2023 (11) TMI 448 - HC - Income Tax

Reassessment proceedings against non existent entity - notice issued against company amalgamated - HELD THAT - So far as argument raised regarding availability of alternative remedy of appeal, is concerned, it is well settled that when the order is without jurisdiction and appears to be passed in blatant exercise of powers and the same is against the principles of natural justice, then the question of availability of alternative remedy does not come in the way for exercising jurisdiction under Article 226 of the Constitution of India. In the present case, the notices/order has been issued against a non existent / amalgamated entity. Hence, the objection regarding availability of alternative remedy of appeal is overruled . Secondly, in the present case, it is clear that the reassessment proceedings have been initiated against Company which had indeed ceased to exist with effect from 01.04.2017 based upon the scheme of amalgamation having been approved on 17.04.2018. Apex Court in case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki 2019 (7) TMI 1449 - SUPREME COURT has categorically held that if the company has ceased to exist as a result of the approved scheme of amalgamation, then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. It is also held that upon amalgamating entity ceasing to exist, it cannot be regarded as a person under sub section (31) of Section 2 of the Act against whom assessment proceedings can be initiated. The participation by the amalgamated company in the proceedings would be of no effect as there is not estoppel against law. In view of the settled law, from the appointed date, under the scheme of amalgamation, the existence of the transferor company had merged into the transferee company. Mere activation of PAN number may not give a right to the respondents to issue notice to a non-existent entity after appointed date i.e. 01.04.2017. Admittedly, the order under Section 148A(d) of the Income Tax Act has been passed by the respondents against a non-existent entity. Therefore, the impugned notices and orders are bad in the eyes of law. Reassessment notice quashed - Decided in favour of assessee.

Summary

Issues involved:
The judgment addresses the challenge to notices and orders issued under the Income Tax Act, 1961 against an entity that had been amalgamated with another entity, leading to the cessation of its existence.

Details of the Judgment:

Issue 1: Jurisdiction of initiating re-assessment proceedings against an amalgamated entity
The petitioner challenged the notices and orders issued against the amalgamated entity, arguing that they were void ab initio and contrary to established legal principles. The petitioner contended that assessment proceedings cannot be initiated against amalgamated entities as they cease to exist post-amalgamation. The petitioner relied on legal precedents, including the judgment in Saraswati Industrial Syndicate Ltd. vs. CIT, to support their argument.

Issue 2: Availability of alternative remedy and maintainability of the petition
The respondents argued that the petitioner had the option to challenge the notices through the appeal process under Section 246 of the Income Tax Act, making the present petition not maintainable. However, the petitioner asserted that no notice can be issued against a non-existent entity, rendering the notice invalid from the beginning. The court overruled the objection regarding the availability of an alternative remedy, emphasizing that when an order is passed without jurisdiction, the question of alternative remedy does not apply.

Issue 3: Legal implications of amalgamation on assessment proceedings
The court observed that the reassessment proceedings were initiated against an entity that had ceased to exist post-amalgamation, as per the approved scheme. Citing the judgment in Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki, the court held that jurisdictional notices issued against a non-existent amalgamated entity are fundamentally illegal and without jurisdiction. The court reiterated that participation in proceedings by the amalgamated company does not create an estoppel against the law.

Conclusion:
The court declared the impugned notices, orders, and consequential proceedings against the amalgamated entity as null and void. The court quashed and set aside the notices and orders issued in the respective writ petitions, emphasizing that actions against a non-existent entity are prohibited. Consequently, the petitions were allowed, and the court disposed of the matter, directing a copy of the order to be kept in the record of all connected writ petitions.