SMS India Private Limited Vs Assessment Unit Income Tax Department (Delhi High Court)
The Delhi High Court set aside a draft assessment order issued under Section 144C(1) of the Income-tax Act, 1961, holding that an assessment initiated and continued in the name of a company that had ceased to exist due to amalgamation is void ab initio. The writ petition challenged a draft assessment order dated 05 March 2025 for Assessment Year 2022–23, which had been issued in the name of Paul Wurth India Private Limited, a company that had amalgamated with SMS India Private Limited with effect from 01 April 2021. The petitioner contended that the assessment proceedings were initiated on 01 June 2023, long after the amalgamation had taken effect, and were therefore fundamentally invalid. It was further pointed out that the draft assessment order was issued using the PAN of the amalgamating company, which no longer existed in law.
Reliance was placed on the judgment of the Supreme Court in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd., wherein it was held that assessment proceedings initiated against a non-existent entity following amalgamation constitute a substantive illegality and are not curable under Section 292B of the Act. The Supreme Court had clarified that once a scheme of amalgamation is approved, the amalgamating entity ceases to exist, and any jurisdictional notice or assessment issued in its name is legally untenable. Participation in assessment proceedings by the successor entity does not validate such proceedings or operate as an estoppel against law. The High Court noted that this principle has consistently been followed, including in cases such as Spice Infotainment Ltd., and emphasised the importance of certainty and consistency in tax litigation.
