2025 (2) TMI 612 - HC - Income Tax

Assessment orders passed in the name of non-existing companies on account of amalgamation order by which these companies were merged with Reliance Industries Limited (RIL) - Whether the assessment order with regard to amalgamating company should be assessed in the name of amalgamating company or amalgamated company post the amalgamation order ? - HELD THAT - The facts of the present appellant-assessee before us are similar to the significant facts in the case of Maruti Suzuki India Ltd. 2019 (7) TMI 1449 - SUPREME COURT on the basis of which the Supreme Court has held that inspite of the fact of the AO being informed of the amalgamating company having ceased to exist as a result of the scheme of amalgamation if the proceedings are initiated against the non-existing companies then such proceedings are void ab initio although the amalgamated company participated in the proceedings. In our view in the present case also although RIL-amalgamated company participated in the proceedings the respondent-revenue having knowledge of the amalgamation still passed an order in the name of the amalgamating companies which would make the assessment order dated 27 March 1997 void ab initio. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether assessment orders passed under Section 143(3) of the Income Tax Act, 1961, in the name of non-existent entities due to amalgamation, are void ab initio. The Court examined if the assessment orders should have been issued in the name of the amalgamated company, Reliance Industries Limited (RIL), instead of the non-existent amalgamating companies, Reliance Polyethylene Limited (RPEL) and Reliance Polypropylene Limited (RPPL), post-amalgamation.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The Court referred to Section 143(3) of the Income Tax Act, 1961, which pertains to the assessment of income. The Court also considered precedents such as the Supreme Court's decision in PCIT vs. Maruti Suzuki India Limited, which held that assessment orders against non-existent entities due to amalgamation are void. The case of PCIT vs. Mahagun Realtors Pvt. Ltd. was also considered, where the Supreme Court distinguished the Maruti Suzuki case based on specific facts.

Court's interpretation and reasoning:

The Court determined that the issue of jurisdiction is fundamental and goes to the root of the matter. It emphasized that an assessment order against a non-existent entity is a substantive illegality. The Court reasoned that since the amalgamation was known to the Assessing Officer, the orders should have been issued in the name of the amalgamated company, RIL.

Key evidence and findings:

Evidence included documents such as intimation under Section 143(1) of the Act, notes to computation of income, and letters addressed by the assessee to the Assessing Officer, indicating that the Assessing Officer was aware of the amalgamation. The Court allowed these documents to be admitted as additional evidence under Order XLI Rule 27 of the CPC.

Application of law to facts:

The Court applied the principles from Maruti Suzuki, noting that the assessment orders were passed after the amalgamation date and the Assessing Officer had knowledge of the amalgamation. Therefore, the orders were void as they were issued in the name of non-existent entities.

Treatment of competing arguments:

The respondents argued that the appellant's delay in raising the jurisdictional issue was prejudicial, as it prevented the revenue from reassessing the amalgamated company, RIL. The Court rejected this argument, stating that jurisdictional issues can be raised at any stage and emphasized that the revenue had knowledge of the amalgamation.

Conclusions:

The Court concluded that the assessment orders were void as they were issued in the name of non-existent entities despite the Assessing Officer's knowledge of the amalgamation. The appeals filed by the appellant-assessee were allowed, and the revenue's appeals were dismissed as infructuous.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The Court held, "Whether on the facts and circumstances of the case and in law, the assessment order under Section 143 (3) of the Act passed on a non-existent entity is bad in law, void ab-initio."

Core principles established:

The judgment reinforced the principle that assessment orders must be issued in the name of the existing legal entity post-amalgamation. It emphasized that jurisdictional defects render such orders void, and knowledge of amalgamation by the Assessing Officer is a critical factor.

Final determinations on each issue:

The Court determined that the assessment orders for the assessment years 1993-94 to 1995-96 were void due to being issued in the name of non-existent entities. The appellant-assessee's appeals were allowed, and the revenue's appeals were dismissed. The writ petition was disposed of as infructuous.