2023 (1) TMI 538 - HC - Income Tax

Validity of reopening of assessment u/s 147 - notice sent to entity, which no longer exists and it is merged - HELD THAT - Noticing the decision of the Apex Court in the case of CIT vs. Maruti Suzuki India Ltd, 2019 (7) TMI 1449 - SUPREME COURT where it has been held that the amalgamating entity would cease to exist against the approved scheme of amalgamation. In Gayatri Microns ltd. 2019 (12) TMI 1241 - GUJARAT HIGH COURT this Court had followed the Apex Court s decision of Maruti Suzuki India Ltd (supra) to hold that the jurisdictional notice issued in the name of the company, which has been amalgamated is illegal and without jurisdiction, since the amalgamating entity ceases to exist and cannot be regarded as person under sub-section (31) of section 2 of the Act against whom the assessment proceedings can be initiated. In view of all notice itself is not sustainable under the law. Petition stands allowed quashing and setting aside the notice issued under section 148 with all consequential reliefs. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 for reassessment of income post-merger with another entity.

Detailed Analysis:
1. The petitioner, a Multi-State Scheduled Cooperative Bank, challenged a notice under section 148 of the Income Tax Act, 1961, seeking to reassess the income of an entity merged with the petitioner for the Assessment Year 2012-13, alleging the notice was contrary to law.

2. The respondent argued that the amalgamated entity still exists for assessment purposes, despite the merger, and all proceedings should continue in the name of the present entity. The petitioner contended that the reopening ground was based on information lacking proper scrutiny and sought relief through various writs.

3. The petitioner relied on legal precedents to support their argument that notices issued to entities that no longer exist post-merger are illegal and without jurisdiction. The respondent maintained that the information received warranted the reassessment.

4. The court considered the Supreme Court's decision in Maruti Suzuki India Ltd. case, which held that an amalgamating entity ceases to exist for assessment proceedings post-merger. The court also referred to the Gayatri Microns Ltd. case, reinforcing the illegality of issuing notices to non-existing entities.

5. After hearing both parties, the court agreed with the petitioner's argument, citing the legal principles from the Maruti Suzuki India Ltd. and Gayatri Microns Ltd. cases. The court allowed the petitions and quashed the notices dated 30.03.2021 for the assessment years involved.

6. Another case cited involved a company amalgamation where the court held that once an entity merges, it ceases to exist independently and cannot be subject to assessment proceedings. The court quashed the notice issued for reassessment in that case as well.

7. In conclusion, the court found the notices unsustainable under the law and granted relief by quashing and setting aside the notices issued under section 148 of the Income Tax Act, 1961, with all consequential reliefs. The petitions were disposed of accordingly.