2022 (5) TMI 840 - HC - Income Tax

Reopening of assessment u/s 147 - department would submit that except for the details on merger, the assessee has not submitted documents satisfactorily explaining the above transactions has escaped assessment - HELD THAT - This Court is inclined to direct the petitioner herein to give proper explanation before the authorities concerned to the notices received under Section 148 of the Income Tax Act. The petitioner is also given liberty to raise objection, if any before the authorities concerned to the impugned notices.

Summary

Issues:
1. Validity of notices issued under Section 148 of the Income Tax Act, 1961 to a company that has been merged with another entity.
2. Adequacy of documents submitted by the assessee to explain the transactions related to the merged entities for the assessment year 2018-2019.

Analysis:

Issue 1: Validity of Notices
The petitioner, a company formed under the Companies Act, 1956, merged with another company as per a court order. The petitioner received notices under Section 148 of the Income Tax Act, 1961, despite the merger. The petitioner contended that the notices issued in the name of the non-existent company were void ab initio. The petitioner argued that the respondent should have considered the merger documents and tax returns provided. The respondent department, however, claimed that the petitioner failed to satisfactorily explain the transactions leading to the alleged income escape for the assessment year 2018-2019. The High Court noted the contentions of both parties and directed the petitioner to provide a proper explanation to the authorities concerning the notices received under Section 148 of the Income Tax Act. The petitioner was also granted the liberty to raise objections, if any, to the impugned notices.

Issue 2: Adequacy of Documents
The petitioner admitted to receiving income from the merged entity, which was reflected in the books of the surviving entity. Despite the merger, the petitioner continued to account for the income of the merged company. The respondent department argued that this income received after the merger required a proper explanation from the petitioner. The High Court considered the submissions and directed the petitioner to explain the situation to the authorities in response to the notices issued under Section 148 of the Income Tax Act. The petitioner was given the opportunity to raise objections to the notices.

In conclusion, the High Court disposed of the writ petition, emphasizing the need for the petitioner to provide a satisfactory explanation to the authorities regarding the notices received under Section 148 of the Income Tax Act. The petitioner was granted the liberty to raise objections and challenge the impugned notices through the appropriate channels.