2023 (2) TMI 867 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of notice issued to transferor company post amalgamation - information received by the assessing officer arising from the transaction of sale of immovable property - HELD THAT - In the present case involving reassessment, it has material bearing that the reassessment notice was never issued against the transferee company i.e. the present petitioner. In fact, no notice was ever issued to the petitioner company at its email address etc. Also, in the context of reassessment proceedings, the assessing authority is always required to act mindful of the earlier assessment, if any. On the own showing of the revenue, the assessing authority of the transferor company has proceeded to issue the reassessment notice without examining the record of that assessee and without taking note of the event of merger and the subsequent order passed in the case of the merged entity i.e. the present petitioner. Unless that assessment order had been first examined by the assessing authority, it is difficult to visualize a situation where he may have entertained any reason to believe that any income had escaped assessment. The present observation has been made conscious of the discussion in the original assessment order dated 30.12.2017 wherein not only the fact of the merger of the two entities had been taken note of but also that assessing authority had taken note of the transaction of sale of immovable property at Rs. 68 crores. That transaction alone appears to have given rise to re-assessment proceedings against the transferor company. Therefore, it does appear, it has escaped the attention of assessing authority to examine the effect of original assessment order. What exact inference the assessing authority may draw on such material is left to be considered by that authority. Any observation made in this order may not bind that authority to that extent. Thus the assessment order made against the transferor company is without jurisdiction - Decided in favour of assessee.

Summary

Issues:
Challenge to re-assessment order under Sections 147 and 148 of the Income Tax Act 1961 regarding alleged escaped income. Jurisdictional issues arising from merger of two companies. Validity of re-assessment notice and order. Conflict between original assessment and re-assessment. Lack of jurisdiction in re-assessment proceedings.

Analysis:

1. The judgment concerns a challenge to a re-assessment order dated 29.3.2022 under Sections 147 and 148 of the Income Tax Act 1961, involving alleged escaped income of Rs. 189,15,91,521 by M/s Kanpur Builders Pvt. Ltd. The re-assessment was based on information from a property transaction.

2. A key issue raised was the jurisdictional aspect due to the merger of two companies, M/s Kanpur Builders Pvt. Ltd. and M/s Kanpur Constructions Pvt. Ltd. The merger was approved by a court order with effect from 1.4.2014, impacting the assessment for A.Y. 2015-16.

3. The petitioner argued that the re-assessment notice was served on the transferor company, which was no longer in existence post-merger. The re-assessment proceedings lacked jurisdiction as the notice was not served on the present petitioner.

4. The assessing authority of the transferee company had already completed the assessment for A.Y. 2015-16, considering the merger and property sale. The re-assessment notice against the transferor company conflicted with the original assessment order for the same year.

5. The Court emphasized that reassessment proceedings must arise from a valid assumption of jurisdiction. As the transferor company ceased to exist post-merger, the re-assessment notice against it lacked jurisdiction, supporting the petitioner's case.

6. The Court highlighted that the assessing authority failed to consider the merger and original assessment order in issuing the re-assessment notice, rendering it inherently defective and without jurisdiction.

7. The judgment concluded that the re-assessment order against the transferor company lacked jurisdiction and was set aside. The petitioner was not required to seek alternative remedies due to the lack of inherent jurisdiction in the re-assessment proceedings.

8. The revenue was directed to proceed in accordance with the law, considering the provisions of Section 150 of the Act and the observations made in the judgment regarding the lack of jurisdiction in the re-assessment process.