2020 (3) TMI 433 - HC - Income Tax

Validity of exparte assessment order - Reopening of assessment - scheme of amalgamation - HELD THAT - i) No return of income has been filed by OAS for the relevant assessment year. However there are credits in the bank account that are liable to be explained by the entity for the purposes of determination of taxability. ii) The factum of amalgamation was not known to the Income Tax Department. The jurisdictional notice i.e. notice under Section 148 thus came to be issued to OAS. iii) Receipt of notices by OGT is not denied since it has appeared before the Assessing Officer bringing to its notice the factum of amalgamation only then. iv) On 14.09.2017 OGT brings to the notice of the Department the merger of OAS with OGT and specifically requests the Department to handover the notice to its office staff one Mr.Suresh. v) Subsequent notices have been issued to OGT (formally known as OAS) and the order of assessment has also been passed in the name of Oasys Greentech Pvt. Limited i.e. the petitioner. vi) OGT has admittedly filed a return of income in the name of OAS for A.Y.2013-14 even subsequent to amalgamation and also received refunds issued to OAS. The stand of the petitioner to the effect that proceedings for reassessment ought to have been issued only in the name of OGT is clearly misconceived insofar as the Department has not been put to notice of the factum of amalgamation by OGT till 14.09.2017 and the petitioner has also by filing a return in the name of OAS and receiving refunds addressed to OAS furthered the impression that OAS is an existing entity. This argument is rejected. No infirmity in law insofar as the impugned proceedings for re-assessment are concerned and the same are held to be valid. Petitioner has sought confirmation as to whether a return of income can be filed manually by it since it was unable to upload a return electronically the successor company not having been incorporated for that assessment year. No reply has been given to this letter and instead the impugned order of assessment has come to be passed on 30.12.2017 exparte. Order dated 30.12.2017 is set aside. The petitioner is permitted to file a return within a period of two (2) weeks from today. It is made clear that the assumption of jurisdiction by the respondent/Assessing Officer is perfectly in order. After hearing the petitioner the Officer shall complete the proceedings for re-assessment on merits within a period of four (4) weeks from date of filing of return.

Summary

Issues Involved:
1. Validity of reassessment proceedings initiated against a non-existent entity.
2. Conduct and obligations of the transferee entity post-amalgamation.
3. Applicability of legal precedents and statutory provisions to the case at hand.
4. Validity of the assessment and penalty orders issued against the amalgamated entity.

Detailed Analysis:

1. Validity of reassessment proceedings initiated against a non-existent entity:
The reassessment order dated 28.06.2018 for AY 2010-11 was challenged on the grounds that the notice under Section 148 of the Income Tax Act, 1961, was issued to M/s. OAS Digital Infrastructures Private Limited (OAS), which had ceased to exist due to its amalgamation with Oasys Green Tech Private Limited (OGT) effective from 01.02.2015. The petitioner argued that any proceedings initiated against a non-existent entity are void ab initio. The court noted that the Department was unaware of the amalgamation at the time of issuing the notice. However, OGT had filed returns and received refunds in the name of OAS post-amalgamation, leading the Department to believe that OAS continued to exist.

2. Conduct and obligations of the transferee entity post-amalgamation:
The court emphasized the conduct of OGT, which had not informed the Department about the amalgamation until 14.09.2017 and had filed returns and received refunds in the name of OAS. This conduct misled the Department into believing that OAS was still operational. The court held that OGT's actions created an illusion of OAS's existence, and thus, the reassessment proceedings initiated against OAS were not invalid.

3. Applicability of legal precedents and statutory provisions to the case at hand:
The petitioner relied on several judgments, including Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Limited, Spice Entertainment Ltd. v. Commissioner of Service Tax, and others, to argue that proceedings against a non-existent entity are void. The court distinguished these cases by noting that in those instances, the Department had been informed of the amalgamation, unlike in the present case. The court also distinguished the case of Alamelu Veerappan, stating it related to individual assessees under Section 159, not corporate mergers under Section 170.

4. Validity of the assessment and penalty orders issued against the amalgamated entity:
The court found no infirmity in the reassessment proceedings, as the Department was unaware of the amalgamation due to OGT's conduct. However, the court set aside the assessment order dated 30.12.2017 on procedural grounds, allowing the petitioner to file a return within two weeks and directing the Assessing Officer to complete the reassessment on merits within four weeks thereafter. The penalty proceedings under Section 271(1)(c) were also challenged, but the court did not find it necessary to address this separately given the procedural lapse in the assessment order.

Conclusion:
The court dismissed the writ petitions, upheld the validity of the reassessment proceedings, and set aside the ex parte assessment order, granting the petitioner an opportunity to file a return and participate in the reassessment process. The court emphasized the importance of the transferee entity's conduct and the need for consistency and certainty in tax litigation.