Dr Reddy’s Laboratories Limited Vs ACIT (Telangana High Court)
Summary: The Telangana High Court allowed the writ petition filed by M/s Dr Reddy’s Laboratories Limited challenging a notice issued under Section 148 of the Income Tax Act, 1961 in the name of Dr. Reddy’s Holdings Limited, an entity which had ceased to exist following its merger with the petitioner. The NCLT had sanctioned the merger by order dated 05.04.2022 with effect from 01.04.2019. Despite the merger and the petitioner having intimated the Income Tax Department about the same, the impugned notice dated 27.06.2026 relating to Assessment Year 2022-23 continued to be issued in the name of Dr. Reddy’s Holdings Limited.
The petitioner submitted that from the commencement of the proceedings it had appeared before the authorities and repeatedly informed them that Dr. Reddy’s Holdings Limited had ceased to exist consequent upon the merger. The Revenue submitted that replies furnished by the petitioner appeared to have been issued in the name of the non-existing entity, which perhaps resulted in the Section 148 notice being issued in that name. On examining the documents, however, the High Court observed that the replies to the notices had actually been signed by officers of the petitioner and not by officers of Dr. Reddy’s Holdings Limited. The Court further recorded that there was no dispute regarding the NCLT order accepting the merger, its effective date of 01.04.2019, or the intimation of the merger given by the petitioner to the Revenue authorities.
In view of this admitted factual position, the High Court held that the impugned notice under Section 148 dated 27.06.2026 for Assessment Year 2022-23, having been issued against a non-existing entity, was not sustainable in law. The notice was accordingly set aside/quashed. At the same time, the Court expressly reserved the respondents’ right to initiate appropriate proceedings, if so advised, in accordance with law. The writ petition was allowed, pending miscellaneous petitions were closed, and no order as to costs was made.
FULL TEXT OF THE ORDER OF TELANGANA HIGH COURT
Heard Mr. Chidambaram S.P., learned counsel representing Mr. Venkatram Reddy Mantur, learned counsel for the petitioner, and Mr. K. Sudhakar Reddy, learned Senior Standing Counsel for the Income Tax Department, appearing for the respondents. Perused the record.
2. With the consent of both parties, this writ petition is being disposed of at the admission stage.
3. The challenge in the present writ petition is to the notice issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), in the name of Dr. Reddy’s Holdings Limited, an entity which subsequently merged with the petitioner pursuant to proceedings before the National Company Law Tribunal (hereinafter referred to as ‘the NCLT’). The NCLT, vide its order dated 05.04.2022, sanctioned the merger with effect from 01.04.2019. Subsequent to the merger, it is the petitioner which is carrying on the business.
4. In the meantime, however, the notice under Section 148 of the Act has been issued against Dr. Reddy’s Holdings Limited, which, in fact, ceased to exist pursuant to the merger proceedings and the order of the NCLT dated 05.04.2022.
5. Learned counsel for the petitioner submits that, right from the time when the initial proceedings were initiated and the notices were issued by the respondent authorities in the name of Dr. Reddy’s Holdings Limited, the petitioner has been appearing before the authorities and has repeatedly brought to their notice the merger that had taken place, as a consequence of which Dr. Reddy’s Holdings Limited ceased to exist. It is submitted that, subsequent to the merger, it is only the present petitioner which is carrying on the business. Despite the same, the notices issued by the respondents continue to be in the name of a non-existing entity, namely, Dr. Reddy’s Holdings Limited.
6. Learned Senior Standing Counsel for the Income Tax Department, however, submits that the reply furnished by the petitioner appears to have been issued in the name of the non-existing entity, i.e., Dr. Reddy’s Holdings Limited, and perhaps that has led to the issuance of the notice under Section 148 of the Act in the same name. However, upon scrutiny of the documents, it would appear that the replies to each of the notices were, in fact, signed by the officers of the petitioner and not by the officers of the non-existing entity, i.e., Dr. Reddy’s Holdings Limited.
7. There does not appear to be any dispute insofar as the proceedings before the NCLT are concerned, wherein the order dated 05.04.2022 was passed accepting the merger and recording the effective date of merger as 01.04.2019. There also does not appear to be any dispute with regard to the intimation given by the petitioner to the respondent authorities about the merger and the fact that, subsequent thereto, the business has been carried on by the petitioner and not by Dr. Reddy’s Holdings Limited.
8. In view of the admitted factual matrix of the case, we are of the considered opinion that the impugned notice under Section 148 of the Act, dated 27.06.2026, pertaining to the assessment year 2022-23, being Annexure P-1, having been issued against a non-existing entity, is not sustainable in law. The same, therefore, deserves to be and is accordingly set aside/quashed.
9. Nonetheless, the right of the respondents is reserved to initiate appropriate proceedings, if so advised, in accordance with law.
10. Accordingly, the writ petition stands allowed.
As a sequel, miscellaneous petitions, if any pending, shall stand closed. There shall be no order as to costs.
