2019 (12) TMI 1241 - HC - Income Tax

Reopening of assessment u/s 147 - notice in the company name being amalgamated - HELD THAT - In the present case the notice under section 148 of the Act has been issued to Gayatri Integrated Services Private Limited which, as aforesaid, had long back got amalgamated with the petitioner vide order dated 18th June, 2015 passed by this court and thus, it had ceased to have its own existence so as to render it amenable for the reassessment proceedings under the provisions of section 147 of the Act. Moreover, the respondent and the department were duly informed by the petitioner about the amalgamation and despite the said factum having been brought to the notice of the respondent, statutory notice under section 148 came to be issued to Gayatri Integrated Services Private Limited for reopening the assessment on the ground that the respondent has reason to believe that income chargeable to tax for the assessment year 2012-13 has escaped the assessment within the meaning of section 147 of the Act. The controversy in the present petition, is no longer res integra. The Apex Court in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited 2019 (7) TMI 1449 - SUPREME COURT in paragraph 33, has categorically held that if the company has ceased to exist as a result of the approved scheme of amalgamation then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. It is also held that upon the amalgamating entity ceasing to exist, it cannot be regarded as a person under subsection (31) of section 2 of the Act; against whom assessment proceedings can be initiated. Participation by the amalgamated company in the proceedings would be of no effect as there is no estoppel against law. the notice dated 25th March, 2019 issued by the respondent under the provisions of section 148 of the Act for the assessment year 2012-13, being without jurisdiction, is not sustainable. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction to reopen assessment against a non-existing entity.
3. Procedural compliance and provision of reasons for reopening assessment.
4. Legality of penalty proceedings initiated under Section 271 of the Act.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner, Gayatri Microns Limited, challenged the notice dated 25th March 2019, issued under Section 148 of the Income Tax Act, 1961, arguing that it was illegal as it was issued to a non-existing entity, Gayatri Integrated Services Private Limited, which had amalgamated with the petitioner in 2015. The court noted that the amalgamation was sanctioned by the High Court on 18th June 2015, and the respondent was informed of this amalgamation during the assessment proceedings for the year 2015-16. The court held that issuing a notice to a non-existent entity is fundamentally illegal and without jurisdiction.

2. Jurisdiction to Reopen Assessment Against a Non-Existing Entity:
The court referred to the Supreme Court judgment in Principal Commissioner of Income Tax vs. Maruti Suzuki India Ltd., which held that if a company ceases to exist due to amalgamation, any jurisdictional notice issued in its name would be illegal and without jurisdiction. The court reiterated that once a company amalgamates and ceases to exist, it cannot be subjected to assessment proceedings. The court found that the respondent had been informed of the amalgamation and yet issued the notice, which was thus without jurisdiction and unsustainable.

3. Procedural Compliance and Provision of Reasons for Reopening Assessment:
The petitioner argued that the respondent did not provide the reasons for reopening the assessment, which is a procedural requirement. The court emphasized that the respondent should have provided the reasons to enable the petitioner to file objections. The court found that the respondent proceeded with the assessment without offering the petitioner an opportunity to object, which was procedurally incorrect.

4. Legality of Penalty Proceedings Initiated Under Section 271 of the Act:
The petitioner contended that the penalty proceedings under Section 271 read with Section 274 of the Act were illegal as Gayatri Integrated Services Private Limited had filed its return for the assessment year 2012-13 under Section 139 of the Act. The court did not specifically address the legality of the penalty proceedings but quashed all proceedings following the invalid notice under Section 148, implying that the penalty proceedings were also unsustainable.

Conclusion:
The court concluded that the notice dated 25th March 2019, issued under Section 148 of the Act, was without jurisdiction and invalid as it was issued to a non-existing entity. Consequently, the court quashed the notice and all subsequent proceedings. The petition was allowed, and the rule was made absolute with no order as to costs.