2021 (3) TMI 489 - HC - Income Tax

Validity of reassessment order made in the name of defunct company which has since merged with the petitioner - Scheme of amalgamation conducted - HELD THAT - In the assessment proceeding the petitioner replied to the notice issued under Section 142(1) in the name of Doosan International India Private Limited though on its letter head. The petitioner participated in the proceedings before the jurisdictional Asst. Commissioner of Income Tax Bangalore and made submissions on 21.09.2012 and on 07.01.2013 without any demur. The assessment order dated 01.03.2013 also came to be passed in the name of the said Doosan International India Private Limited even the said company ceased to exist and stood merged/amalgamated with the petitioner. If the petitioner felt that the assessment order was made in the wrong name of the merged transferred company which had ceased to exist it should have filed a suitable application for rectification of mistake before the Asst Commissioner of Income Tax Bangalore for effecting the name change in the assessment order dated 01.03.2013. It was incumbent on the part of the petitioner to have informed the Asst. Commissioner of Income Tax at Bangalore about the merger/amalgamation. In any event it was for the petitioner to have taken step to correct the name in the assessment order or in the alternative file a composite return for the Assessment Year 2009-10 with the petitioner s PAN Number for both the petitioner and Doosan International India Private Limited and regularized the changes in accordance with the Act. Mere intimation under Section 127 of the Income Tax Act 1961 for transfer the file to the jurisdictional Income Tax Office at Chennai was not sufficient. In the communication addressed to the Deputy Commissioner of Income Tax Bangalore on 08.08.2013 the petitioner merely asked for transfer of the file to the respondents but did not take any steps for rectifying the mistake. Even during the re-assessment proceeding the petitioner actively participated in the said proceedings on the understanding that the assets and liabilities of Doosan International India Private Limited stood vested with the petitioner and that the petitioner was representing its interest by defending the proceedings seeking to reopening of the assessment vide notice dated 30.03.2016 issued under Section 148 of the Income Tax Act 1961. Therefore it would be absurd to hold that the order has been passed in the name of a defunct company to scuttle the re-assessment proceeding. Amalgamation cannot be used as a tool to defeat assessment and re-assessment proceedings as the sanctioned scheme of amalgamation itself takes care of such eventualities. It cannot be used to subvert assessment proceedings. The definition in Section 2(1B) of the Income Tax Act 1961 makes it clear that all the liabilities of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation. Facts also do not indicate that the petitioner had questioned the jurisdiction of the respondent when the notice dated 31.03.2016 was issued in the name of transferor company Doosan international Private Limited. Therefore the preliminary objection of the petitioner regarding the jurisdiction of the respondent to reopen the assessment stands overruled. Depreciation on the amount claimed and allocated towards the purported Customers/Dealer and Vendor List - There was no explanation offered for claiming depreciation on the amount claimed and allocated towards the purported Customers/Dealer and Vendor List. In the reply to notice dated 11.7.2012 issue under Section 142(1) of the Income Tax Act 1961 the petitioner has merely given a breakup. It did not give any document to substantiate the depreciation on the Customer/Dealer and Vendor lists. Thus it cannot be said that the petitioner had truly and fully disclosed all material that was required for assessment. Therefore there can be no interference at this stage of re-assessment. Claim for depreciation on the Customer/Dealer and Vendor lists goes to the very root of the assessment inasmuch as not only there was no valuation but also it is also questionable whether depreciation can be allowed towards Customer/Dealer and Vendor lists based on an internal allocation made by the said company. It is therefore for the petitioner to explain before the respondent that it was indeed entitled to claim depreciation on the Customer/Dealer and Vendor lists. No merits in quashing the impugned order in the light of the above reasoning. Therefore the second respondent is directed to complete the re-assessment in accordance with law.

Summary

Issues Involved:
1. Jurisdiction to reopen assessment under Section 148 of the Income Tax Act, 1961.
2. Validity of reassessment proceedings in the name of a defunct company.
3. Claim for depreciation on intangible assets, specifically Customer/Dealer and Vendor lists.
4. Allegation of change of opinion by the Assessing Officer.

Issue 1: Jurisdiction to Reopen Assessment under Section 148 of the Income Tax Act, 1961

The petitioner challenged the invocation of Section 148 for reopening the assessment for the Assessment Year 2009-2010. The court noted that the Assessing Officer had sufficient "reason to believe" that income had escaped assessment. The reopening was justified as there was no discussion or opinion formed on the issue of depreciation on intangible assets in the original assessment. The court cited several precedents, including A.L.A. Firms Vs. CIT and Asst. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd., to support the validity of the reopening under Section 147.

Issue 2: Validity of Reassessment Proceedings in the Name of a Defunct Company

The petitioner argued that the reassessment was invalid as it was conducted in the name of Doosan International India Private Limited, which had merged with the petitioner. The court distinguished the facts from the case of Principal Commissioner of Income Tax Vs. Maruti Suzuki India Ltd. and held that the petitioner had participated in the proceedings without demur and had not informed the jurisdictional officer about the merger in a timely manner. Therefore, the reassessment proceedings were not invalidated by the name issue.

Issue 3: Claim for Depreciation on Intangible Assets

The reassessment notice questioned the depreciation claimed on the Customer/Dealer and Vendor lists, stating there was no valuation by an approved valuer and no absolute right over the list. The court found that the petitioner had not fully and truly disclosed all material facts required for assessment, particularly regarding the valuation of the Customer/Dealer and Vendor lists. The court directed the reassessment to focus solely on this issue and allowed the petitioner to substantiate its claim with proper documents within thirty days.

Issue 4: Allegation of Change of Opinion by the Assessing Officer

The petitioner contended that the reopening was based on a change of opinion. The court rejected this argument, stating that the original assessment did not form any opinion on the depreciation of the Customer/Dealer and Vendor lists. The court cited various cases, including Commissioner of Income Tax Vs. Kelvinator of India Ltd., to support the view that a change of opinion does not apply when no opinion was formed in the original assessment.

Conclusion:

The court upheld the reopening of the assessment under Section 148, dismissed the argument regarding the invalidity of the reassessment in the name of a defunct company, and directed the reassessment to focus on the depreciation claim for Customer/Dealer and Vendor lists. The petitioner was given thirty days to provide proper documentation, and the second respondent was directed to complete the reassessment within three months. The writ petition was disposed of with these observations, and no costs were awarded.