TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 723
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....he 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 of certified copy of the order of the NCLT and thereafter, on 01.04.20....
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....assed 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 appointed date from 01.04.2020. All other aspects have been denied in toto. It is further made clear that the relevant details in support of claim ....
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....kar, 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 09.02.2021 with effect from the appointed date of 01.04.2020 for Part II of the Scheme (Merger of GFL Renewables Limited into GFL Limited). Communications addressed to Inox Renewables were responded by the petitioner after 09.....
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....sferee 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 transfer is the date specified in the scheme as "the transfer date". It cannot be otherwise. It must be remembered that before applying to the Court under Section 391(1) a scheme has to be framed and such scheme has to contain a date of amalg....
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....ransferee 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 that the transferor company would no longer be amenable to assessment proceedings for the assessment year 2010-11. The notice for producing documents for such assessment would, therefore, be invalid. Reference of the Revenue to clause 6 of the scheme is whol....
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....e 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, the Tribunal set aside the final assessment order on the ground that it was void ab initio, having been passed in the name of a non-existent entity by the assessing officer. The decision of the Tribunal was affirmed in an appeal under Section 260A by the Delhi High Court on 9 January 2018 foll....
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....llant 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 [2018] 90 taxmann.com 413/254 Taxman 109/405 ITR 296 ("Skylight Hospitality LLP"), which was confirmed by this Court on Skylight Hospitality LLP v. Asstt. CIT [2018] 92 taxmann.com 93/254 Taxman 390 (SC) dealt with a situation where a notice under Section 148 was issued in the name of a non-existent private limited company. The Court held that the defect....
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....he 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, if a statutory notice is issued in the name of a non-existent entity, the entire assessment would be a nullity in the eyes of law: - CIT v. Intel Technology India (P.) Ltd. [2015] 57 taxmann.com 159/232 Taxman 279/[2016] 380 ITR 272 (Kar.) - Pr. CIT v. Nokia Solutions & Network India (P.) Ltd. [2018] 90 taxmann.com 369/253 Taxman 409/402 ITR 21 (Delhi) - Spice Entertainment (supra) - Similarly, a notice....
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....n 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 Suzuki (supra) held in favour of the Respondent by following the judgment in the case of Spice Entertainment (supra). ♦ Further, the Revenue's SLP was dismissed by this Court Maruti Suzuki (supra) , following the judgment in Spice Entertainment. ♦ Relying on the decision of this Hon'ble Court, in the following decisions, assessments framed in the case of a non-existent entity (the amalgamating company) have been held to be non-est in the eyes of law: - Pr. CIT v. BMA Capfin Ltd. [2018] 100 taxmann.com 329 (Delhi) (Revenue's SLP dis....
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....cheme 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 shareholders and creditors are varied, it amounts to reconstruction or reorganisation of scheme of arrangement. In amalgamation two or more companies are fused into one by merger or by taking over by another. Reconstruction or 'amalgamation' has no precise legal meaning. The amalgamation is a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company become substantially the shareholders in the company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. Strictly 'amalgamatio....
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.... 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 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 an 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. 12. Once it is found that assessment is framed in the name of no....
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....es 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 submissions, learned senior counsel Mr. Mistri refers to decision of the Supreme Court of India in the case of Principal Commissioner of Income Tax, New Delhi Vs. Maruti Suzuki India Ltd.7 (Maruti Suzuki) 22. The Supreme Court in the case of Maruti Suzuki (supra) had considered that income, which was subject to be charged to tax for the assessment year 2012-13 was the income of erstwhile entity prior to amalgamation. Transferee had assumed liabilities of transferor company, including that of tax. The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under Section 143(2) of the Act was issued on 26.9.2013, the sche....
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....gorically 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 Delhi High Court in case of Sky Light Hospitality LLP Vs. 14 (2018) 90 taxmann.com 369/253 Taxman 409/402 ITR 21 (Delhi) 15 (2012) 247 CTR 500 (Delhi) 16 (2018) 92 taxmann.com 93 (SC) 17 (2019) 10 taxmann.com 233/260 Taxman 412 (Delhi) 18 (2019) 101 taxmann.com 362/261 Taxman 137 (Guj.) 19 (2018) taxmann.com 155/257Taxman 72 (Mad.) 17 / 18 WP. 950-2020 Assistant Commissioner of Income Tax, Circle 28(1), New Delhi 20 it would be of little avail for the respondents. The decision in the case of Maruti Suzuki (supra) would hold sway over present facts and circumstances." 16 This Court in the case of Bhupendra Bhikalal Desai vs.Income Tax Officer, Ward 1(2)(1), [2021] 130 taxmann.com 196(Gujarat), on taking into account plethora of decisions, has observed that if a person sought to be taxed comes within the letter of the law, he mus....
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....e 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 did was to inform the Assessing Officer about the death of his father and requested to drop the proceedings. It is true that although the father passed away in the year 2017, yet the legal heir did not inform the department upto October 2019. However, at the same time, we should not overlook the fact that even after coming to know about the demise of late Bhupendrabhai, the department could have issued a valid notice to the legal heir as the period of limitation of 21 months had not expired. We fail to understand what prevented the department from issuing a valid notice to the legal heir within the prescribed time period. 25. In the aforesaid context, we may refer to a recent pronouncement of the Supreme Court in the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Limited, (2019) 107 taxmann.com 375 (SC). The ratio of this decision of the Supreme Court is that during the pendency of....
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....rder 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 representative of the Maharaja of Patiala, the assessments were illegal. The Bombay High Court held that the successor Maharaja was a legal representative of the deceased and while it would have been better to so describe him in the notice, the notice was not bad merely because it omitted to state that it was served in that capacity. Following these two decisions, this Court in Jai Prakash Singh held that an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where the liability is created by a distinct substantive provision. The omission or defect may render the order irregular but not void or illegal. Jai Prakash Singh and the two decisions that it placed reliance upon were evidently based upon the specific facts. Jai Prakash Singh involved a situation where the return of income had been filed by one of the legal representatives to whom notices were iss....
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.... 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 Commissioner of Income-tax vs BMA Capfin Ltd,[2018] 100 taxmann.com 330(SC), rendered by the Apex Court, the assessee company got merged with another company. The Assessing Officer took note of the said development, but instead of completing the assessment in hand and in the name of amalgamated or merged entity, he proceeded to complete separate assessment in name of assessee, who, by then, had become a non-existent entity. The Tribunal and Commissioner (Appeals) both accepted assessee's plea that assessment so completed was a nullity. The High Court upheld the order passed by the Tribunal and the SLP filed against the decision of the High Court was dismissed. 18.1 The assessee had indicated that it underwent a change. The original assessment was completed, but the matter was remanded on two occasions and in the third round, the assessee had indicated how it had underwent the change. The decision of Spice Entertainment vs. CIT [IT Appeal No.475 of 2011], had been....
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....ssessee 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 Companies Act, 1956, but would depend upon terms of amalgamation and facts of each case. The matter was remanded back to the Tribunal for decision afresh. 19.2 Relevant paragraphs are reproduced profitably as under: "31. In Maruti Suzuki (supra), the scheme of amalgamation was approved on 29.01.2013 w.e.f. 01.04.2012, the same was intimated to the AO on 02.04.2013, and the notice under Section 143(2) for AY 2012-13 was issued to amalgamating company on 26.09.2013. This court in facts and circumstances observed the following: "35. In this case, the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer was issued to a non- existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B. ------------- ----------------- 39. In the present case, despite the fact that the assessing officer was informed of the amalg....
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....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 death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case. 20 The Apex Court here looked beyond the construction "corporate entity", which otherwise brings to an end or terminates any assessment proceedings equating the same with the civil law and the procedure where upon amalgamation, the cause of action or the complaint does not per se cease, depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and Courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have developed or upon whom the liability in the event it is adjudicated, would fall. 20.1 While distinguishing the decision of Maruti Suzuki India Ltd. (supra), the Court notices that the scheme of amalgamation was approved....
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....he 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 seizure was first conducted on the Mahagun group of companies. Notices under section 153A and section 143(2) were issued in the name of MRPL and the representative from MRPL corresponded with the department in the name of MRPL. The assessee filed its return of income in the name of MRPL, and in the 'business Reorganization' column of the form mentioned 'not applicable' in amalgamation section. The intimation to the departmental authorities was for Assessment Year 2007-08 and not for Assessment Year 2006-07. For Assessment Years 2007-08 to 2008-09, a separate proceedings against MIPL and the proceedings against MRPL for these two assessment years were quashed by the Additional CIT by order dated 30.11.2010, as the amalgamation was disclosed. 20.4 What overwhelmingly evident was that the amalgamation was known to the assessee, even at the stage when the search and seizure operations took place as well as statements were recorded by the Revenue of the Directors and Managing Director of the group. A return was filed, pursuant to the notice, which ....
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....assessment through email dated 10.03.2021, which in its subject speaks of the composite scheme of arrangement between Inox Renewables Ltd., GFL Limited and the petitioner company, the first and the second transferee company respectively informed authority concerned about the composite scheme of arrangement. Relevant paragraphs of email are reproduced as under: "We would like to inform that the Composite Scheme of Arrangement in the nature of amalgamation of Inox Renewables Limited, the Petitioner Transferor Company with GFL Limited ( Part II of the Scheme) and De-merger and Transfer of the De-merged Undertaking viz.Renewable Energy Business of GFL Limited, the Petitioenr First Transferee/ De-merged company to Inox Wind Energy Limited, the Petitioner Resulting/ Second Transferee Company ( Part III of the Scheme) was approved by the Hon'ble National Company Law Tribunal, Ahmedabad Bench ("NCLT") vide its order dated 25th January, 2021. The Scheme has become effective upon filing of the certified copy of the Order passed by NCLT sanctioning the Scheme, with the Registrar of Companies, Gujarat (MCA website) today i.e. 9th February, 2021, with effect from the Appointed Date of 1st A....
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....ate of incorporation 06th March, 2020 CIN U40106GJ2020PLC113100 PAN AAFCI6084A TAN BRDI01285E GST 24AAFCI6084A1ZV Registered office 3rd Floor, ABS Towers, Old Padra Road, Vadodara- 390007. 2) Please furnish the remaining queries of earlier notice u/s. 142(1) of the Act. 3) Details of monthly aggregate investment made in previous year. And reason for no-compliance of 14A r.w.Rule of the IT Act. Reply: -Inox Renewables Limited has investments in its subsidiary company Inox Renewables (Jaisalmer) Limited for 10,60,50,000 equity Shares (31st March 2016 and 31st March, 2017) of Rs.10 each. Opening and Closing Balance in Investments is the same. Although , No fresh investment has been made during the year under consideration. The assessee company has not earned any exempt income during the year under consideration. Hence, in view of Nil exempt income, the assessee company is not under obligation to offer disallowance u/s. 14A." 21.3 Thereafter, a communication was sent to the petitioner by Joint Commissioner of Income Tax, National Faceless Assessment Centre, Delhi intimating that the Board of Directors of the Company, as a part of business restructuring, has approv....
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....when was issued in the name of the non-existing company giving a very short period for the company to reply, the very objection was raised by the amalgamated company pointing out that the assessment was in the name of the non-existing company. Repeated objections on the part of the petitioner had fallen on deaf ears and no heed was paid to various correspondences addressed to the respondent department. It is not being disputed that the order of NCLT and all the requisite documents were furnished to the authority by the amalgamated company and it had virtually implored to discontinue the proceedings against the nonexisting company. 23 On the issue of prejudice also, we are convinced that when the proceedings continued against the non-existing company, if fort was held for some time by the amalgamated company to ensure that no further damage is caused, this participation surely cannot be held against it. Moreover, amalgamated company, with all its obligations, would file return of income and also continue the process, but once assessment order is passed against non-existing company, there would be no cure, even for filing of the appeal. Once it is found that the assessment is framed....