2014 (11) TMI 181 - HC - Income Tax

Amalgamation of two companies - Assessment to be made on which entity Held that - The Supreme Court in Saraswati Industrial Syndicate Limited Versus Commissioner of Income-Tax, Haryana Himachal Pradesh And Delhi III 1990 (9) TMI 1 - SUPREME Court held that after the amalgamation of the two companies the transferor company ceased to have any entity and the amalgamated company acquired a new status and it was not possible to treat the two companies as partners or jointly liable in respect of their liabilities and assets following the decision in SPICE ENTERTAINMENT LTD. Versus CIT 2011 (8) TMI 544 - DELHI HIGH COURT Tribunal rightly upheld the decision of the CIT(A) that assessment on a company, which has been dissolved/amalgamated under section 391 and 394 of the Companies Act, 1956, is invalid - There is no provision in the IT Act, to make assessment on an amalgamating company (transferor/dissolved company), even though the appellant company participated in assessment proceedings Decided against revenue. Applicability of section 292B - Whether an assessment upon an amalgamated company is a mistake within the meaning of Section 292B - Held that - In SPICE ENTERTAINMENT LTD. Versus CIT 2011 (8) TMI 544 - DELHI HIGH COURT it has been held that once it is found that assessment is framed in the name of nonexisting entity it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act thus, no substantial question of law arises for consideration Decided against Revenue.

Summary

Issues:
Challenge to ITAT order quashing assessment under Sections 143(3), 153A, and 153C of the Income Tax Act, 1961 due to amalgamation of the Assessee company.

Analysis:
1. The Appellants challenged the ITAT order quashing the assessment order against the Assessee due to amalgamation. The CIT(A) and ITAT held that assessment on a dissolved company is impermissible. The Revenue argued that Sections 170(1) and 170(2) apply in cases of succession of business, but the Court disagreed. The Supreme Court's ruling in Saraswati Industrial Syndicate and other precedents were cited by the Assessee to support their contentions.

2. The Court clarified that in cases of amalgamation, the assessment must be made on the successor company as per Section 170(2). The liabilities of the amalgamating company accrue to the amalgamated company, but the assessment is to be made on the successor. The Court referred to the Supreme Court's decision in Saraswati Industrial Syndicate regarding the status of companies post-amalgamation.

3. Precedents like Vived Marketing Servicing Pvt. Ltd. and Marshall Sons and Co. were cited to emphasize that assessment on a dissolved company is invalid. The Court highlighted that provisions like Section 176 and 159 of the IT Act do not apply to cases of amalgamation or dissolution of companies.

4. The applicability of Section 292-B was discussed, with the Revenue arguing that the assessment was in conformity with the Act. However, the Court held that framing an assessment against a non-existing entity is a jurisdictional defect, not a procedural irregularity. Precedents like Spice and Norton Motor were cited to support this position.

5. The Court rejected the Revenue's arguments based on previous decisions of the High Court, emphasizing that there is no substantial question of law arising in the appeal. The appeals were dismissed, concluding that there was no merit in the Revenue's contentions based on established legal principles.

This detailed analysis of the judgment covers the issues raised, the arguments presented by both parties, and the Court's reasoning based on legal precedents and provisions of the Income Tax Act, 1961.