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2022 (4) TMI 347 - SC - Income TaxNotice in name of the transferor or amalgamating company - corporate death of an entity upon amalgamation - Curable defect u/s 292B - Amalgamated company through its representatives participated in each proceedings - HELD THAT - Amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group. A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT. Even the affidavit before this court is on behalf of the director of MRPL - the assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special auditor s report, brings specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of MRPL (as the assessee) - but represented by the transferee, MIPL. All these clearly indicate that the order adopted a particular method of expressing the tax liability. AO, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home D cor Pvt. Ltd.). The mere choice of the AO in issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it. Right from the time it was issued, and at all stages of various proceedings, the parties concerned (i.e., MIPL) treated it to be in respect of the transferee company (MIPL) by virtue of the amalgamation order and Section 394 (2). Furthermore, it would be anybody s guess, if any refund were due, as to whether MIPL would then say that it is not entitled to it, because the refund order would be issued in favour of a non-existing company (MRPL). Having regard to all these reasons, this court is of the opinion that in the facts of this case, the conduct of the assessee, commencing from the date the search took place, and before all forums, reflects that it consistently held itself out as the assessee. This Court notes and holds that whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case. In view of the foregoing discussion and having regard to the facts of this case, this court is of the considered view, that the impugned order of the High Court cannot be sustained; it is set aside.
Issues Involved:
1. Validity of assessment order issued in the name of a non-existent entity post-amalgamation. 2. Applicability of Section 292B to cure defects in the assessment order. 3. The impact of the assessee's conduct and participation in proceedings on the validity of the assessment order. 4. The relevance and application of previous judgments and legislative provisions regarding amalgamation. Detailed Analysis: 1. Validity of Assessment Order Issued in the Name of a Non-Existent Entity Post-Amalgamation: The appeal arises from the Delhi High Court's decision dismissing the revenue's appeal and affirming the ITAT's quashing of the assessment order against the assessee, MRPL, which had amalgamated with MIPL. The ITAT held that the assessment order was not sustainable as MRPL did not exist on the date of the assessment order, referencing the Delhi High Court's decisions in Spice Infotainment Ltd. v. CIT and CIT v. Dimension Apparel Pvt. Ltd. The High Court relied on the Supreme Court's judgment in Principal Commissioner of Income Tax v. Maruti Suzuki India Limited, which held that assessment orders issued in the name of a non-existent entity are void. 2. Applicability of Section 292B to Cure Defects in the Assessment Order: The revenue argued that the defects or omissions in the assessment order could be cured under Section 292B, as the assessment was in substance and effect in conformity with the intent and purpose of the Act. The revenue contended that both the amalgamating and amalgamated companies were mentioned in the assessment order, and no prejudice was caused to any party. It was distinguished from Maruti Suzuki, where the final assessment order referred only to the name of the amalgamating company. 3. The Impact of the Assessee's Conduct and Participation in Proceedings on the Validity of the Assessment Order: The revenue highlighted that MRPL had not informed the authorities about the amalgamation for AY 2006-07 and had filed the return in the name of MRPL. The revenue issued notices and conducted proceedings in the name of MRPL, which was represented by MIPL. The respondent argued that the notice under Section 153A issued in the name of MRPL was invalid as MRPL had ceased to exist, and the assessment framed in the name of the amalgamating company was invalid under Section 170(2) of the Act. 4. The Relevance and Application of Previous Judgments and Legislative Provisions Regarding Amalgamation: The Supreme Court analyzed the relevant provisions, including Section 170 of the Income Tax Act, which deals with succession to business, and the Companies Act provisions regarding amalgamation. The court noted that amalgamation results in the transfer of assets and liabilities to the transferee company, and the business continues within the new corporate entity. The court distinguished the present case from Spice and Maruti Suzuki, noting that in those cases, the assessee had informed the authorities about the merger, whereas, in the present case, MRPL had not disclosed the amalgamation for AY 2006-07. The court also considered the conduct of the assessee, who participated in the proceedings and filed returns and appeals in the name of MRPL. The court emphasized that the assessment order, despite being issued in the name of MRPL, was effectively in relation to MIPL, the transferee company. Conclusion: The Supreme Court set aside the High Court's order, holding that the assessment order was valid as it was in substance and effect in relation to the transferee company, MIPL. The matter was remanded to the ITAT to hear the parties on the merits of the appeal and cross objections, excluding the issue of the nullity of the assessment order. The appeal was allowed without costs.
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