2023 (2) TMI 1392 - AT - Income Tax

Validity of order passed u/s 143(3) r.w.s.144C on the non-existing amalgamating entity - HELD THAT - The reply of the AO also does not support the case of the revenue that there was no mention of assessment year in letter dated 1/4/2020 of Hindustan Unilever limited. This is also once again not correct for the simple reason because in every communication made by the assessee at all stages of assessment proceedings the assessee clearly in the subject matter itself mentioned Hindustan Unilever limited (legal successor to GlaxoSmithKline consumer healthcare limited). The replies submitted by the assessee are also on the letterhead of Hindustan Unilever limited and signed by officers of Hindustan Unilever limited. We have mentioned many communication above wherein the letters are addressed intimating the assessing authorities about the fact of business reorganisation on account of amalgamation. Therefore the arguments advanced by the AO and the secretary of learned dispute resolution panel are not acceptable. Facts in the case of decision of PCIT V Mahagun Realtors Limited 2022 (4) TMI 347 - SUPREME COURT was of no indication given to the assessing authority about amalgamation and return was also filed pursuant to the notice suppressing the facts of amalgamation demonstrating the non-existent entity as the real entity on which assessment was to be made. Thus we quash the assessment order passed for assessment year which were passed in the name of GlaxoSmithKline consumer healthcare limited (amalgamating company) instead of in the name of Hindustan Unilever limited (amalgamated company) despite timely and in sufficient manner giving the intimation of the scheme of amalgamation of amalgamating company with amalgamated company. Thus when the assessment orders were passed amalgamating company was non-existent entity therefore not a person who can be assessed under the income tax act. Thus the orders passed by AO are illegal and not valid. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the assessment orders passed against GlaxoSmithKline Consumer Healthcare Ltd (the amalgamating entity) are void ab initio, given that the entity had ceased to exist due to its amalgamation with Hindustan Unilever Ltd.

2. The validity of the assessment orders issued in the name of a non-existent entity and the implications of such an error in light of the legal principles established by precedents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Assessment Orders on a Non-Existent Entity

- Relevant legal framework and precedents: The case hinges on the legal principle that an assessment order cannot be passed against a non-existent entity. This principle is supported by the Supreme Court's decision in PCIT v. Maruti Suzuki India Ltd, which held that an order passed on a non-existent entity is a nullity. The Companies Act provisions regarding amalgamation, particularly sections 230 to 232, and the Income Tax Act provisions, particularly section 144C, are also relevant.

- Court's interpretation and reasoning: The Tribunal noted that GlaxoSmithKline Consumer Healthcare Ltd had ceased to exist following its merger with Hindustan Unilever Ltd, effective from April 1, 2020. Despite being informed of this merger, the assessment orders were issued in the name of the non-existent GlaxoSmithKline Consumer Healthcare Ltd. The Tribunal emphasized that the amalgamating entity ceases to exist upon the approved scheme of amalgamation, and any order passed in its name is void.

- Key evidence and findings: The Tribunal found that the amalgamation was duly communicated to the relevant tax authorities, including the Assessing Officer and the Transfer Pricing Officer, through various letters and submissions. The Tribunal also noted that the Dispute Resolution Panel (DRP) issued directions in the name of Hindustan Unilever Ltd as the legal successor of GlaxoSmithKline Consumer Healthcare Ltd.

- Application of law to facts: Applying the legal principles from Maruti Suzuki and other precedents, the Tribunal concluded that the assessment orders were invalid as they were issued in the name of a non-existent entity. The Tribunal rejected the arguments from the revenue authorities that procedural errors or the lack of certain documentation could validate the orders.

- Treatment of competing arguments: The Tribunal dismissed the revenue's arguments based on section 292B of the Income Tax Act, which pertains to procedural errors, stating that the issue was not merely procedural but substantive, as the entity assessed did not exist.

- Conclusions: The Tribunal concluded that the assessment orders for both assessment years were void ab initio and quashed them. The Tribunal did not address other grounds of appeal as the primary issue rendered them moot.

3. SIGNIFICANT HOLDINGS

- Preserve verbatim quotes of crucial legal reasoning: "In view of the facts stated above as well as the decision of the honourable Supreme Court, we quash the assessment order passed for assessment year 2017 - 18 and 2018 - 19 which were passed in the name of GlaxoSmithKline consumer healthcare limited (amalgamating company) instead of in the name of Hindustan Unilever limited (amalgamated company) despite timely and in sufficient manner giving the intimation of the scheme of amalgamation of amalgamating company with amalgamated company."

- Core principles established: An assessment order passed in the name of a non-existent entity, post-amalgamation, is a nullity and void ab initio. The Tribunal reinforced the principle that the jurisdictional notice must be issued in the name of the existing legal entity.

- Final determinations on each issue: The Tribunal allowed the appeals for both assessment years, rendering the assessment orders void, and dismissed other grounds as unnecessary to adjudicate.