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2023 (10) TMI 210 - HC - Income TaxReopening of assessment post amalgamation process - revenue proceed against an amalgamating company post appointed date - HELD THAT - Admittedly, the petitioner had informed the revenue of the amalgamation process. The NCLT judgment observation has been made with regard to the submissions that were made by the revenue in the amalgamation proceedings. In the same paragraph, the NCLT has noted the undertakings that were given by the Transferee company, by which the Transferee company, i.e. the petitioner, undertook that the scheme of amalgamation would ensure that the statutory dues, tax, etc, that are due and payable by the Transferor company subsequent to the merger, would stand transferred to the Transferee company. The scheme of amalgamation was sanctioned by the NCLT. The petitioner did inform the revenue of it. In view of the settled law, from the appointed date, under the scheme of amalgamation, the existence of the Transferor company had merged into the Transferee company. That is what the scheme of amalgamation that has been proved in the instant case by NCLT also provides. It also provides for business and property-in-trust in Clause 8 of the scheme of amalgamation. Mere activation of PAN number may not give a right to the revenue to issue notice to a non-existent entity. Admittedly, in the instant case, the notice was given to the Transferor company, which is a non-existent entity, after the appointed date, i.e. 01.04.2018. Admittedly, the order u/s 148 A (d) has been passed by the revenue against a non-existent entity. Therefore, the order is bad in the eyes of law. Accordingly the petitioner deserves to be allowed.
Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act to a non-existent entity post-amalgamation. 2. Applicability of Section 170 of the Income Tax Act in the context of the amalgamation. Summary: Validity of the Notice Issued Under Section 148: The petitioner challenged the notice under Section 148 of the Income Tax Act, 1961, dated 20.03.2023, and the order under Section 148A(d) dated 20.03.2023, for re-assessment of Delta Power Solutions India Pvt. Ltd. (DPS) for the assessment year 2019-20. The petitioner argued that DPS and Delta Electronics India Pvt. Ltd. (DIN) had amalgamated with an appointed date of 01.04.2018, approved by the National Company Law Tribunal (NCLT) on 31.01.2019. The revenue was informed about the amalgamation process and participated in the NCLT proceedings. Despite this, the revenue issued a notice under Section 148A to the Transferor company (DPS), which was replied to by the petitioner, reiterating the fact of amalgamation. The revenue admitted the amalgamation but contended that the PAN of the Transferor company was still active due to the failure to surrender it. The petitioner argued that the notice against a non-existent entity is invalid, citing several judgments including PCIT Vs. Maruti Suzuki India Ltd., Saraswati Industrial Syndicate Ltd. Vs. CIT, and others. The court referred to these judgments, stating that an amalgamating company loses its entity post-amalgamation and any notice issued to such a non-existent entity is invalid. The court observed that the business carried on by the Transferor company post-appointed date should be deemed to be carried on for and on behalf of the Transferee company. Applicability of Section 170: The petitioner argued that under Section 170 of the Income Tax Act, the Transferor company cannot be assessed post-appointed date as per the approved scheme of amalgamation. The court agreed, stating that from the appointed date, the existence of the Transferor company had merged into the Transferee company as per the scheme of amalgamation approved by the NCLT. The court held that the mere activation of the PAN number does not give the revenue the right to issue a notice to a non-existent entity. Conclusion: The court concluded that the notice and order issued to the Transferor company (DPS) post-amalgamation were invalid and bad in the eyes of law. The petition was allowed, and the impugned notice dated 20.03.2023 and the order dated 20.03.2023 under Section 148(A)(d) of the Income Tax Act were quashed.
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