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2023 (7) TMI 1162 - HC - Income TaxValidity of assessment against non existent company - amalgamation proceedings concluded - HELD THAT - Tribunal has not committed any error in rejecting the appeal filed by the Revenue, in as much as, admittedly; the respondent-company was not in existence as on the date of passing of the assessment order and this fact was duly informed and was in the knowledge of the A.O. Hence, we hold that the assessment order passed on a non-existent Company is bad in law, inasmuch as, on the date of passing of the assessment order, the respondent company was not in existence, and as such no any liability can be fastened on a non-existent entity. The Tribunal has rightly held that assessment order passed on a non-existent Company is bad in law. Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment order passed on a non-existent company. 2. Justification of the ITAT's decision based on alleged false information regarding the merger date. 3. Legitimacy of tax evasion claims related to unexplained share capital and share premium. Summary: Issue 1: Validity of the assessment order passed on a non-existent company The respondent company, M/S Mount View Dealmark Private Limited, was amalgamated with M/S Vishesh Marketing Private Limited on 09.08.2018. This amalgamation was duly informed to the Income Tax Officer on 19.11.2018. Despite this, the Assessing Officer (AO) proceeded to assess the respondent company, which had lost its existence, and passed the assessment order on 20.12.2018. The High Court held that the assessment order passed on a non-existent company is bad in law, as established in the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki (India) Ltd., reported in (2020) 18 SCC 331. The Tribunal correctly rejected the appeal filed by the Revenue, affirming that no liability can be fastened on a non-existent entity. Issue 2: Justification of the ITAT's decision based on alleged false information regarding the merger dateThe Revenue argued that the ITAT dismissed the department's appeal based on the false information that the merger occurred on 29.03.2018, whereas it actually took place on 09.08.2018. However, the High Court noted that the jurisdictional notices were issued under Section 133(6) of the Income Tax Act, 1961, before the merger date. The respondent company sought reasons for reopening the assessment, which were provided, and the company filed objections. The amalgamation was sanctioned during the assessment proceedings, and this fact was communicated to the AO. The High Court found that the ITAT did not err in its decision as the assessment order was passed on a non-existent company. Issue 3: Legitimacy of tax evasion claims related to unexplained share capital and share premiumThe Revenue contended that the respondent company engaged in organized tax evasion through unexplained share capital and share premium introduced by seven companies with doubtful identity, creditworthiness, and genuineness. The High Court noted that the Commissioner of Income Tax (Appeal) had already held the initiation of proceedings to be bad in law due to lack of proper "satisfaction" or "reason to believe" by the AO. The ITAT upheld this view, reinforcing that the assessment order was void ab-initio. The High Court did not delve further into the tax evasion claims, focusing on the procedural invalidity of the assessment order. Conclusion:The High Court dismissed the Revenue's appeal, affirming that the assessment order passed on a non-existent company is void. The ITAT's decision was upheld, and the assessment proceedings were declared null and void due to the procedural lapse of assessing a non-existent entity.
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