AI Drafter 
TaxTMI 
TaxTMI 
2023 (3) TMI 723
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....ear 2018-2019. 2. According to the petitioner, the return of income was filed by the Inox Renewables Limited for the Assessment Year 2018-2019 on 30.11.2018. The case was selected for scrutiny by issuance of the notice under Section 143(2) of the IT Act on 23.09.2019 and later, notices were issued seeking information to frame the assessment. 3. Pending this assessment, the composite scheme of arrangements between the Inox Renewables Limited, GFL Limited and the petitioner was approved by the National Company Law Tribunal (NCLT), Ahmedabad. The scheme came in operation from 09.02.2021 w.e.f. appointed date of 01.04.2020 for Part II of the Scheme (Merger of Inox Renewables Limited into GFL Limited) and 01.07.2020 for Part II of the1 (Demerger of Renewables Energy business into the Petitioner). 4. According to the petitioner, since by virtue of the law, the Inox Renewables Limited ceased to exist with effect from 01.04.2020 and all its businesses, certificates licenses, approvals got transferred in the name of GFL Limited with effect from the selfsame date 01.04.2020, the communications had been sent to the respondent, the first time on 10.03.2021 on receipt....
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....rrectness of each and every allegation. 4 It is further contended that the challenge in the present petition is of the assessment order passed under section 143(3) of the Income Tax Act, 1961 ("the Act" for short) read with section 144B of the Act. According to the respondent the allegation and contention raised in each and every averment has no basis. 5 Notice under section 143(2) dated 23.09.2019 was issued against the assessee in the name of Inox Renewables Ltd. It was then transferred to National Faceless Assessment Center (NFAC) on 13.10.2020 and subsequently the assessee informed the Jurisdictional Assessing Officer about the scheme of arrangement on 10.03.2021. The assessee had not challenged the issuance of notice in the name of Inox Renewables Ltd. The decision of the Apex Court in the case of Maruti Suzuki India Ltd. vs Commissioner of Income Tax, 416 ITR 613, has been distinguished on facts. The scrutiny assessment proceedings was initiated by issuance of notice under section 143(2) on 23.09.2019 and the assessee for the first time had informed the Jurisdictional Assessing Officer on 10.03.2021 about scheme of arrangement sanctioned by NCLT on 25.01.2021 with appoi....
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....posing addition on account of cost taken for calculating for profit/gain from the slump sale of these assets." 6 We have extensively heard Mr. S.N. Soparkar, learned advocate Senior Advocate appearing with Mr.B.S.Soparkar, learned advocate for the petitioner and Mr. Nikunt Raval, learned Senior Standing Counsel appearing Mr. Karan Sanghani, learned Standing Counsel for the respondents. 7 It appears from the chronology of events that from 04.02.1987, GFL Limited was incorporated in the Companies Act and Inox Renewables Limited was incorporated as public limited company on 11.10.2010. The petitioner-Inox Wind Energy Limited ('the petitioner company" for short) was incorporated on 06.03.2020 as wholly owned subsidiary of GFL Limited on 06.03.2020. 8 The return of income was filed on Inox Renewables Limited for Assessment Year 2018-19 on 30.11.2018 declaring total income at nil. Notice under section 143(2) was issued on 23.09.2019 selecting the case for scrutiny. The composite scheme of arrangement between the Inox Renewables Limited, GFL Limited and the petitioner company was approved by the National Company Law Tribunal, Ahmedabad (NCLT). The scheme came under operation on 0....
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....ed 18.03.2011 passed in Company Petition No.161 of 2010. No deviation was made by the Court and, thus, by virtue of the scheme being sanctioned by the High Court, vide its order dated 18.03.2011, the transferor company merged into transferee company with effect from the appointed date i.e. 01.04.2009. This Court took into consideration the decision of Marshall Sons & Co. (India ) Ltd. vs. ITO, [1997] 223 ITR 809. Relevant paragraphs are reproduced as under: "14. Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide viz. January 1, 1982. It is true that while sanctioning the scheme it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in this facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the Court does not prescribe any specific date but merely sanctions the scheme presented to it - as has happened in this case - it should follow that the date of amalgamation/date of ....
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....refuses to sanction the scheme of amalgamation. We do not see any basis for this apprehension. Firstly, an assessment can always be made and is supposed to be made on the Transferee Company taking into account the income of both the Transferor and Transferee Company. Secondly, and probably the more advisable course from the point of view of the Revenue would be to make one assessment on the Transferee Company taking into account the income of both of Transferor or Transferee Companies and also to make separate protective assessments on both the Transferor and Transferee Companies separately. There may be a certain practical difficulty in adopting this course inasmuch as separate balancesheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balance-sheet. In certain cases, best-judgment assessment may also be resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for consideration in these cases directly." In view of the above concluded position of law, we have no hesitation in holding th....
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....came to be passed under section 143(3) of the Income Tax Act. The assessee filed an appeal where one of the grounds was that the assessment order was without jurisdiction, as it had been passed in the name of entity, which had seized to exist. 14 This was accepted by the Tribunal, as a result of which the assessment order came to be set aside. The decision of the Tribunal has been affirmed by the High Court indicating its earlier decision for the Assessment Year 2012. Relevant paragraphs are reproduced as under: "14. On 14 October 2016, the DRP issued its order in the name of MSIL (as successor in interest of erstwhile SPIL since amalgamated). 15. The final assessment order was passed on 31 October 2016 in the name of SPIL (amalgamated with MSIL) making an addition of Rs. 78.97 crores to the total income of the assessee. While preferring an appeal before the Tribunal, the assessee raised the objection that the assessment proceedings were continued in the name of the non-existent or merged entity SPIL and that the final assessment order which was also issued in the name of a non-existent entity, would be invalid. 16. By its decision dated 6 April 2017, ....
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....f Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said 'dead person'. When notice under Section 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/ s Spice which was non existing entity on that day. In such proceedings and assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law." From the above extract, it would emerge that if an assessment order had been passed on the resulting company, it would not be void. Hence, in the present case, the issuance of a notice under Section 143 (2) to SPIL cannot be considered to be a jurisdictional effect when the assessment order categorically mentions the names of the amalgamated and amalgamating companies; (vi) The decision of the Delhi High Court in Sky light Hospitality LLP v. Asstt. CIT....
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....ld suffer from a jurisdictional error or whether it is a mere defect or mistake which would be governed by Section 292B. 18. On the other hand, Mr Ajay Vohra, learned Senior Counsel appearing on behalf of the respondents submitted that: (i) Upon a scheme of amalgamation being sanctioned, the amalgamated company is dissolved without winding up, in terms of Section 394 of the Companies Act 1956. The amalgamating company ceases to exist in the eyes of law [Saraswati Industrial Syndicate Ltd.v CIT [1990] 53 Taxman 92/186 ITR 278 (SC) ("Saraswati Industrial Syndicate Ltd.")]; (ii) The amalgamating company cannot thereafter be regarded as a "person" in terms of Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated and an assessment order passed; (iii) The jurisdictional notice under Section 143(2) of the Act, pursuant to which the assessing officer assumed jurisdiction to make an assessment was issued in the name of SPIL, a non-existent entity, and was invalid. Hence the initiation of assessment proceedings against a non-existent entity was void ab initio. ♦ It has been held in the following decisions that, i....
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....ssment proceedings would not operate as estoppel. ♦ Following the aforesaid decision of the High Court in the case of Spice Entertainment, (supra) the Delhi High Court quashed assessment orders which were framed in the name of an amalgamating company, recording also the name of the amalgamated company, in the following cases: - CIT v. Dimension Apparels (P.) Ltd. [2014] 52 taxmann.com 356/[2015] 370 ITR 288 (Delhi) ; affirmed by this Hon'ble Court vide Civil Appeal No. 3125 of 2015; - CIT v. Micron Steels (P.) Ltd. [2015] 59 taxmann.com 470/233 Taxman 120/372 ITR 386 (Delhi)(Mag.) - CIT v. Micra India (P) Ltd. [2015] 57 taxmann.com 163/231 Taxman 809 (Delhi) The aforesaid judgments of the Delhi High Court have been approved by this Court in Civil Appeal No.285 of 2014 (& other connected matters). Thus applying the doctrine of merger, the law laid down by the Delhi High Court has become a precedent under Article 141. (vi) The Respondent's case is squarely covered by the decision of this Court in its own case for the immediately preceding year: ♦ The Delhi High Court by its judgment reported in Maruti ....
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....on-existent entity: - Rajender Kumar Sehgal v. ITO [2019] 10 taxmann.com 233/260 Taxman 412 (Delhi) - Chandreshbhai Jayantibhai Patel v. ITO [2019] 101 taxmann.com 362/261 Taxman 137 (Guj.) - Alamelu Veerappan (supra) 19. While assessing the merits of the rival submissions, it is necessary at the outset to advert to certain significant facets of the present case: (i) Firstly, the income which is sought to be subjected to the charge of tax for AY 2012-13 is the income of the erstwhile entity (SPIL) prior to amalgamation. This is on account of a transfer pricing addition of Rs. 78.97 crores; (ii) Secondly, under the approved scheme of amalgamation, the transferee has assumed the liabilities of the transferor company, including tax liabilities; (iii) Thirdly, the consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist. In Saraswati Industrial Syndicate Ltd., (supra) the principle has been formulated by this Court in the following observations: "5. Generally, where only one company is involved in change and the rights of the sha....
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.... facts, the initiation of assessment proceedings against an entity which had ceased to exist was void ab initio. 20. In Spice Entertainment, (supra) a Division Bench of the Delhi High Court dealt with the question as to whether an assessment in the name of a company which has been amalgamated and has been dissolved is null and void or, whether the framing of an assessment in the name of such company is merely a procedural defect which can be cured. The High Court held that upon a notice under Section 143 (2) being addressed, the amalgamated company had brought the fact of the amalgamation to the notice of the assessing officer. Despite this, the assessing officer did not substitute the name of the amalgamated company and proceeded to make an assessment in the name of a non-existent company which renders it void. This, in the view of the High Court, was not merely a procedural defect. Moreover, the participation by the amalgamated company would have no effect since there could be no estoppel against law : "11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exit w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumben....
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....elevant paragraphs are reproduced as under: "20. Position emerges that there is no dispute on factual aspect that TSPL had been amalgamated into M/s. Intelnet Global Services Pvt. Ltd. with effect from 1st April, 2010. As a matter of fact, same has been endorsed in the affidavit-in-reply filed on behalf of the respondents, referring to that petitioner is its ultimate successor. Thereafter, said company had also been submitting returns and those were assessed from time to time in respect of subsequent financial and assessment years. This aspect as well has not been disputed. So is the case in respect of averments appearing in paragraph 4J. (c) of the petition to the following effect: 15.3 "(c) The Petitioner submitted that even after merger, 14 / 18 WP. 950-2020 sometimes the payers make payment to the Petitioner, however, erroneously continue to mention the PAN of the erstwhile company and not the Petitioner's company. However, the Petitioner in its return of income consider all such payments and claim all such deduction. Therefore, there can be no question of any escaping assessment for the assessment year 2012-13." 21. During the course of submissio....
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....R 386 (Del.) (Mag.) 12 (2015) 57 taxmann.com 163/231 Taxman 809 (Delhi) 13 (2016) 380 UTE 272 (Kar.) 16 / 18 WP. 950-2020 Nokia Solutions and Network India (P) Ltd.14 23. The Supreme Court in Spice Infotainment Ltd. Vs. CIT15 found that there is no reason to interfere with the impugned judgment of Delhi high court and it found no merits in the appeal and special leave petition and were dismissed accordingly. The Supreme Court had taken note of revenue resistance contending that contrary position emerges from decision of Delhi high court decision in Sky Light Hospitality LLP Vs. Assistant Cdommissioner of Income-tax16 and that it had been affirmed by the Supreme Court. However, the Supreme Court had also taken note of Sky Light LLP (supra) was in peculiar facts of the case, where the high court had catgegorically concluded that there was clerical mistake within the meaning of section 292B and the case had been distinguished by decisions of Delhi, Gujarat and Madras high courts in Rajender Kumar Sehgal Vs. ITO17; Chandreshbhai Jayantibhai Patel Vs. IOT18; and Alamelu Veerappan Vs. ITO1. 24. In the circumstances, though the respondents refer to decision of D....
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.... completion of the assessment, whichever is earlier. xxx xxx xxx 23. The following principles are discernible from the above referred judgment of this Court : i. The issuance of the notice to a dead assessee is not a mere technical defect which can be corrected under Section 292B of the Act. The issuance of the notice to a dead assessee and the consequent proceedings pursuant thereto would be without jurisdiction and, therefore, null and void. ii. The want of a valid notice affects the jurisdiction of the Assessing Officer to proceed with the assessment and thus affects the validity of the proceedings for assessment or re-assessment. A notice issued under Section 148 of the Act against a dead person is invalid, unless the legal representative submits to the jurisdiction of the Assessing Officer without raising any objection. 24. We are of the view that the same principle as referred to above would apply even to a notice issued to a dead assessee under Section 153C of the Act. It is not in dispute that the legal heir of late Bhupendrabhai Desai had not participated in the proceedings. All that the legal heir of late Bhupendrabhai Desai di....
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....appeal, it was contended that the assessment proceedings were void as all the legal representatives were not given notice. In this backdrop, a two judge Bench of this Court held that the assessment proceedings were not null and void, and at the worst, that they were defective. In this context, reliance was placed on the decision of the Federal Court in Chatturam v CIT39 holding that the jurisdiction to assess and the liability to pay tax are not conditional on the validity of the notice : the liability to pay tax is founded in the charging sections and not in the machinery provisions to determine the amount of tax. Reliance was also placed on the decision in Maharaja of Patiala v CIT (1943) 11 ITR 202 (Bom.) ("Maharaja of Patiala"). That was a case where two notices were issued after the death of the assessee in his name, requiring him to make a return of income. The notices were served upon the successor Maharaja and the assessment order was passed describing the assessee as "His Highness...late Maharaja of Patiala". The successor appealed against the assessment contending that since the notices were sent in the name of the Maharaja of Patiala and not to him as the legal represent....
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....ce Enfotainment." xxx xxx xxx 29. Ultimately, in view of the aforesaid, the only proposition of law that is applicable in the present litigation is that a notice, be it under Section 148 of the Act or Section 153C of the Act, issued to a dead person, is unenforceable in law. If such is the legal position, the Revenue cannot contend that as they had no knowledge about the death of the assessee, they are entitled to plead that the notice is not defective. " 16.2 The emphasis on the part of the petitioner is that the existence of the assessee shall need to be there under the law at the time of passing the order. Its existence at the initial stage also will not suffice and no notice could be issued to a person, who is not alive or who is dead. 17 In the case of Commissioner of Income Tax, New Delhi vs. Spice Enfotainment Limited , (2020) 18 SCC 353, framing of assessment was against a non-existing entity/person, since the company had stood amalgamated in another company in the Assessment Year. Non-consideration of this aspect had led the Court to hold that the appeal against the judgement of the High Court was devoid of merits. 18 In the case of Principal Com....
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..... The Assessing Officer issued notice under section 153A in the name of amalgamating company i.e. MRPL, which filed return of income for the Assessment Year 2006-07 and the assessee company filed return in the name of MRPL. It appears that the Assessing Officer completed the assessment and made an addition. The Tribunal quashed the said order. The MRPL was not in existence when the assessment order was passed. The High Court upheld the said order. 19.1 It was noted by the Apex Court that no indication about amalgamation was given by assessee during search operations and return filed pursuant to notice issued under section 153A suppressed fact of amalgamation. The Court held that even though the assessee company ceased to exist, the appeals were filed on behalf of the assessee. Since the conduct of the assessee, commencing from the date of search and before all forums reflected that it consistently held itself as assessee, assessment order passed in the name of the assessee was valid. The corporate death of an entity upon amalgamation per se invalidate assessment order passed in name of amalgamating company cannot be determined on a bare application of section 481 of the Companie....
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....ndividual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable." 32. The court, undoubtedly noticed Saraswati Syndicate. Further, the judgment in Spice (supra) and other line of decisions, culminating in this court's order, approving those judgments, was also noticed. Yet, the legislative change, by way of introduction of Section 2 (1A), defining "amalgamation" was not taken into account. Further, the tax treatment in the various provisions of the Act were not brought to the notice of this court, in the previous decisions. 33. There is no doubt that MRPL amalgamated with MIPL and ceased to exist thereafter; this is an established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to contend that the notice issued in the name of the amalgamating company is void and illegal. The facts of present case, however, can be distinguished from the facts in Spice and Maruti Suzuki on the following bases. xxx xxx xxx 42. Before concluding, this Court notes and holds that whether corporate de....
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....Assessment Year 2011-12 was found to be necessary to be adopted in respect of the appeal, as otherwise, the same would result into uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. 20.3 Distinguishing the facts from the case of Spice Entertainment Ltd. (supra) and Maruti Suzuki India Ltd. (supra), the Court held otherwise. In both the cases the assessee had duly informed the authorities about the merger of companies and, yet the assessment order was passed against the amalgamating or non-existing company. In Mahagun Realtors (P.) Ltd.(supra), there was no intimation by the assessee regarding the amalgamation of the company. The return of income for the Assessment Years 2006-07 was filed by the assessee on 30.06.2006 in the name of MRPL. The MRPL amalgamated with MIPL on 11.05.2007 with effect from 01.04.2006. The proceedings against MRPL started on 27.08.2008 when search and seiz....
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....l income at nil. The case for scrutiny was selected and the notice under section 143(2) was issued on 23.09.2019. On 25.01.2021, the composite scheme of arrangement between Inox Renewables Limited and GFL Limited and the petitioner company was approved by the NCLT and the appointed date for the merger of Inox Renewables Limited and GFL Limited was fixed on 01.04.2010 and demerger of energy business into the petitioner company was from 01.07.2020. The scheme since came into operation from 09.02.2021, the Jurisdictional Assessing Officer received the intimation through email on 10.03.2021. The petitioner informed the respondent about such sanction of the composite scheme on 31.08.2021 and on 19.09.2021. Notices continued to be issued in the name of erstwhile company, which no longer existed from 01.04.2020. The show cause notice-cum-draft assessment order was also issued on 23.09.2021. Therefore, on 25.09.2021, once again the petitioner intimated and objected to the notice. It would be worthwhile to also elaborately consider the communication of e-assessment through email dated 10.03.2021, which in its subject speaks of the composite scheme of arrangement between Inox Renewables Ltd.....
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....Renewables Limited (IRL) into GFL Limited w.e.f. 1st April, 2020, and Part B- Demerger of the Renewable Energy Business ( as more particularly defined in the Scheme ) of GFL Limited into its wholly-owned subsidiary, Inox Wind Energy Limited (IWEL), a newly incorporated company for the purpose of vesting of the Renewable Energy Business w.e.f. 1st July, 2020. The above mentioned Composite Scheme of Arrangement is also approved by Sharesholders, SEBI, Stock Exchanges and Hon'ble National Company Law Tribunal (NCLT), Ahmedabad Bench, as per the statutory requirements. The Scheme is made effective from 09th February, 2021. We request you to take note of the following changes which forms the terms of this Scheme:- 1. IRL ceased to exist with effect from 01st April, 2020. 2. Post effectiveness of the Scheme, all the registration certificates/ licenses/ approvals will be transferred to in the nameo f IWEL. 3. In view of above, we request you to update the following details of various registrations and date of incorporation of the IWEL in your records; Particulars Inox Wind Energy Limited Date of incorporation 06th March, 20....
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....peculiar facts of the case could not have been disregarded by the authority concerned. 22 The decision of Mahagun Realtors (P.) Ltd. (supra) has been delivered in very peculiar facts and circumstances where not only the new company had posted itself as the old company never revealing before the authority concerned that the old company had not existed, it continued to represent the defendant and pressed its case as if nothing had changed, whereas in the case of Maruti Suzuki India Ltd.(supra), the Court has made is clear taking note of the case of Spice Entertainment Ltd. (supra) that the assessment in the name of the company, which has been amalgamated and has been dissolved is null and void and framing of assessment in the name of such companies is not merely a procedural difficulty, which can be cured. Amalgamated company had already brought the facts of amalgamation to the notice of the Assessing Officer and yet he chose not to substitute the name of the amalgamated company and proceeded to make the assessment in the name of non-existing company and thereby rendering it void. This surely could not be said to be a procedural difficulty on 23.09.2021. The show cause notice-cum-....