DCIT Vs Reliance Industries Limited (Supreme Court of India)
Summary: The Supreme Court dismissed the Special Leave Petitions filed by the Revenue in the dispute concerning income-tax assessments originally made in the names of Reliance Polyethylene Limited (RPEL) and Reliance Polypropylene Limited (RPPL), which had amalgamated with Reliance Industries Limited (RIL). The Court condoned the delay and recorded the statement of counsel for RIL that, following the Bombay High Court’s decision, the Revenue had issued a fresh notice dated 17 July 2025. In view of this subsequent development, the Supreme Court found no reason to entertain the Special Leave Petitions and dismissed them. The Court also noted that RIL had challenged the fresh notice through a writ petition under Article 226 of the Constitution. It expressly left the Revenue free to raise all objections, including questions of law and fact, in that writ proceeding, with the High Court to decide the matter in accordance with law. The Supreme Court did not independently adjudicate the validity of the fresh notice or provide a separate substantive determination of the amalgamation-assessment issue.
Read HC Judgment in this case: Income Tax Assessments on Amalgamated Companies Void Where AO Knew of Merger: Bombay HC
The underlying Bombay High Court judgment concerned assessments for AYs 1993-94, 1994-95 and 1995-96 made against RPEL and RPPL after their amalgamation with RIL, approved on 11 January 1995 with effect from 1 January 1995. The High Court permitted RIL to raise an additional jurisdictional question at the final hearing under Section 260A and admitted relevant additional evidence under Order XLI Rule 27 of the Code of Civil Procedure. It examined the Revenue’s knowledge of the merger separately for each assessment year. For AY 1993-94, a letter dated 9 October 1995 and computation-related documents preceded the assessment orders dated 18 March 1996. For AY 1994-95, the Court relied on documents including a refund adjustment intimation dated 17 December 1996, preceding the assessments dated 27 March 1997. For AY 1995-96, the assessment orders dated 27 February 1998 themselves acknowledged the amalgamation. The High Court consequently found that the Assessing Officer had knowledge of the merger before issuing the assessments in the names of the erstwhile companies.
Applying the Supreme Court’s decision in PCIT v. Maruti Suzuki India Ltd. and distinguishing PCIT v. Mahagun Realtors (P) Ltd. on its facts, the Bombay High Court held that the assessments made in the names of RPEL and RPPL, despite the Assessing Officer’s knowledge that those companies had ceased to exist, were void ab initio. It allowed RIL’s six appeals, quashed the relevant assessments and consequential appellate proceedings, and treated the Revenue’s two appeals and RIL’s Writ Petition No. 772 of 1999 as infructuous. Importantly, the High Court expressly clarified that its decision did not prevent the Revenue from initiating fresh proceedings against the amalgamated company, RIL, in accordance with law. It did not decide the originally admitted questions concerning the merits of the additions. The Supreme Court’s subsequent dismissal of the Special Leave Petitions must therefore be understood in light of the fresh notice and pending writ proceedings, rather than described as a separate merits judgment approving every aspect of the High Court’s reasoning.
Legal Analysis
Jurisdictional defect: The Bombay High Court treated assessment in the name of an amalgamating company that had ceased to exist, despite the Assessing Officer’s knowledge of the amalgamation, as a defect going to the root of jurisdiction. RIL’s participation in the assessment and appellate proceedings did not cure that defect on the facts found by the Court.
Distinction between the precedents: The High Court considered the circumstances examined in Maruti Suzuki and Mahagun Realtors. It distinguished Mahagun Realtors because, in that case, the conduct and disclosures of the amalgamating company were materially different. In the Reliance dispute, the High Court found affirmative evidence that the Revenue already knew of the amalgamation before passing the disputed assessments. The High Court applied Maruti Suzuki on that factual basis; the Supreme Court’s later short order in the present matter did not undertake a fresh comparison of those precedents.
Additional evidence: The High Court admitted inter-party documents and Revenue-generated records under Order XLI Rule 27, read with Section 260A(7), because they were necessary to determine the Assessing Officer’s knowledge of the amalgamation. Their existence and contents were not disputed. This evidentiary finding formed an important part of the High Court’s jurisdictional conclusion.
Scope of relief: The High Court invalidated the assessments made against the erstwhile companies, but did not grant immunity from lawful assessment of the amalgamated company. It expressly preserved the Revenue’s ability to proceed against RIL in accordance with law. Whether the fresh notice dated 17 July 2025 is sustainable was not decided by the Supreme Court and remains a matter for the High Court in the separately instituted writ proceedings.
Effect of the Supreme Court order: The Special Leave Petitions were dismissed because the Revenue had already issued a fresh notice after the High Court judgment. The Supreme Court did not set aside the High Court’s judgment, but its short order should not be presented as a reasoned merits ruling independently establishing the validity or invalidity of assessments against amalgamated entities in all circumstances.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. We are informed by learned counsel for the respondent that pursuant to the decision of the High Court, the petitioner/revenue has issued fresh notice on 17.07.2025. In this view of the matter, we see no reason to entertain the present Special Leave Petitions and are, accordingly, dismissed.
3. We are informed by Mr. S. Dwarakanath, learned A.S.G. that the respondent has in fact challenged the said notice dated 17.07.2025 by filing a writ petition under Article 226 of the Constitution of India. Needless to say, that the petitioner/revenue will be entitled to raise all objections, including questions of law and fact in opposition to the writ petition. It is for the High Court to consider the same and dispose it of in accordance with law.
4. Pending application(s), if any, shall stand disposed of.
