2013 (5) TMI 887 - AT - Income Tax

Summary

Issues involved: Assessment year 2004-05, validity of reopening assessment u/s 148, dissolution of company post-merger, applicability of amalgamation laws, notice issued to non-existing company.

The appeal before the Appellate Tribunal ITAT Chennai pertained to the assessment year 2004-05 and challenged the order of the Commissioner of Income-tax(Appeals)-I at Coimbatore dated 10.8.2012, arising from the assessment completed u/s 143(3), read with sec. 147 of the Income-tax Act, 1961. The primary issue revolved around the validity of reopening the assessment u/s 148, following the merger of M/s. Meridian Industries Ltd. with M/s. Precot Mills Ltd., approved by the Hon'ble High Court of Madras, leading to the dissolution of the transferor company post-merger.

The Assessing Officer had disallowed certain deductions in the income escaping assessment, including disallowance of dividend receipts and depreciation on windmill. The assessee challenged these additions before the Commissioner of Income-tax(Appeals), along with contesting the validity of the reopening of assessment. The assessee argued that the notice u/s 148 was issued to a non-existing company, as the merger had been approved by the Hon'ble High Court, resulting in the dissolution of the assessee-company post-merger. The Commissioner of Income-tax(Appeals) accepted these contentions, emphasizing that a dissolved company cannot be assessed for income tax, citing relevant legal precedents and annulled the income escaping assessment.

The Revenue appealed the decision, contending that the dissolution of the company post-merger with effect from 1.4.2006 would not invalidate the notice issued u/s 148 on 3.3.2011 for the assessment year 2004-05. The Revenue argued that even though the company was dissolved, the assessment year in question was prior to the dissolution. However, the Tribunal upheld the decision of the Commissioner of Income-tax(Appeals), emphasizing the legal principle that after amalgamation, the transferor company ceases to exist, and the notice should have been issued to the amalgamated company, M/s. Precot Industries Ltd., as the assessee-company was no longer in existence post-merger.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, affirming the decision of the Commissioner of Income-tax(Appeals) and upholding the annulment of the income escaping assessment due to the dissolution of the company post-merger, emphasizing the legal implications of amalgamation on the existence of the transferor company.