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IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
RAVINDRA MAITHANI, J.
Delta Electronics India Pvt. Ltd. – Petitioner
Versus
Principal Commissioner of Income Tax and Another – Respondents
Writ Petition (M/s) No. 1557 of 2023
Decided On : 22-09-2023
Income Tax Act - Challenge to notice under Section 148 and order under Section 148 A(d) - [Section 148, Section 148A, Section 170] - The court discussed the provisions of Section 170 of the Income Tax Act, which deals with the succession to business otherwise than on death, and its application in the context of amalgamation. The court highlighted the principles of law established in various judgments, including the interpretation of the scheme of amalgamation, its effective date, and the consequences of amalgamation. The court emphasized that the existence of the transferor company merged into the transferee company from the appointed date under the scheme of amalgamation, and mere activation of PAN number does not give the revenue a right to issue notice to a non-existent entity.
Fact of the Case:
The petitioner challenged the notice and order under the Income Tax Act for re-assessment of a company post-amalgamation. The petitioner contended that the revenue issued notices against the transferor company, which had become non-existent post-amalgamation, and therefore, the order was bad in the eyes of the law.
Finding of the Court:
The court found that the order under Section 148 A(d) of the Income Tax Act, passed against a non-existent entity, was bad in the eyes of the law and quashed the impugned notice and order.
Issues: The issues involved the validity of the notice and order under the Income Tax Act for re-assessment of a company post-amalgamation, and the applicability of Section 170 of the Income Tax Act in such a scenario.
Ratio Decidendi: The court held that the existence of the transferor company had merged into the transferee company from the appointed date under the scheme of amalgamation, and mere activation of PAN number did not give the revenue a right to issue notice to a non-existent entity. Therefore, the order under Section 148 A(d) of the Income Tax Act, passed against a non-existent entity, was quashed.
Final Decision: The petition was allowed, and the impugned notice and order under the Income Tax Act were quashed.
JUDGMENT :
RAVINDRA MAITHANI, J.
1. The challenge in this petition is made to notice under Section 148 of the Income Tax Act, 1961 (“the Income Tax Act”) dated 20.03.2023 as well as order under Section 148 A(d) of the Income Tax Act dated 20.03.2023 for re-assessment of Delta Power Solutions India Pvt. Ltd. (“DPS”) for the assessment year 2019-20.
2. Heard learned counsel for the parties and perused the record.
3. It is the case of the petitioner that DPS and petitioner’s Company, i.e. Delta Electronics India Pvt. Ltd. (DIN) proposed a scheme for amalgamation with appointed dated of 01.04.2018 (DPS being Transferor company or amalgamating company and DIN being Transferee company or amalgamated company). The amalgamation processes was approved by National Company Law Tribunal (“NCLT”) on 31.01.2019. The proposed scheme of amalgamation was also informed to the revenue by a communication dated 08.08.2018. The revenue participated in the amalgamation proceedings before the NCLT. Post approval by the NCLT, according to the petitioner, the revenue was further informed by a communication dated 15.02.2020. But, it is the case of the petitioner that the revenue issued notice dated 03.02.2020, under Section 148A of the Income Tax Act against the Transferor company specifying, therein, that the PAN of the Transferor company was active. This notice was replied by the petitioner on 10.02.2020 bringing it to the notice of the revenue the factum of amalgamation. As also indicating that with effect from the appointed dated, i.e. 01.04.2018, all the transactions entered and appeared on the PAN of Transferor company has been duly accounted by the petitioner’s company being amalgamated company in accordance with the generally accepted accounting policy and other applicable laws.
4. The revenue further gave notices on 27.02.2023 and 28.02.2023 to the Transferor company under Section 148 A of the Income Tax Act. They were replied by the petitioner on 02.03.2023 reiterating the same stand with further elaborating the facts. Thereafter, the order under Section 148 A (d) of the Income Tax Act has been passed for reopening of the assessment of the Transferor Company for the assessment year 2019-20.
5. The revenue has filed its counter affidavit. The factum of amalgamation and appointed date has not been disputed in Para 5 of the counter affidavit. It has also been admitted by the revenue that the factum of amalgamation has duly been informed to them. In Para 7 of its counter affidavit, the revenue records that, the Transferor company has become non-existent post amalgamation, but the PAN of assessee lying a-float and was active due to the non-action/failure on the part of the assessee in the surrendering the PAN. It has been the objection of the revenue that the petition deserves to be dismissed.
6. Learned counsel for the petitioner would submit that the order impugned is bad in the eyes of law. In view of Section 170 of the Income Tax Act, the Transferor company cannot be assessed for the period post appointed date, as per approved scheme of amalgamation. He would also raise the following points in his submission:
(ii) As per the scheme of amalgamation, after appointed date whatever transaction were to be done by the Transferor company that was done then for and on behalf of the Transferee company as a trust or in a fiduciary relationship with the transferee company.
(iii) The effective date of amalgamation would be the date of the NCLT, which, in the instant case is 31.01.2019.
(iv) During the process of amalgamation, after appointed date, the information was duly sent to the revenue about the process of amalgamation.
(v) The revenue did participate in the amalgamation proceedings before the NCLT.
(vi) In the process of amalgamation, the Transferor company did not vanish from the appointed date. In fact, it has to carry out the operations. But, they were to be done on behalf of the Transferee company. Whatever tr
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 order against a non-existent entity due to a scheme of amalgamation is not legally valid.
Amalgamation of company – An assessment can always be made and is supposed to be made on Transferee Company taking into account income of both Transferor and Transferee Company.
Proceedings against a dissolved company are void and cannot be sustained under the Central Goods and Services Tax Act.
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