TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 360
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....der the Appellant's objections that reassessment proceedings initiated in the name of non-existing entity are void ab initio. 2.2. The CIT(A) erred in relying on the decision of the Supreme Court in the case of PCIT(Central) Vs Mahagun Realtors P Ltd [2022 SCC Online SC 407] while deciding on the validity of an order passed in the name of a non-existing entity, without appreciating that the facts in the case of M/s. Mahagun Realtors P Ltd (supra) dealt with willful suppression of fact of amalgamation by the assessee and hence, is distinguishable from the facts of your Appellant's case. 2.3. The CIT(A) incorrectly ignored Appellant's reliance to decision of the Apex Court in Pr. CIT v. Maruti Suzuki India Ltd. [2019] 416 ITR 613 (SC) and decision of the Delhi High Court in the case of Spice Entertainment v. CIT in 2012 (280) ELT 43 (Delhi) which have upheld the principle that notice issued in the name of amalgamating entity is invalid and therefore any proceedings taken against such notice would be void ab initio. 3. Since the legal issue raised in the above ground, especially that notice(s) u/s 148 & 143(2) was issued and that the impugned assessmen....
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.....2021 & 24.02.2022, the assessee had inter alia consistently objected to the validity of the notice(s) and the impugned reassessment proceedings which were being conducted in the name of non-existent entity, ALWL. It is noted that, the AO vide letter dated 14.03.2022 acknowledged that M/s.ALVL had amalgamated with M/s.Ashok Leyland Ltd., w.e.f. 01.04.2018, but he inter alia disposed off the legal objection raised by the assessee to the validity of the notice by observing that, mere service of notice in respect of a company which did not exist cannot be a ground to assail the proceedings instituted for reopening the assessment u/s 147 of the Act. According to him, the notices were acknowledged by the assessee and therefore it cannot be treated as invalid. The AO is noted to have referred to the decision of Hon'ble Madras High Court in the case of Vama Sundari Investments (Delhi) Pvt Ltd Vs ACIT [2021] 128 taxmann.com 239 and CIT Vs T V Sundaram Iyengar and Sons Pvt Ltd [1999] 238 ITR 328 to reject the legal plea raised by the assessee. Though having acknowledged the fact, in this letter dated 14.03.2022 that, ALWL was no longer in existence as it stood merged with ALL with effect 01....
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....order was passed in the name of the nonexistent company, ALWL. 8. It is by now well settled in law that, any notice or order issued in the name of non-existent entity which has since stood merged/ amalgamated / dissolved is ab initio void and bad in law. Once it is found that the notice assuming jurisdiction is issued in the name of a nonexistent entity, then the assessment framed consequent thereto, is nonest in the eyes of law. As already noted above, the mandatory notice(s) to reopen the assessment u/s 148 of the Act, to scrutinize the assessment u/s. 143(2) of the Act and also the impugned assessment order was issued in the name of the already amalgamated company/non-existing entity [M/s ALWL]. Hence, we find that, the AO had usurped without jurisdiction to assess the non-existing entity [M/s. ALWL]. Consequently, the framing of assessment u/s. 147/143(3) of the Act, which was also in the name of non-existing entity [M/s ALWL], had been done without assuming valid jurisdiction and is thus null in the eyes of law. It is settled law that, the issuance of mandatory notice in the name of a non-existent entity is an incurable defect and cannot be treated as a procedural irregular....
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....settled legal position that the judgment of the Delhi High Court stands affirmed by the above decision in the Civil Appeals. It is of relevance to refer to Section 292B of the Income Tax Act which reads as follows: "292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act." 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. In this context, it is necessary to advert to the prov....
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....e succession" 33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment (supra) on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment (supra)." 9. Before us Ld. DR relied upon the decisions of Hon'ble Madras High Court in the cases of CIT Vs T V Sundaram Iyengar and Sons Pvt Ltd (supra) & Vama Sundari Investments (Delhi) (P.) Ltd. (supra) and the Hon'ble Su....
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....High Court in the case of Pharmazell (India) (P.) Ltd. V. NFAC (supra), and the relevant findings are noted to be as under:- "3. It may also be relevant to note that the factum of amalgamation of Pharmazell Vizag Pvt. Ltd. with Pharmazell (India) Pvt. Ltd. was intimated / disclosed to the respondent vide Email dated 09.10.2020 and letters / objections dated 28.12.2020 and 10.03.2021. Importantly, in the letters / objections dated 28.12.2020 and 10.03.2021 the reply was in the name of Pharmazell (India) Pvt. Ltd. and even in the subject the merger of Pharmazell Vizag Pvt. Ltd. with Pharmazell (India) Pvt. Ltd. was indicated. All these communications were made even prior to the draft assessment order being made. However, the Draft Assessment Order came to be passed on 30.03.2021, in the name of Pharmazell Vizag Pvt. Ltd. which ceased to exist by then, by virtue of the order of amalgamation. The impugned order of assessment thereafter was also made in the name of Pharmazell Vizag Pvt. Ltd. a non existing entity. 4. It was submitted that pursuant to the order of amalgamation any order that is made in the name of Pharmazell Vizag which is not in existence would be void....
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....t indicated its agreement that the wrong name given in the notice was merely a clerical error, capable of being corrected under Section 29. 28. The "peculiar facts" of Skylight Hospitality emerge from the decision of the Delhi High Court Sky Light Hospitality LLP (supray/Skylight Hospitality, an LLP, (supra) had taken over on 13 May 2016 and acquired the rights and liabilities of Skylight Hospitality Pvt. Ltd upon conversion under the Limited Liability Partnership Act 200825, It Instituted writ proceedings for challenging a notice under Sections 147/148 of the Act 1961 dated 30 March 2017 for AY 2010-2011. The "reasons to believe" made a reference to a tax evasion report received from the investigation unit of the income tax department. The facts were ascertained by the investigation unit. The reasons to believe referred to the assessment order for AY 2013-2014 and the findings recorded in it. Though the notice under Sections 147/148 was issued in the name of Skylight Hospitality Pvt. Ltd. (which had ceased to exist upon conversion into an LLP), there was, as the Delhi High Court held "substantial and affirmative material and evidence on record" to show that the issuance o....
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....ith the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Infotainment (supra) on 2 November 2017. The decision in Spice Infotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Infotainment (supra). 34. We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs....
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....nted by the amalgamated company and no prejudice was caused to any of the parties by the assessment order. It is further urged by the Revenue that in Maruti Suzuki, this court rejected the Revenue's appeal on the ground that the final assessment order referred only to the name of the amalgamating company and there was no mention of the resulting company, whereas in this case, in both the draft and the final assessment orders, the names of both the amalgamating and amalgamated company were mentioned. 9. It was also urged that the facts of the Maruti Suzuki are distinguishable from the present case, as in that case the Revenue was duly informed about the merger and change in name of the company, and yet the Assessing Officer passed the order in the name of the transferor or amalgamating[2019] 107 taxmann.com 375/416 ITR 613/265 Taxman 515 (SC); [2019] SCC Online SC 928. company. However, in the present case, the Assessing Officer or even the Revenue was not informed about the amalgamation. . . . . . . . . . . . 33. ...The respondent has relied upon Spice and Maruti Suzuki (supra) to contend that the notice issued in the name of the amalgamating company ....
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.... 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 notice, which suppressed the fact of amalgamation on the contrary, the return was of MRPL. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the Commissioner of Income-tax, and a cross-appeal was filed before the Income-tax Appellate Tribunal. Even the affidavit before this court is on behalf of the director of MRPL. Furthermore, the assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special auditor's report, brings specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of MRPL (as the assessee) but represented by the transferee, MIPL. All these clearly indicate that the order adopted a particular method of expressing the tax liability. The Assessing Officer, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertisin....
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.... of the amalgamating company. However, this again does not justify the passing of an assessment order in the name of a company which has got amalgamated and thus non-existent. In this regard reliance was placed on the judgment of the Bombay High Court in the case of Diversey India Hygiene (P.) Ltd. v. Asstt. CIT[Writ Petition No. 3034 of 2022, dated 8-11-2023]. The relevant portion is extracted hereunder: "6. The fact that PAN was not deactivated would not help the Revenue because there could be cases relating to various years when the company was in existence and it is possible those PAN numbers are picked up for scrutiny or for issuance of refund. That in our view, will not be a sanction for Department to issue notices to a non- existing entity, particularly, when they were aware that the entity was not in existence." 10. From the above discussion I am of the view that the case on hand stands covered by the decision of the Supreme Court in the case of Maruti Suzuki and thus the impugned order of assessment in the name of the amalgamating company i.e. Pharmazell Vizag Pvt. Ltd. which was not in existence on the date of passing the impugned order canot be sustaine....
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.... 30. We may, however, note that a reading of paragraph Nos.18 to 33 of the Hon'ble Supreme Court in the case of Mahagun Realtors (P) Ltd. (supra) does indicate that the Hon'ble Supreme Court in Mahagun Realtors (P) Ltd. (supra) did not agree with the proposition that the proceedings taken against the non-existing company would be void. In paragraph 32 of Mahagun Realtors (P) Ltd. (supra), it is observed that the legislative change, by way of introduction of Section 2(1A), defining "amalgamation" was not taken into account in the earlier decision of the Hon'ble Supreme Court. Further, tax treatment in the various provisions of the Act was not brought to the notice of this Court in the previous decisions. In paragraph 30 of Mahagun Realtors (P) Ltd. (supra), the Hon'ble Supreme Court observed that the combined effect of Section 394(2) of the Companies Act, 1956, Section 2(1A) and various other provisions of the Income-tax Act, 1961 is that unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation continues. In paragraph 18 of Mahagun Realtors (P) Ltd. (supra), the Hon'ble Supreme Court observed that i....
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....dicate Ltd. v. Commissioner of Income-tax [1990] 53 Taxman 92/186 ITR 278 (SC)observed that the consequence of the scheme of amalgamation is that the amalgamating company ceased to exist. In the instant case before us also, this would be the consequence insofar as RPEL and RPPL are concerned. (iv) Upon ceasing to exist, an entity cannot be regarded as a "person'' under Section 2(31) of the Act against whom an assessment order can be passed. In the instant case before us also the amalgamating companies are RPEL and RPPL which have ceased to exist on account of amalgamation, but still the assessment order is passed in the names of RPEL and RPPL. (v) The scheme of amalgamation in the present case before us was approved on 11 January 1995 with effect from 1 January 1995 by the order of this Court and the assessment orders were passed after 1 January 1995. (vi) In spite of the Assessing Officer being aware of the fact of amalgamation, the assessment order was passed on an entity which had ceased to exist. (vii) The assessment orders are passed in the name of RPEL and RPPL only without mentioning anything about RIL. This fact is identical to Ma....