2015 (2) TMI 589 - HC - Income Tax

Block assessment set aside - assessee had amalgamated with M/s Lakhanpal Infrastructure Pvt. Ltd. - whether the amalgamation of the original assessee corporate had rendered the assessment framed against it as void? - Held that - The issue urged is no longer res integra. As stated earlier, Spice Entertainment (2011 (8) TMI 544 - DELHI HIGH COURT) is an authority for the proposition that completion of assessment in respect of a nonexistent company, due to the amalgamation order, would render assessment in the name and in respect of the original assessee company, a nullity. Once it is found that assessment is framed in the name of non-existing 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. The Court was further of the opinion that a jurisdictional defect such as nullity shakes the entire proceedings and does not render the order a mere irregularity. For this purpose the Court has relied upon CIT vs. Norton Motors 2004 (11) TMI 56 - PUNJAB AND HARYANA High Court - No substantial question of law arises - Decided against Revenue.

Summary

Issues:
1. Validity of assessment order post-amalgamation of companies.
2. Applicability of Section 292B of the Income Tax Act.
3. Consequences of assessment on a dissolved company due to amalgamation.

Detailed Analysis:
1. The Revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the block assessment of the amalgamated company. The CIT(Appeals) and ITAT set aside the assessment citing the amalgamation of the original assessee as the reason. The Revenue contended that the assessment should not have been set aside as the assessee had participated in the proceedings post-amalgamation. However, the ITAT upheld the CIT(Appeals) decision, stating that assessment on a dissolved company due to amalgamation is impermissible as per the Companies Act. The ITAT relied on legal precedents to support its decision, emphasizing that assessment on a dissolved company is invalid.

2. The issue of the applicability of Section 292B of the Income Tax Act was raised by the Revenue. The Revenue argued that Section 292B precludes the contention of the assessee regarding the nullity of the proceedings post-amalgamation. However, the Court held that Section 292B cannot cure a jurisdictional defect in the assessment order. Citing legal cases, the Court emphasized that Section 292B is not applicable in cases where the assessment is framed against a non-existing entity, as it goes to the root of the matter and constitutes a jurisdictional defect.

3. The Court further elaborated on the consequences of assessing a dissolved company due to amalgamation. It stated that once a company is dissolved, it ceases to exist, and any assessment on such a dissolved entity is void. The Court emphasized that a jurisdictional defect like nullity shakes the entire proceedings and is not a mere irregularity. Legal precedents were cited to support the view that assessment on a dissolved entity cannot be cured by Section 292B and constitutes a substantive defect rather than a procedural irregularity.

In conclusion, the Court dismissed the appeals, stating that no substantial question of law arose from the facts of the case. The judgment reaffirmed that assessment on a dissolved company post-amalgamation is invalid, emphasizing the jurisdictional defect and the inapplicability of Section 292B in such cases.