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2025 (5) TMI 546 - HC - GSTPermissibility for the respondent authority to issue a SCN in the name of a company which stood amalgamated and proceed to complete the adjudication in the name of the amalgamated/non-existent company - HELD THAT - The respondent initially submitted that the respondent authority was not aware of the amalgamation. When the cause notice was pointed to state that the officer was informed and aware of the factum of amalgamation the learned counsel for respondent would request liberty to proceed afresh against the resultant company. The impugned order is set aside - Respondents are at liberty to proceed in accordance with law. - petition disposed off.
The primary legal question considered is whether a show cause notice and subsequent adjudication can be validly issued in the name of a company that has ceased to exist due to amalgamation, specifically whether proceedings initiated against a non-existent amalgamating company are permissible.
The Court examined the legal framework governing amalgamation and assessment proceedings, relying heavily on precedents from the Supreme Court and various High Courts. Central to the analysis was the principle that an amalgamating company ceases to exist upon the sanction of the amalgamation scheme, and therefore, any legal proceedings or orders issued in its name post-amalgamation are generally void. In support of this principle, the Court referred to the judgment in the case involving Maruti Suzuki and Spice Entertainment, where it was held that assessments or notices issued in the name of a non-existent amalgamated company are not mere procedural defects but are nullities. The Court noted the following authoritative excerpt from the Spice Entertainment judgment: "After the sanction of the scheme on 11th April, 2004, the Spice ceases to exist w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said -dead person-. When notice under Section 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s Spice which was non existing entity on that day. In such proceedings an assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law." The Court further emphasized that participation by the amalgamated company in proceedings does not create estoppel against the law, reinforcing the invalidity of proceedings against a dissolved entity. Addressing the respondent's contention that the petitioner had not deactivated their PAN, the Court held that the mere non-deactivation of PAN does not justify issuance of notices or assessment orders against a non-existent entity. This position was supported by the Bombay High Court's ruling in Diversey India Hygiene Private Limited, which stated: "The fact that PAN was not deactivated would not help the Revenue because there could be cases relating to various years when the company was in existence and it is possible those PAN numbers are picked up for scrutiny or for issuance of refund. That in our view, will not be a sanction for Department to issue notices to a non-existing entity, particularly, when they were aware that the entity was not in existence." The Court also considered the decision in Mahagun Realtors (P) Ltd., where the Supreme Court distinguished Maruti Suzuki on facts. In Mahagun Realtors, the assessment order was made in the name of both the amalgamating and amalgamated companies, and the amalgamation was not brought to the notice of the assessing authority at the relevant time. The Supreme Court held that under such circumstances, the assessment order was not a nullity. However, the present case was distinguished from Mahagun Realtors because the petitioner had repeatedly informed the assessing authority about the amalgamation and requested that assessments be made in the name of the resultant company. The Court analyzed the competing arguments regarding the applicability of the Skylight Hospitality LLP case, where a two-judge Supreme Court bench held that a wrong name in the notice was a clerical error curable under Section 292B of the Income Tax Act. However, the Court clarified that Skylight Hospitality LLP was decided on peculiar facts where substantial evidence showed the notice was intended for the dissolved company's successor and no prejudice was caused. This decision was distinguished and did not dilute the binding precedent established in Spice Entertainment and Maruti Suzuki, which govern the general principle that assessments against non-existent amalgamating companies are void. Applying the law to the facts, the Court found that the respondent authority was aware of the amalgamation, as evidenced from the show cause notice itself, which recorded the statement of the petitioner's senior DGM acknowledging the merger. Despite this, the show cause notice and the assessment order were issued in the name of the amalgamating company, which had ceased to exist. The Court held that this was contrary to settled legal principles and rendered the impugned order void. The Court rejected the respondent's argument that the petitioner's participation in the proceedings estopped them from challenging the validity of the assessment order. It reiterated that estoppel cannot operate against law, especially where the legal principle of corporate death upon amalgamation is well established. Consequently, the Court set aside the impugned assessment order passed in the name of the amalgamating company and granted liberty to the respondents to proceed afresh against the resultant company in accordance with law. Significant holdings include the reaffirmation of the principle that:
In summary, the Court held that the impugned assessment order in the name of the amalgamating company, which had ceased to exist due to amalgamation, was invalid and liable to be quashed. The respondents were directed to initiate proceedings against the amalgamated company, ensuring adherence to legal principles promoting certainty, uniformity, and consistency in tax litigation.
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