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TMI Blog2024 (11) TMI 1331X X X X Extracts X X X X X X X X Extracts X X X X ..... d hereinafter refer to Digilife Distribution and Marketing Services Limited as the "Amalgamating Company" and the petitioner/HCL Infosystems Limited as the "Amalgamated Company". 3. The Scheme ultimately came to be approved by the National Company Law Tribunal [NCLT] in term of its order of 10 August 2022. The appointed date specified in that Scheme was 01 April 2022. Pursuant to the aforesaid Scheme coming to be approved, both the Amalgamating Company as well as the petitioner informed and apprised the Registrar of Companies of the factum of the Scheme having come to be duly approved. 4. On 12 October 2022, the Amalgamating Company moved an application for cancellation of its existing registration citing the reason for the filing of that application as being "transfer of business on account of amalgamation, merger, demerger, sale". It was during the pendency of consideration of the aforesaid application that the respondents issued an acknowledgement of the same and suspended the Goods and Services Tax [GST] registration of the Amalgamating Company with effect from 12 October 2022. This becomes apparent from the communication which stands placed on our record as Annexure P/8. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had evidently under an approved Scheme amalgamated with Maruti Suzuki India Ltd., was a nullity. On facts it emerged that MSIL had duly intimated the AO of the amalgamation prior to the case being selected for scrutiny assessment. Notwithstanding that information being available, the AO appears to have framed a draft assessment order in the name of SPIL. xxxx xxxx xxxx 14. It was in the aforesaid backdrop that the Supreme Court firstly took note of an earlier decision of this Court in Spice Entertainment Ltd. v. Commissioner of Service Tax, where it had been held that an assessment made in the name of a transferor company would be void ab initio and could not possibly be viewed as a procedural defect curable or rectifiable under Section 292B of the Act. xxxx xxxx xxxx 18. Arguments flowing on lines similar to those which were addressed before us in this batch appear to have been urged before the Supreme Court in Maruti Suzuki with it being argued that a notice in the name of a company which stood dissolved would be a curable mistake and that in any case, Section 170 of the Act would save those notices. This becomes apparent from a reading of paragraphs 32 and 33 of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purpose of this Act." In this case, the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292-B. 33. In this context, it is necessary to advert to the provisions of Section 170 which deal with succession to business otherwise than on death. Section 170 provides as follows: "170. Succession to business otherwise than on death.- (1) Where a person carrying on any business or profession (such person hereinafter in this section being referred to as the predecessor) has been succeeded therein by any other person (hereinafter in this section referred to as the successor) who continues to carry on that business or profession- (a) the predecessor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession; (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Spice Enfotainment Ltd., (2020) 18 SCC 353] on 2-11-2017. The decision in Spice Enfotainment [CIT v. Spice Enfotainment Ltd., (2020) 18 SCC 353] 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 Enfotainment [CIT v. Spice Enfotainment Ltd., (2020) 18 SCC 353]. 37. 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 in relation to the respondent for AY 2011-2012 must, in our view be adopted in respect of the present appeal which relates to AY 20122013. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable." 20. As is evident from the above, Maruti Suzuki came to affirm the view which was expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or scheme of arrangement. In amalgamation two or more companies are fused into one by merger or by taking over by another. Reconstruction or amalgamation has no precise legal meaning. The amalgamation is a blending of two or more existing undertakings into one undertaking, the share holders of each blending Company become substantially the share holders in the Company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new Company, or by the transfer 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 Halsburys Laws of England 4th Edition Vol. 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree entity. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee-company. It is, therefore, essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action or the complaint does not per se cease-depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall." xxxx xxxx xxxx 27. After copiously taking note of the disclosures which were made in the course of assessment, it found that the following salient facts emerged in the case of Mahagun Realtors:- "40. The facts of the present case are distinctive, as evident from the following sequence: "1. The original return of MRPL was filed under section 139(1) on June 30, 2006. 2. The order of amalgamation is dated May 11, 2007 - but made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year ending March 31, 2006, in the cross objection before the Income-tax Appellate Tribunal, for the first time (in the appeal preferred by the Revenue), an additional ground was urged that the assessment order was a nullity because MRPL was not in existence. 10. Assessment order was issued - undoubtedly in relation to MRPL (shown as the assessee, but represented by the transferee company MIPL). 11. Appeals were filed to the Commissioner of Income-tax (and a cross-objection, to the Income-tax Appellate Tribunal) - by MRPL 'represented by MIPL'. 12. At no point in time - the earliest being at the time of search, and subsequently, on receipt of notice, was it plainly stated that MRPL was not in existence, and its business assets and liabilities, taken over by MIPL. 13. The counter-affidavit filed before this court - (dated November 7, 2020) has been affirmed by Shri. Amit Jain S/o Shri. P. K. Jain, who-is described in the affidavit as 'Director of M/s. Mahagun Realtors (P.) Ltd., R/o...'."" 28. It was on the aforesaid set of facts that it ultimately came to hold as under: "41. In the light of the facts, what is overwhelmingly evident - is that the amalgamation was kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferee company taking into account the income of both the transferor and transferee company." 42. Before concluding, this court notes and holds that whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case. 43. In view of the foregoing discussion and having regard to the facts of this case, this court is of the considered view, that the impugned order of the High Court cannot be sustained; it is set aside. Since the appeal of the Revenue against the order of the Commissioner of Income-tax was not heard on the merits, the matter is restored to the file of the Income-tax Appellate Tribunal, which shall proceed to hear the parties on the merits of the appeal - as well as the cross objections, on issues, other than the nullity of the assessment order, on merits. The appeal is allowed, in the above terms, without order on costs." 29. As is apparent from the aforesaid extracts, what appears to have weighed upon the Supreme Court in M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s error continued to obtain, even after the Dispute Resolution Panel had made course correction. 25. Thus, for the foregoing reasons, we are unable to persuade ourselves with the contention advanced on behalf of the appellant Revenue, that this is a mistake which can be corrected, by taking recourse to the powers available with the Revenue under section 292B of the Act." 31. We thus find ourselves unable to read Mahagun Realtors as a decision which may have either diluted or struck a discordant chord with the principles which came to be enunciated in Maruti Suzuki. We also bear in mind the indisputable position of both judgments having been rendered by co-equal Benches of the Supreme Court. Mahagun Realtors is ultimately liable to be appreciated bearing in mind the peculiar facts of that case including the conduct of the assessee therein. It was those facets which appear to have weighed upon the Supreme Court to hold against the assessee. 32. In view of the aforesaid, the position in law appears to be well-settled that a notice or proceedings drawn against a dissolved company or one which no longer exists in law would invalidate proceedings beyond repair. Maruti Suzuki conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. 160. - Assessment proceedings, etc., not to be invalid on certain grounds.- (1) No assessment, re-assessment, adjudication, review, revision, appeal, rectification, notice, summons or other proceedings done, accepted, made, issued, initiated, or purported to have been done, accepted, made, issued, initiated in pursuance of any of the provisions of this Act shall be invalid or deemed to be invalid merely by reason of any mistake, defect or omission therein, if such assessment, re-assessment, adjudication, review, revision, appeal, rectification, notice, summons or other proceedings are in substance and effect in conformity with or according to the intents, purposes or requirements of this Act or any existing law. (2) The service of any notice, order or communic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved, for the purposes of the CGST Act, the two entities would be treated as a distinct companies for the period up to the date of the order of the competent court or tribunal approving the scheme and the registration certificate of the companies being cancelled. 17. We thus find ourselves unable to read Section 87 as enabling the respondents to either continue to place a non-existent entity on notice or for that matter to pass an order of assessment referable to Section 73 against such an entity. In fact, in terms of Section 87, the liabilities of the non-existent company would in any case stand transposed to be borne by the amalgamated entity. This is, therefore, not a case where the Revenue would stand to lose or be deprived of their right to subject transactions to tax. 18. In our considered opinion, the principles that we had identified in International Hospital albeit in the context of the IT Act would equally apply to the CGST Act. 19. Accordingly, and for all the aforesaid reasons, we allow the instant writ petition and quash the impugned SCN dated 3 December 2023 as well as the impugned order dated 27 April 2024. 20. We leave it open to the respondents to draw such proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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