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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SONIA GOKANI, SANDEEP N. BHATT, JJ.
Kunvarji Fincorp Private Limited – Appellant
Versus
Deputy Commissioner Of Income Tax Circle 2(1)(1), Ahmedabad – Respondent
R/SPECIAL CIVIL APPLICATION NO. 935 of 2022 With R/SPECIAL CIVIL APPLICATION NO. 966 of 2022 With R/SPECIAL CIVIL APPLICATION NO. 981 of 2022
Decided on : 06-02-2023
Income Tax - Notice under Section-148 - [Section-148 of the Income Tax Act] - The court allowed the petitions and quashed the show-cause notices issued by the respondent, holding that the notice under Section-148 was fundamentally illegal and without jurisdiction as the amalgamated company had ceased to exist, and the department was duly informed about the amalgamation. The court referred to the legal principle established in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited, where it was held that if a company has ceased to exist as a result of an approved scheme of amalgamation, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. The court also emphasized that the participation by the amalgamated company in the proceedings would be of no effect as there is no estoppel against law.
Fact of the Case:
The petitioner, a limited company, was issued a notice under Section-148 of the Income Tax Act for the assessment year 2016-17. The petitioner argued that the notice was bad ab-initio as the company mentioned in the notice had been amalgamated into the petitioner and had ceased to exist.
Finding of the Court:
The court allowed the petitions and quashed the show-cause notices issued by the respondent, holding that the notice under Section-148 was fundamentally illegal and without jurisdiction as the amalgamated company had ceased to exist, and the department was duly informed about the amalgamation.
Issues: The main issue was the validity of the notice under Section-148 of the Income Tax Act, considering the amalgamation of the company mentioned in the notice.
Ratio Decidendi: The court relied on the legal principle established in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited, which held that if a company has ceased to exist as a result of an approved scheme of amalgamation, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction.
Final Decision: The petitions were allowed, and the show-cause notices issued by the respondent were quashed with consequential reliefs.
ORDER :
SONIA GOKANI, J.
1. Draft amendment is permitted in cause-title and Paragraphs-2.5 & 3.2 of Special Civil Application No.935 of 2022 where instead of ‘successor to Kaizen Fincorp Private Limited’, it should be ‘successor to Kaizen Stocktrade Private Limited’.
Fresh copy of the same shall be brought on record.
2. This group of petitions are preferred, which involve identical question of law and facts, and therefore, are being decided by a common order.
3. The challenge is to the notice issued under Section-148 of the Income Tax Act by the respondent no.1.
4. The facts had drawn from Special Civil Application No.935 of 2022.
4.1 The petitioner is a limited company. The two companies namely Kaizen Stocktrade Pvt. Ltd. and Kaizen Finstock Pvt. Ltd. were amalgamated into the petitioner company by order dated 05.08.2016 passed in Company Petition No.235 of 2016 in Company Application No.221 of 2016.
4.2 The petitioner for the A.Y.2016-17 filed a return. Case was picked-up for re-assessment and a notice under Section 142(1) was issued on 22.02.2018, which has been replied by the petitioner on 20.03.2018.
4.3 It is averred by the petitioner that on 04.12.2018, the assessment order under Section-143(3) of the Act was passed after considering the income of the petitioner and of the two other companies.
4.4 The notice dated 29.03.2021 was issued under Section 148 in the name of earlier company i.e. Kaizen Stocktrade Pvt. Ltd.
4.5 According to the petitioner, the notice is bad ab-initio inasmuch as even Kaizen Stocktrade Pvt. Ltd. is amalgamated into the petitioner and erstwhile company Kaizen Stocktrade Pvt. Ltd. has ceased to exist. The ratio according to the petitioner is covered by the decision of CIT Vs. Maruti Suzuki Ltd.
5. The company which is no longer in existence and amalgamated, could not have been issued the notice under Section-148, following the same prays in paragraph-7 as under:-
(c) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure-’A’ to this petition and stay further proceedings for assessment and recovery and for A.Y.2013-14;
(d) any other and further relief deemed just and proper be granted in the interest of justice;
6. Heard learned advocate Mr. Bandish Soparkar assisted by learned advocate Mr. Anjaria for the petitioner – assessee and learned senior standing counsel Mr. Varun Patel assisted by learned advocate Mr. Dev Patel for the respondent – department.
7. It is urged before this Court that this group of other such matters in relation to the very company for other assessment years have been decided in Special Civil Application No.903 of 2022 and allied matters on 16.01.2023 and on the reasoning mutatis mutandis applied to case of the present group of matters, where the Court has held thus:-
11. In absence of any particular format for intimating the authority concerned, this intimation on the part of the petitioner is sufficient intimation to the department. We need to make also a note of
Notices under Section 148 of the Income Tax Act cannot be issued to a non-existent entity following an amalgamation, as such actions lack legal jurisdiction.
Notices issued under Section 148 of the Income Tax Act against non-existing companies post-amalgamation are invalid and without jurisdiction.
An assessment notice issued against a non-existing entity post-amalgamation is void ab initio, reinforcing the principle that an amalgamated company ceases to exist legally.
The assessment framed by the Assessing Officer on a non-existent company is a nullity in the eyes of law and void, and the provisions of section 292B cannot rescue the department.
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Issuing a notice under Section 148 of the Income Tax Act to a non-existent entity post-merger constitutes a substantive illegality and cannot be rectified as a mere procedural error.
The main legal point established in the judgment is that the existence of the transferor company merged into the transferee company from the appointed date under the scheme of amalgamation, and mere ....
Proceedings against a dissolved company are void and cannot be sustained under the Central Goods and Services Tax Act.
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