2012 (6) TMI 87 - HC - Income Tax

Validity of reassessment notice issued for AY 1984-85, 1985-86, 1986-87 on ground that no amalgamation between M/s Modipon Ltd. and M/s Indofil Chemicals ltd. had taken place in the accounting years ended on 30.6.1983 and 30.6.1984 - effective date of amalgamation is 1st July, 1982 - Revenue contending date of amalgamation to be appointed date therefore, amalgamation took place after 31st March, 1986 - Held that - It is undisputed that assessment for AY 84-85 and 85-86 were completed recording that the business income/earnings of Indofil Chemicals Ltd. was treated as income/earnings of chemical division of the Modipon Ltd. Further in AY 86-87 Tribunal decided in favor of assessee holding that amalgamation was effective from 1st July, 1982 and accordingly income of Indofil Chemicals Ltd. was assessable in the hands of the petitioner (Modipon Ltd.) on the basis of the scheme of amalgamation which was effective from 1st July, 1982. Since Tribunal order became final, petitioner is entitled to succeed in the present writ petitions and the reassessment notices issued are accordingly set aside and quashed.

Summary

Issues:
Challenging reassessment notices for various assessment years without reasons to believe, impact of amalgamation on income tax assessments, effective date of amalgamation, validity of reassessment notices.

Reassessment Notices without Reasons to Believe:
The High Court addressed the issue of reassessment notices challenged by Modipon Ltd. for the assessment years 1984-85, 1985-86, and 1986-87. The court noted that the reasons to believe for issuing the notices were not placed on record. However, a letter from the Assessing Officer dated 1st September, 1989, indicated that the reassessment proceedings were initiated under Section 147(a) of the Income-tax Act due to omissions and failures to disclose all material facts necessary for determining taxable income. The court emphasized that there was no provision for supplying copies of the reasons under Section 147 or 148 of the Act. Despite this, the court found that the reassessment notices lacked a valid basis due to the absence of reasons to believe, leading to the notices being set aside and quashed.

Impact of Amalgamation on Income Tax Assessments:
The court delved into the impact of the amalgamation between Modipon Ltd. and Indofil Chemicals Ltd. on income tax assessments. It was observed that the Assessing Officer had completed assessment proceedings for the assessment years 1984-85 and 1985-86 under Section 143(3) of the Income Tax Act. The court highlighted that the business income of Indofil Chemicals Ltd. was treated as part of Modipon Ltd.'s income post-amalgamation, affecting the assessment orders for the respective years. The court noted the approval of the amalgamation scheme by the Bombay High Court and the subsequent approval by the Allahabad High Court, emphasizing the legal processes involved in the amalgamation and its impact on income tax assessments.

Effective Date of Amalgamation:
A crucial issue addressed by the court was determining the effective date of the amalgamation between Modipon Ltd. and Indofil Chemicals Ltd. The court noted that the Assessing Officer for the assessment year 1986-87 held that the amalgamation occurred after 31st March, 1986, based on the appointed date rather than the effective date. This led to a dispute regarding the taxability of the income/earnings of the two companies. The court highlighted the differing views taken by the Assessing Officer, CIT(Appeals), and the Tribunal regarding the effective date of amalgamation and its implications on tax assessments. Ultimately, the Tribunal's decision in favor of Modipon Ltd. regarding the effective date of amalgamation for the assessment year 1986-87 was upheld, solidifying the tax treatment of the amalgamation from 1st July, 1982.

Validity of Reassessment Notices:
In conclusion, the court ruled in favor of Modipon Ltd., setting aside and quashing the reassessment notices challenged in the writ petitions. The court emphasized that in light of the finality of the Tribunal's decision regarding the effective date of amalgamation, the petitioner was entitled to succeed in the present writ petitions. As a result, the reassessment notices were deemed invalid, and the writ petitions were disposed of with no order as to costs.