgamation was brought to the notice of the tax authorities constitute a jurisdictional error. Relevant statutory provisions under which notices and assessment were issued include Sections 142(1), 143(2), 143(3), 144B and Section 156, and penalty provisions under Sections 274 and 270A of the Income-tax Act, 1961. Prior judicial decisions holding that an amalgamating company loses corporate existence and that continuation of proceedings in its name after intimation of amalgamation is void were applied. Distinctions with authorities relied on by the Revenue were drawn on factual grounds where the resultant company did not inform authorities or participated in proceedings; here, the amalgamation had been duly intimated and objections were raised at the earliest opportunity.Conclusion: The notices under Section 142(1), the show cause notices, the assessment order dated 23.03.2024 under Section 143(3) read with Section 144B, the consequential notice under Section 156 and the penalty notice under Sections 274 read with 270A, all issued in the name of the amalgamating company which had ceased to exist, are void and are quashed and set aside. The writ petition is allowed.Ratio Decidendi: Where an amalgamating company has ceased to exist pursuant to a sanctioned scheme of amalgamation and that fact has been duly intimated to the tax authorities, issuance of jurisdictional notices or framing of assessment in the name of the non-existent amalgamating entity is a jurisdictional error rendering such notices and orders void.