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2016 (11) TMI 332 - HC - Income TaxValidity of notice - assessment against a nonest entity - Held that - It is not in dispute that on the date when notice was issued on 5.10.1998 in the name of M/s. Calcutta Instalment Pvt. Ltd. or when assessment order was passed in name of M/s. Calcutta Instalment Pvt. Ltd. it had already ceased to be in existence having been amalgamated with M/s. Modifin (P) Ltd. The factum of amalgamation was well within knowledge of Assessing Officer on the date when assessment was made still it proceeded to issue notice dated 5.10.1998 and made assessment in respect to a legal person which had already ceased existence after amalgamation with another company. Assessment can be made against a person who is in existence. When after amalgamation company undergone amalgamation has ceased to exist assessment against a nonest entity is illegal and void. Tribunal has also taken same view relying on judgment of Delhi High Court in Birla Cotton Spinning & Weaving Mills Ltd. vs. CIT (1979 (12) TMI 50 - DELHI High Court ). - Decided in favour of assessee.
Issues:
Validity of assessment made after the dissolution of a company. Legality of assessment based on the return of income filed by a dissolved company. Analysis: 1. The appeal was filed under Section 260-A of the Income Tax Act, 1961, challenging the judgment and order passed by the Income Tax Appellate Tribunal. The substantial questions of law raised were related to the validity of the assessment made in the name of a dissolved company and the legality of the assessment based on the return of income filed by the dissolved company for the assessment year 1996-97. 2. The factual scenario involved a company, M/s. Calcutta Instalments Pvt. Limited, engaged in leasing and investments, which was part of a scheme of amalgamation with another company, Modifin Pvt. Ltd. The High Court sanctioned the scheme of amalgamation, specifying the transfer of assets, liabilities, and dissolution of the transferor companies. 3. The assessment for the year 1996-97 was initially made against M/s. Calcutta Instalment Pvt. Ltd., even though it had already merged with Modifin Pvt. Ltd. The Assessing Officer was informed of the merger, but the assessment was still finalized in the name of the dissolved company, leading to the question of the validity of the assessment. 4. Legal precedents were cited to support the argument that assessment against a non-existent entity, post-merger, is a jurisdictional defect and renders the assessment null and void. Various judgments, including those from the Supreme Court and High Courts, emphasized that assessment against a dissolved company is illegal and lacks jurisdictional validity. 5. The Tribunal, in line with previous judicial decisions, held that the assessment made against the dissolved company was void ab-initio. The Tribunal's decision was supported by the judgment of the Delhi High Court, reinforcing the principle that assessment against a company that has merged and ceased to exist is null and void. 6. The High Court concurred with the Tribunal's decision, emphasizing that the assessment against a non-existent entity is illegal and void. The approach taken by the Tribunal was deemed correct and in accordance with the law, leading to the dismissal of the appeal in favor of the respondent-assessee. In conclusion, the High Court upheld the Tribunal's decision, emphasizing the illegality of assessing a dissolved company and reinforcing the principle that assessment against a non-existent entity post-merger is void and lacks jurisdictional validity.
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