2021 (9) TMI 121 - AT - Income Tax

Validity of assessment against non-existent entity - scheme of amalgamation conceived - Assessment pertains to the original assessee/amalgamating entity - valid assessment in case of a surviving entity - HELD THAT - Lower authorities had issued Section 142(1) notices; even post amalgamation, to former entity, M/s. Vivimed Labs (Alathur) Pvt. Ltd., only. So far as the Revenue's arguments that with reference to the lower authorities have duly incorporated names of both these entities, we find that it had adopted the very line of reasoning before their lordships in paras 17(i) as well as (vii) thereof which stood rejected in the hon'ble apex court. We further note that their lordships have considered all these issues in the foregoing detailed judgment whilst concluding that such an assessment does not satisfy the legal requirement involving a duly existent entity. As lastly contended that the lower authorities could not be allowed to escape their liability to escape from their duty to frame a valid assessment in case of a surviving entity only just by quoting the former entity's PAN (supra) since the same ceases to exist post amalgamation. Be that as it may, the fact remains that we have taken note of all the case material on record suggesting the learned lower authorities to have issued notice(s) (supra) to a non-existent entity only which renders the entire assessment as an invalid one. - Decided in favour of assessee.

Summary

Issues:
Validity of impugned assessment regarding amalgamation of entities.

Analysis:
The appeal for the assessment year 2014-15 pertained to the original assessee, M/s. Vivimed Labs (Alathur) Pvt. Ltd., which had amalgamated into M/s. Vivimed Labs Ltd. with different PANs. The assessment was framed following directions from the Dispute Resolution Panel-1 in Bengaluru. The primary issue for consideration was the validity of the assessment.

The appellant argued that the assessment was invalid as it was made in the name of a non-existent entity post-amalgamation. Citing a landmark judgment, the appellant contended that the assessment should be declared void ab initio due to the approved amalgamation scheme. The Revenue, however, argued that the assessment was valid as notices were issued in the name of the appellant post-amalgamation, ensuring compliance with the Income Tax Act.

After hearing both parties, the tribunal found no merit in the Revenue's argument. The tribunal noted that notices were issued post-amalgamation to the former entity, M/s. Vivimed Labs (Alathur) Pvt. Ltd., indicating that the assessment was made in the name of a non-existent entity. The tribunal rejected the Revenue's argument that mentioning both entities' names and PANs satisfied legal requirements, citing a previous apex court judgment that emphasized the need for assessment in the name of an existent entity.

The tribunal concluded that the assessment was invalid as it was made in the name of a non-existent entity, post-amalgamation. The assessment dated 25-10-2018 was quashed, and the appeal was allowed in favor of the appellant. All other arguments on merits were deemed infructuous. The order was pronounced on 18th August 2021.