2020 (12) TMI 388 - AT - Income Tax

Validity of reopening of assessment u/s 147 - notice in name of non existent company - scheme of amalgamation conceived - HELD THAT - A coordinate bench of this Tribunal in ACIT Vs. M/s Pride Residency (P) Ltd. 2019 (12) TMI 694 - ITAT DELHI also held that when two companies amalgamate and merge to one, the transferor company loses its entity as the decisions to have its business, and their respective rights and liabilities are determined under the scheme of amalgamation, but the corporate entity of the transferor company ceases to exist with effect from the date the amalgamation is made effective, and if the Ld. learned Assessing Officer has got knowledge about the merger and if jurisdictional notice is issued to the non-existent entity the consequent assessment is bad under law. In this matter having knowledge about the merger of M/s Anjani Exports Pvt. Ltd. with the M/s Anjani Technoplast Ltd., where back by 16.12.2009, the learned Assessing Officer issued the jurisdictional notice dated 25.03.2014 on M/s Anajani Export P. Ltd. which was not in existent as on the date, to the knowledge of the Learned Assessing Officer, and, therefore, the assumption of jurisdiction by the learned Assessing Officer u/s 147 of the Act is bad - Decided in favour of assessee.

Summary

Issues:
Jurisdiction of the Assessing Officer in reassessment based on merger of companies.

Detailed Analysis:

Issue 1: Jurisdiction of Assessing Officer
The case involved a challenge by the assessee against the reassessment conducted by the Assessing Officer based on the merger of two companies. The Assessing Officer had issued a notice under section 148 to a non-existent company, which was challenged by the assessee. The Assessing Officer contended that the notice was valid as the merger came into effect from a prior date, and the assessee was in existence until a later date. The Commissioner of Income Tax (Appeals) upheld the jurisdiction of the Assessing Officer and the additions made in the reassessment.

Analysis:
The Tribunal examined the facts and legal principles related to the jurisdiction of the Assessing Officer in cases of company mergers. It was noted that the original assessment had recognized the merger of the companies and that the notice under section 148 was issued to the non-existent company. The Tribunal referred to the decision in CIT vs. Maruti Suzuki India Pvt. Ltd. where the Supreme Court held that if a jurisdictional notice is issued to a non-existing entity post-merger, it is fundamentally at odds with legal principles. The Tribunal also cited a previous decision that emphasized the loss of entity of the transferor company post-merger. Based on these precedents, the Tribunal concluded that the assumption of jurisdiction by the Assessing Officer was invalid, and the assessment was liable to be quashed.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the orders of the authorities below and quashing the reassessment dated 31.03.2015. The judgment emphasized the importance of correctly identifying the entities involved in cases of company mergers to ensure the validity of jurisdiction and assessments.