2024 (10) TMI 705 - HC - Income Tax

Validity of assessment order against company already got amalgamated - order passed was on non existence company which was in fact amalgamated - HELD THAT - If we exercise at the decisions cited by the Revenue in Mahagun Realtors (P) Ltd. 2022 (4) TMI 347 - SUPREME COURT it is clear that in amalgamation unlike the case of winding up of a corporate entity, the entity still continues enfolded within the new or the existing transferee entity. The Supreme Court has held that, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. Therefore it become essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. Therefore the corporate business continues or the corporate venture continues with the transferree company of the transferor company. Therefore the liability will continue to be shouldered by the transferee company which concept cannot be easily ignored. The very CIT (Appeals) order for the AY 2002-03 shows that the appeal was filed before the CIT (Appeals) in the name of M/s. Shaw Wallace Properties Ltd., i.e., transferor company. Therefore, it was with the knowledge of the assessee that, even though the merger had been taken place w.e.f 30.09.2001 by virtue of the order passed by the High Courts owing to liability of the transferor company, appeal was filed and pursued. A notice to the assessee was also issued at its Chennai address. Since it was not responded, the AO proceeded to conclude the assessment, as the ITAT has remitted the matter back to the AO to do the same. Thus, it cannot be held that the Assessment Order passed by the AO was a nullity. An assessee cannot wriggle out of the assessment proceeding. At the same time, since there has been no effective hearing to the transferee company whereby, the claim for long term capital has been rejected and was assessed to income, to that extent, the Assessment Order also can be said to be invalid. Decided in favour of revenue.

Summary

Issues:
Validity of assessment order post-amalgamation

Analysis:

The case involved two Tax Case Appeals concerning the amalgamation of an assessee company with another company. The main issue was whether the assessment orders passed post-amalgamation were valid or nullity. The Tribunal quashed the assessment orders, citing the amalgamated company's non-existence. The appellant argued that the merger was not brought to the Assessing Authority's notice, and the assessment orders were set aside due to a procedural violation. The appellant contended that the liability post-amalgamation should rest with the transferee company. The appellant also highlighted the Supreme Court's decision emphasizing that in amalgamation, the business continues within the new entity. The appellant challenged the ITAT's decision and sought a re-assessment by giving proper notice to the present transferee company.

The High Court analyzed the facts, noting that the amalgamation took effect from a specific date, leading to the transferor company's non-existence. The Court considered the liabilities post-amalgamation and the filing of appeals by both transferor and transferee companies. It referenced the Supreme Court's decision on amalgamation, emphasizing the continuity of business within the new entity. The Court observed that the assessment order could not be termed a nullity, but the lack of effective hearing to the transferee company rendered the order partially invalid. The Court concluded that the ITAT had not considered all aspects, leading to interference with its decision.

In the final judgment, the High Court ruled in favor of the Revenue, setting aside the ITAT's orders, along with those of the CIT (Appeals) and the Assessing Authority. The case was remitted back to the Assessing Authority for re-assessment, emphasizing the importance of giving proper notice to the present transferee company and ensuring a fair opportunity for assessment finalization. The Court provided detailed observations and directives for the reassessment process, ultimately ordering both Tax Case Appeals accordingly, with no costs imposed.