2016 (12) TMI 872 - HC - Income Tax

Validity of reopening of assessment - notice issued to non existent company - Held that - It is not in dispute that the impugned notices under Section 148 of the Income Tax Act have been issued against the original assessee on 21/01/2011 to reopen the assessment for the Assessment Year 2009-10. It is also not in dispute that the respective petitioners original assessee are ordered to be amalgamated with one Takshashila Gruh Nirman (subsequently named as Takshahila Realties Pvt. Ltd.). The scheme of amalgamation has been sanctioned by this Court, by which the respective petitioners are ordered to be amalgamated into Takshashila Gruh Nirman (subsequently named as Takshahila Realties Pvt. Ltd.) with effect from 01/04/2010. Under the circumstances, when the impugned notices are issued against the original assessee amalgamating Company on 21/01/2011, it can be said that the same has been issued against the non-existent Company. It cannot be disputed that once the scheme for amalgamation has been sanctioned by the Court with effect from 01/04/2010, from that date amalgamating Company would not be in existence. Under the circumstances, the impugned notices, which are issued against the non existent Company, cannot be sustained and the same deserves to be quashed and set aside. - Decided in favour of assessee

Summary

Issues:
Challenge to impugned notice under Section 148 of the Income Tax Act for reopening assessment for the Assessment Year 2009-10 against amalgamating Company.

Analysis:
The petitions under Article 226 sought to quash notices under Section 148 of the Income Tax Act issued to reopen assessments for the Assessment Year 2009-10 against the amalgamating Company. The main contention was whether such notices against the amalgamating Company could be sustained post its amalgamation. The amalgamation took effect from 01/04/2010, and the impugned notices were issued on 21/01/2011. The petitioners argued that as the amalgamating Company ceased to exist post the amalgamation, the notices against it were invalid. The Division Bench's decision in Khurana Engineering Ltd. case was cited, emphasizing that post-amalgamation, notices against the non-existent amalgamating Company were impermissible.

The petitioners relied on the Division Bench's ruling in the Khurana Engineering Ltd. case, which held that post-amalgamation, notices against the transferor Company were invalid. The Court noted that once the amalgamation scheme was sanctioned, the amalgamating Company ceased to exist. The Division Bench recommended assessing the transferee Company and making protective assessments on both transferor and transferee Companies separately. Consequently, the impugned notices against the original assessee - amalgamating Company for the Assessment Year 2009-10 were deemed unsustainable and were quashed based on the binding precedent.

In conclusion, all petitions succeeded, and the impugned notices were quashed and set aside. The Court reiterated that post-amalgamation, notices against the non-existent amalgamating Company were untenable, aligning with the Division Bench's decision. No costs were awarded in the case.