2023 (12) TMI 98 - HC - Income Tax

Validity of reassessment against company not in existence - scheme of merger concluded - assessment against Transferor Company - Investment in the Mutual Fund had not been disclosed - HELD THAT - No material to show that the petitioner Company had concealed any investment because once the petitioner Company/Transferor Company is merged with the Transferee Company, the entire investment will stand transferred in the name of the Transferee Company and same also got reflected in the Book of Accounts of the Transferee Company. Hence, the interest of the revenue was no way affected. However, without verifying the same, the respondent had issued notice in the name of the petitioner Company/Transferor Company which is not in existence on and from 14.10.2011 , even after receipt of the communication of merger vide letter dated 29.03.2012 and passed the impugned Assessment Order. Hence, for all the aforesaid reasons, the impugned Assessment Order is liable to be set aside and accordingly set aside. Assessee appeal allowed.

Summary

Issues:
The issues involved in the judgment are challenging an impugned assessment order under the Income Tax Act, 1961 for the Assessment Year 2013-14 based on alleged non-disclosure of investment in Mutual Funds, following a merger of two companies, and the validity of the assessment order passed against a non-existing entity.

Challenge to Assessment Order:
The petitioner challenged the assessment order dated 09.03.2022, alleging non-disclosure of investment in Mutual Funds. The petitioner argued that the order was passed after the petitioner company had already merged with another company and was dissolved, thus not in existence at the time of the assessment order. The petitioner sought to set aside the assessment order on this ground.

Contentions of the Respondent:
The respondent department contended that despite the merger, the PAN of the petitioner company was still in existence, justifying the assessment order. They argued that had the department been informed about the merger, they would not have proceeded with the reassessment. The respondent urged the petitioner to appeal the assessment order instead of seeking its setting aside.

Judgment and Analysis:
The Court found that the petitioner company had indeed merged with another company before the assessment proceedings. The Court emphasized that issuing an assessment order against a non-existent entity is legally unsustainable. The communication of the merger to the tax authorities was acknowledged, yet the assessment order was still passed against the dissolved company. The Court noted that the investment in Mutual Funds would have been transferred to the new entity post-merger, and the revenue was not impacted. Consequently, the Court set aside the impugned assessment order.

Decision on Remand:
The respondent sought to remand the matter for a fresh assessment order, but the Court declined, citing the clear communication of the merger and the lack of justification for re-assessment against a non-existing entity. The Court allowed the Writ Petition, setting aside the assessment order, and closed the connected miscellaneous petitions without costs.