TMI Blog2023 (3) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... company, if fort was held for some time by the amalgamated company to ensure that no further damage is caused, this participation surely cannot be held against it. Moreover, amalgamated company, with all its obligations, would file return of income and also continue the process, but once assessment order is passed against non-existing company, there would be no cure, even for filing of the appeal. Once it is found that the assessment is framed, in the instant case, in the name of the non-existing company, as held hereinabove, that surely does not remain the procedural irregularity, which can be cured under the provision of section 292B of the Act. The assessment framed in the name of the existing company requires to be quashed. This Court has chosen to invoke the jurisdiction under Article 226 of the Constitution of India although the plea of alternative remedy of an appeal, is much emphasized upon by the respondent. There is a non-existing company and the amalgamated company is a separate legal entity, these arguments cannot be endorsed by the Court and, moreover, despite being aware of the settled position of the law, when all facts in the instant case can be equated with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f certified copy of the order of the NCLT and thereafter, on 01.04.2021 as also on 10.09.2021. These communications have been uploaded by declaring the subsequent events which took place. However, in complete disregard to the developments which took place, the respondent framed the assessment by proceeding against the Inox Renewables Limited. 5. Therefore, aggrieved petitioner is before this Court with the following prayers: 7 (a) quash and set aside the impugned order at Annexure- A to this Petition; (b) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the order at Annexure- A to this petition and stay the demand notice at Annexure- J to this petition and the Penalty notice at Annexure- K to this petition. (c) any other and further relief deemed just and proper be granted in the interest of justice. (d) to provide for the cost of this petition. 6. We have heard the learned senior advocate, Mr.Soparkar assisted by the learned advocate, Mr.Bandish Soparkar, who has sought to rely on the various decisions including the decision of this Court rendered in case of Khurana Engineering Ltd, reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in toto. It is further made clear that the relevant details in support of claim of assessee have been sought at the pendency of the proceedings and, hence, the allegations of violation of principles of natural justice are erroneous. It is pointed out that notice under section 142(1) of the Act is issued on 08.01.2021. Another notices are of 30.08.2021, 10.09.2021, 14.09.2021 and 23.09.2021 where the queries have been raised. Apt would be reproduce this portion of the reply as under: a) Notice u/s 142(1) dated 08.01.2021 i. Question 5(d) whether any movable or immovable properties sold during the year. If yes, Capital gain/loss computation along with proof of acquisition date and price and other costs, if any. Also whether capital gains offered for tax and rate. ii. Question 6(3) It is also been observed that during the year consideration Short Term Capital Gains to the tune of Rs.72,72,36,200/- on slump sale are shown. Please furnish the complete working of computation of short term capital gains with all the necessary supporting documentary evidences. (b) Notice u/s. 142(1) dated 30.08.2021 i. Question 3 Please furnish details regarding loss on assets held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions addressed to Inox Renewables were responded by the petitioner after 09.02.2021. On 10.03.2021 an email was addressed to the Jurisdictional Assessing Officer informing the fact of scheme of arrangement and the merger of Inox Renewables Limited into the petitioner company and shared a copy of the order passed by NCLT, where the petitioner company also informed the respondent about the sanction of composite scheme of arrangement on replies dated 31.08.2021 and 10.09.2021. 9 The respondents since continued to issue notice in the name of erstwhile company, which was not in existence with effect from 01.04.2020, the grievance is made by the petitioner. 10 The show cause notice-cum-draft assessment order was also issued in the name of Inox Renewables Limited on 23.09.2021. On 25.09.2021 the petitioner reiterated the factum of the scheme of arrangement and objected to the notice being unlawful and non est. Therefore, the grievance on the part of the petitioner is that the draft assessment order as well as the final assessment order passed in the name of such entity would become bad and illegal. There is a fundamental error in continuing with the proceedings and issuance of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 391(1) a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take sometime; indeed, they are bound to take some time because several steps provided by Sections 391 to 394-A and the relevant Rules have to be followed and complied with. During the period the proceedings are pending before the Court, both the amalgamating units, i.e., the Transferor Company and the Transferee Company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the Transferor Company (Subsidiary Company) shall be deemed to have carried on the business for and on behalf of the Transferee Company (Holding Company) with all attendant consequences. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would, therefore, be invalid. Reference of the Revenue to clause 6 of the scheme is wholly misplaced. Clause 6 refers to two dates, namely, appointed date and the effective date. It only clarifies that the scheme shall be operative from the appointed date, but shall become effective from the effective date. This, in our opinion, does not alter the position of law. The term appointed date as defined in clause 1(ii) itself envisages 1st April 2009 as the appointed date unless, of course, any other date as may be approved by the High Court. In the present case, the High Court made no change in this respect. The appointed date for the said scheme, therefore, must be held to be 1.4.2009. In the result, the petition is allowed. The impugned notice Annexure A is quashed. Rule is made absolute accordingly. 12.2 The Court held, on the basis of the clear position of law, that the transferor company no longer be amenable to assessment proceedings for the Assessment Year 2010-11. The notice issued for producing the documents for such assessment has been also held to be invalid. 13 The Apex Court in the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal was affirmed in an appeal under Section 260A by the Delhi High Court on 9 January 2018 following its earlier decision in the case of the assessee for AY 2011-12. That has given rise to the present appeal. 17. Mr Zoheb Hossain, learned Counsel appearing on behalf of the appellant submitted that: (i) The High Court was not justified in quashing the final assessment order under Section 143 (3) only on the ground that the assessment was framed in the name of the amalgamating company, which was not in existence, ignoring the fact that the names of both the amalgamated company and the amalgamating company were mentioned in the assessment order; (ii) Even on the hypothesis that the assessment order was framed incorrectly in the name of the amalgamating company, it would amount to a mistake, defect or omission which is curable under Section 292B when the assessment is, in substance and effect, in conformity with or according to the intent and purpose of the Act; (iii) During the assessment proceedings and the subsequent proceedings in appeal, the amalgamating company was duly represented by the amalgamated company. No prejudice was caused to any of the parties b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 148 was issued in the name of a non-existent private limited company. The Court held that the defect in recording the name of a non-existent company in a notice under Section 148 was a procedural defect or mistake curable under Section 292B, since no prejudice was caused to the assessee. The Delhi High Court distinguished the decision in Spice Entertainment (supra) on the ground that in that case even the final assessment order was in the name of a non-existent company; (vii) In the present case, both the draft assessment order and the final assessment order contained the names of the amalgamated and amalgamating companies and hence it cannot be held that the final order is in the name of a non-existent company. The order of the TPO is not the subject of a challenge by the assessee before any forum. The directions of the TPO were implemented by the assessing officer in the draft assessment order in accordance with Section 144C(1) which was then challenged by the assessee before the DRP under Section 144C(2). Since the names of both the amalgamated and amalgamating companies were mentioned in the draft assessment order and final assessment order, there is no jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. [2018] 90 taxmann.com 369/253 Taxman 409/402 ITR 21 (Delhi) - Spice Entertainmen t (supra) - Similarly, a notice to the amalgamating company, subsequent to the amalgamation becoming effective and despite the fact of the amalgamation having been brought to the notice of the assessing officer, is void ab initio as held in the following decisions: - BDR Builders Developers (P.) Ltd. v. Asstt. CIT [2017] 85 taxmann.com 146/397 ITR 529 (Delhi) - - Rustagi Engineering Udyog (P.) Ltd. v. Dy. CIT [2016] 67 taxmann.com 284/382 ITR 443 (Delhi) - - Khurana Engineering Ltd. v. Dy. CIT [2013] 34 taxmann.com 261/217 Taxman 75 (Mag.)/[2014] 364 ITR 600 (Guj) - Takshashila Realties (P.) Ltd. v Dy. CIT [2017] 77 taxmann.com 160 (Guj.) - Alamelu Veerappan v. ITO [2018] 95 taxmann.com 155/257 Taxman 72 (Mad.) (iv) The order passed by the TPO in the name of SPIL, a non-existent entity was invalid in the eyes of the law: SPIL ceased to be an eligible assessee , in terms of section 144C (15) (b) of the Act. Consequently, there was no requirement to pass a draft assessment order/reference to DRP etc.; and Furthermore, the final assessment order dated 31 October 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law: - Pr. CIT v. BMA Capfin Ltd. [2018] 100 taxmann.com 329 (Delhi) (Revenue's SLP dismissed against the same Pr. CIT v. BMA Capfin Ltd. [2018] 100 taxmann.com 330/[2019] 260 Taxman 89 (SC). - Nokia Solutions (vii) The judgment of the Delhi High Court in Skylight Hospitality LLP (supra) is distinguishable and is not applicable to the facts of the present case: The judgment was rendered on its own peculiar facts. In that case, the tax evasion petition mentioned the factum of conversion of the company into a Limited Liability Partnership29 , which was also noticed in the reasons to believe and approval of the Principal Commissioner (before issuance of a notice under Section 148 of the Act). However, only because of a clerical mistake, the notice was wrongly issued in the name of Skylight Hospitality Pvt. Ltd. instead of Skylight Hospitality LLP. In the aforesaid facts, the High Court held that this was an irregularity and procedural/ technical lapse which was curable under section 292B of the Act. The decision in the case of Spice Enfotainmen t (supra) was not followed on the ground that it pertained to the passing of an assessment order in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of one or more undertakings to an existing company. Strictly 'amalgamation' does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See: Halsbury's Laws of England (4th edition volume 7 para 1539). Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity. (iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed; (v) Fifthly, a notice under Section 143 (2) was issued on 26 September 2013 to the amalgamating company, SPIL, which was followed by a notice to it under Section 142(1); (vi) Sixthly, prior to the date on which the jurisdictional notice under Section 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no estoppel against law. 12. Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act. Following the decision in Spice Entertainment, (supra) the Delhi High Court quashed assessment orders which were framed in the name of the amalgamating company in: (i) Dimension Apparels (supra); (ii) Micron Steels; and (supra) (iii) Micra India (supra). 15 In the case before the High Court of Bombay rendered in the case of Teleperformance Global Services (P.) Ltd. vs. Assistant Commissioner of Income Tax, Central Circle 25(1), New Delhi, [2021] 127 taxmann.com 46( Bombay), it was considering the case where notice under section 148 of the Act for Assessment Year 2013 was in the name of M/s. Tecnovate Esolutions Private Limited issued by the Assessing Officer directing to file return of income within 30 days on the ground that there is a reasonable belief that the income chargeable to tax had escaped assessment. 15.1 The petitioner with which, the TSPL had been amalgamated had sent a letter stating that TSPL had been amal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be initiated. In said case before notice under Section 143(2) of the Act was issued on 26.9.2013, the scheme of amalgamation had been approved by the high court with effect from 1.4.2012. It has been observed that assessment order 7 (2019) 416 ITR 613 (SC) 15 / 18 WP. 950-2020 passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292 (b) of the Act. The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. Vs. CIT8. The Supreme Court has also referred to decision of Delhi high court in the case of CIT Vs. Spice Enfotainment Ltd.9and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B. The Supreme Court had also taken note of decision in Spice Entertainment (supra) was followed by Delhi high court in matters, viz. CIT Vs. Dimensio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethora of decisions, has observed that if a person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. If the State is seeking to recover the tax, it cannot bring the citizen within the letter of the law, the citizen is free, however, apparently within the spirit of law the case might otherwise appear to be. 16.1 It was a case where notice was issued to the dead person. The petitioner, being the heir and the legal representative of the deceased, raised an objection against the validity of the notice and did not submit to the jurisdiction of the Assessing Officer by filing the return of the income, but went on objecting to the continuation of the assessment proceedings pursuant to the impugned notice. The Assessing Officer, instead of taking corrective steps under section 292B of the Act and issuing the notice to the heirs and the legal representatives, continued with the proceedings pursuant to the impugned notice, which was issued in the name of dead person. 18. In the last, Mr.Bhatt invited the attention of this Court to Section 124(3)(c) of the Act, which reads thus : 124. Jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Limited, (2019) 107 taxmann.com 375 (SC). The ratio of this decision of the Supreme Court is that during the pendency of the assessment proceedings if the assessee company gets amalgamated with another company, it would lose its existence and the assessment order passed subsequently in the name of the said non-existing entity would be without jurisdiction and liable to be setaside. 26. In the facts of the case before the Supreme Court, although the Assessing Officer was informed of the amalgamated company having ceased to exist as a result of the approved scheme of amalgamation, yet the jurisdictional notice was issued only in its name. The Supreme Court took the view that the basis on which the jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. We quote the relevant observations thus : 32. On behalf of the Revenue, reliance has been placed on the decision of this Court in Commissioner of Income Tax, Shillong v Jai Prakash Singh38 ( Jai Prakash Singh ). That was a case where the assessee did not file a return for three assessment years and died in the meanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh involved a situation where the return of income had been filed by one of the legal representatives to whom notices were issued under Section 142(1) and 143(2). No objection was raised by the legal representative who had filed the return that a notice should also to be served to other legal representatives of the deceased assessee. No objection was raised before the assessing officer. Similarly, the decision in Maharaja of Patiala was a case where the notice had been served on the legal representative, the successor Maharaja and the Bombay High Court held that it was not void merely because it omitted to state that it was served in that capacity. 33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had indicated how it had underwent the change. The decision of Spice Entertainment vs. CIT [IT Appeal No.475 of 2011], had been referred to, to hold that once the corporate entity is merged with another, i.e., transferee corporation or entity, the assessment had to be completed in the later s hands. The appeal was dismissed, as no substantial question of law was there to consider. 18.2 The decision also makes it quite clear that the assessment when initiated in the name of the transferor company and before it gets completed, if the company goes into amalgamation and the Revenue still continues to assess the transferor company and not the transferee company, it is a nullity. 19 The decision of the Apex Court in the case of Principal Commissioner of Income-tax vs. Mahagun Realtors (P.) Ltd., [2022] 137 taxmann. Com 91 (SC), requires serious consideration at this stage. It was a case where no indication about amalgamation was given by the assessee during search operations and return filed pursuant to notice issued under section 153A suppressed the fact of amalgamation. Since the conduct of the assessee, commencing from the date of search and before all forums reflecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 292B. ------------- ----------------- 39. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Entertainment on 2 November 2017. The decision in Spice Entertainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Entertainment. 40. We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated, would fall. 20.1 While distinguishing the decision of Maruti Suzuki India Ltd. (supra), the Court notices that the scheme of amalgamation was approved on 29.01.2013 with effect from 01.04.2012 and the same was intimated to the Assessing Officer on 02.04.2013 i.e. on the very next day and the notice under section 143(2) for the Assessment Year 2012- 13 was issued to amalgamating company on 26.09.2013. Thus, the notice was issued to non- existing company and the assessment order was issued against the company, which was held to be substantive illegality and not procedural violation of the nature adverted to in section 292B. 20.2 In Maruti Suzuki India Ltd. (supra), the Court had further noticed that the Assessing Officer was informed of the amalgamating company having ceased to exist as a result of approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The legal principle that had been applied was that the amalgamating entity ceases to exist against the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against the law. While so doing the Court had also reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took place as well as statements were recorded by the Revenue of the Directors and Managing Director of the group. A return was filed, pursuant to the notice, which suppressed the fact of amalgamation and, in fact, the return was filed by MRPL though the entity was ceased to exist and yet the appeals were filed before the CIT and the Tribunal. Even the affidavit was filed before this Court on behalf of the Director of MRPL. The assessment order attributes specific amounts surrendered by MRPL and after considering the special auditor s report, brings specific amounts to tax in the search assessment order. 20.5 All these clearly indicate that the order adopted a particular method of expressing the tax liability. And hence, the Court held that whether the corporate death of an entity upon amalgamation per se invalidates an assessment order, ordinarily cannot be determined on a bare application under section 481 of the Companies Act, but would depend on the terms of amalgamation and the facts of each case. In such circumstances, the Apex Court had not sustained the High Court s order and set it aside. 21 Reverting to the facts of the matter on hands and equating the same with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by NCLT sanctioning the Scheme, with the Registrar of Companies, Gujarat (MCA website) today i.e. 9th February, 2021, with effect from the Appointed Date of 1st April, 2020 for Part II of the Scheme and 1st July 2020 for Part II of the Scheme. Consequent to the Scheme becoming effective, Inox Renewables Limited stands dissolved without the process of winding up and Inox Wind Energy Limited is now the Holding and Promoter Company of Inox Wind Limited with effect from 0th February, 2021. Copy of the Order passed by NCLT dated 25h January, 2021 along-with copy of the Scheme is attached herewith for ready reference. This is for your information and needful consequential actions in the matter. 21.1 This makes it abundantly clear that the scheme has been made effective from 09.02.2021 with effect from the appointed date of 1st April, 2020 for Part-II and 1st July, 2020 for Part III of the scheme. 21.2 Another communication is dated 31.08.2021 which reiterates amalgamation of Inox Renewables Limited with GFL with effect from 01.04.2020 and Part B speaks of demerger of the Renewable Energy Business of GFL Limited into its wholly owned subsidiary, Inox Wind Energy L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The assessee company has not earned any exempt income during the year under consideration. Hence, in view of Nil exempt income, the assessee company is not under obligation to offer disallowance u/s. 14A. 21.3 Thereafter, a communication was sent to the petitioner by Joint Commissioner of Income Tax, National Faceless Assessment Centre, Delhi intimating that the Board of Directors of the Company, as a part of business restructuring, has approved composite scheme of arrangement as per the details given at Part A and Part B. After various queries, which had been raised, certain documents were requested to be taken on record. Thereafter, on 25.09.2021, in reply to the show cause notice dated 23.09.2021, justifications were given as to why the assessment should not be completed as per the draft assessment order. It also complained of less time given for compliance as the email was received on 23.09.2021 and the time given was only upto 25.09.2021, which was less than two days. However, it replied to the various aspects, which had been raised by the department. It has been argued before us by Mr. S.N.Soparkar, learned Senior Advocate for the petitioner that had there been n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the non-existing company, if fort was held for some time by the amalgamated company to ensure that no further damage is caused, this participation surely cannot be held against it. Moreover, amalgamated company, with all its obligations, would file return of income and also continue the process, but once assessment order is passed against non-existing company, there would be no cure, even for filing of the appeal. Once it is found that the assessment is framed, in the instant case, in the name of the nonexisting company, as held hereinabove, that surely does not remain the procedural irregularity, which can be cured under the provision of section 292B of the Act. 24 The assessment framed in the name of the existing company requires to be quashed. This Court has chosen to invoke the jurisdiction under Article 226 of the Constitution of India although the plea of alternative remedy of an appeal, is much emphasized upon by the respondent. Considering the fact that there is a non-existing company and the amalgamated company is a separate legal entity, these arguments cannot be endorsed by the Court and, moreover, despite being aware of the settled position of the law, when all facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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