Case Law Details
Adani Estate Management Private Limited Vs ITO (Gujarat High Court)
Gujarat High Court held that if the company has ceased to exist as a result of the approved scheme of amalgamation then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction.
Facts- The petitioner is a private limited company and its majority of the ultimate shareholders are the individuals, who are the citizens of India.
Notably, the Court vide order dated 28.01.2016, approved the scheme of amalgamation of one Panchdhara Agro Farms Pvt. Ltd. with the petitioner-Company, i.e. Shantigram Estate Management Pvt. Ltd. with effect from 01.04.2015, i.e. the appointed date. The petitioner informed the concerned Assessing Officer about the same vide communication dated 31.03.2016.
Thereafter, the Respondent issued a notice, u/s. 133 (6) of the Income Tax Act, 1961 on 24.01.2020. The petitioner filed its objections to the same vide letter dated 13.01.2022. It is the case of the petitioner that the notice dated 27.03.2021 issued to it, under Section 148 of the Act, is bad and illegal and the same deserves to be quashed. Hence, the present petition is filed.
Conclusion-The Apex Court in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited has categorically held that if the company has ceased to exist as a result of the approved scheme of amalgamation then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. It is also held that upon the amalgamating entity ceasing to exist, it cannot be regarded as a person under subsection (31) of section 2 of the Act; against whom assessment proceedings can be initiated. The Apex Court has further held that participation by the amalgamated company in the proceedings would be of no effect as there is no estoppel against law.
In the result, this petition is ALLOWED and the impugned notice, Dated: 27.03.2016, issued under Section 148 of the Act to the erstwhile Panchdhara Agro Farms Pvt. Ltd. is quashed and set aside.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Since, the issue involved in this matter involves the short question of law, learned Advocates for the parties jointly requested that this matter be taken-up for final hearing, at the admission stage.
2. By way of this petition, filed under Article 226 of the Constitution of India, the petitioner has sought the following reliefs;
“7. …
A. quash and e set aside the impugned notice dated 27.03.2021 issued by the Respondent under section 148 of the Income Tax Act, 1961 for the Assessment Year 2016-17 at Annexure ‘A’;
B. Pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure A to this petition and stay further procedure for assessment and recovery for A.Y. 201617;
C. any other and further relief deemed just and proper be granted in the interest of justice;
D. to provide for the costs of this petition;”
3. Heard, learned Advocate, Mr. Soparkar, appearing for the petitioner and learned Advocate, Mr. Sangani, appearing with learned Advocate, Ms. Raval, for the Respondent.
4. Learned Advocate, Mr. Soparkar, appearing for the petitioner submitted that the petitioner is a private limited company and its majority of the ultimate shareholders are the individuals, who are the citizens of India.
4.1 It was submitted that this Court vide order dated 28.01.2016, approved the scheme of amalgamation of one Panchdhara Agro Farms Pvt. Ltd. with the petitioner-Company, i.e. Shantigram Estate Management Pvt. Ltd. with effect from 01.04.2015, i.e. the appointed date.
4.2 It was pointed out from the record that the petitioner informed the concerned Assessing Officer about the same vide communication dated 31.03.2016.
4.3 It was averred that in spite of the above, the Respondent issued a notice, under Section 133 (6) of the Income Tax Act, 1961 (in brief, ‘the Act’), on 24.01.2020.
4.4 The petitioner replied to the same vide communication dated 17.02.2020, wherein, the details, with regard to the fact of merger having taken place, were given. Though, this was pointed out to the concerned assessing officer, the notice, under Section 148 of the Act, came to be issued to the petitioner on 27.03.2021 and the reasons for reopening were supplied vide communication dated 29.12.2021.
4.5 The petitioner filed its objections to the same vide letter dated 13.01.2022.
4.6 It is the case of the petitioner that the notice dated 27.03.2021 issued to it, under Section 148 of the Act, is bad and illegal and the same deserves to be quashed. Hence, the present petition is filed.
5. Learned Advocate, Mr. Soparkar, submitted that, though, the aspect of merger was brought to the notice of the concerned assessing officer, the notice, under Section 148 of the Act, came to be issued to the petitioner on 27.03.2021, which is unjust and illegal.
5.1 In support of his submission, learned Advocate, Mr. Soparkar, placed reliance on the decision of the Hon’ble Apex Court, rendered in the case of ‘PRINCIPAL COMMISSIONER OF INCOME TAX VS. MARUTI SUZUKI LTD.’, reported in 416 ITR 613(SC).
5.2 Learned Advocate, Mr. Soparkar, also placed reliance on the decision of this Court in the case of ‘ADANI WILMAR LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX’, reported in 150 taxmann.com 178 (Gujarat).
5.3 By referred to the aforesaid decisions, it was submitted that the issue involved in this matter is squarely covered by the same.
6. On the other hand, learned Advocate, Mr. Sangani, appearing with learned Advocate, Ms. Raval, for the Respondent, though, opposed this petition, he is not in a position to dispute the fact that the issue involved in this matter is covered by the aforesaid two decisions.
7. Having heard the learned Advocates for the parties and having perused the material on record, it emerges that one Panchdhara Agro Farms Pvt. Ltd. came to be merged with Shantigram Estate Management Pvt. Ltd., i.e. the petitioner-Company, with effect from 01.04.2015 and the same was approved by this Court vide order dated 28.01.2016.
7.1 From the record, it also emerges that pursuant to the above, the petitioner had also intimated the concerned assessing officer of the respondent about the same vide communication dated 31.03.2016. A copy of the same is produced at Page-13 to the compilation. In spite of the same, a notice, under Section 148 of the Act, came to be issued to the erstwhile Panchdhara Agro Farms Pvt. Ltd..
7.2 In above view of the matter, it would be relevant to refer to the observations made by this Court in ‘ADANI WILMAR LTD.’ (Supra), wherein, after referring to the decision of the Apex Court ‘PRINCIPAL COMMISSIONER OF INCOME TAX VS. MARUTI SUZUKI LTD.’ in (Supra), this Court observed as under at Paragraphs-5 and 6, thereof;
“5. It is urged before this Court that this group of other such matters in relation to the another company – Kunvarji Fincorp Pvt. Ltd. for other assessment years have been decided in Special Civil Application No.935 of 2022 and allied matters on 06.02.2023 and on the reasoning mutatis mutandis applied to case of the present matter, where the Court has referred order passed in Special Civil Application No.903 of 2022 dated 16.01.2023 and reproduced relevant portion as under:-
“10. Noticing thus the submission of both the sides and the materials on record, it is not requiring much of debate that in the instant case, this Court on 05.08.2016 after following the requisite procedure which also includes giving of notice to the Income-tax Department, has chosen to decide the plea of amalgamation and approved the Scheme of Amalgamation in the interest of shareholders, creditors and has also taken note of the public interest. This decision had been intimated by the present petitioner and reply to the notice under Section-142(1) of the Incometax Act for the A.Y.2016-17, not only, it had specified that it has required the two companies i.e.M/s. Kaizen Stocktrade Pvt. Ltd. [PAN: AADCK0048A] and Kaizen Finstock Pvt. Ltd. [PAN: AAECK6956E] and this communication addressed to Circle 2(1)(2) provides for order of the Court dated 31 st August, 2016.
11. In absence of any particular format for intimating the authority concerned, this intimation on the part of the petitioner is sufficient intimation to the department. We need to make also a note of the fact that the notice, which is impugned in the present petition is issued by the Officer Circle 2(1)(1).
12. The Apex court in the case of Principal CIT Vs. Maruti Suzuki Ltd. (Supra) had noted that the Assessing Officer was informed of the amalgamating company having ceased to exist as a result of the approved Scheme of Amalgamation. The Court has held that the legal principle provides that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. This Court in the case of Gayatri Microns Ltd. Vs. Assistant Commissioner of Income-tax was considering the the case of issuance of notice under Section-148 to one of the three transferee companies for reopening the assessment. The Court considered whether the transferor company had ceased to exist as a result of the approved Scheme of Amalgamation. Answering that in the affirmation has held that in such case, the notice issued under Section-148 in its name would be fundamentally illegal and without jurisdiction.
8. Concededly, in the present case the notice under section 148 of the Act has been issued to Gayatri Integrated Services Private Limited which, as aforesaid, had long back got amalgamated with the petitioner vide order dated 18th June, 2015 passed by this court and thus, it had ceased to have its own existence so as to render it amenable for the reassessment proceedings under the provisions of section 147 of the Act. Moreover, the respondent and the department were duly informed by the petitioner about the amalgamation and despite the said factum having been brought to the notice of the respondent, statutory notice under section 148 came to be issued to Gayatri Integrated Services Private Limited for reopening the assessment on the ground that the respondent has reason to believe that income chargeable to tax for the assessment year 2012-13 has escaped the assessment within the meaning of section 147 of the Act.
9. The controversy in the present petition, is no longer res integra. The Apex Court in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited (supra), in paragraph 33, has categorically held that if the company has ceased to exist as a result of the approved scheme of amalgamation then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. It is also held that upon the amalgamating entity ceasing to exist, it cannot be regarded as a person under subsection (31) of section 2 of the Act; against whom assessment proceedings can be initiated. The Apex Court has further held that participation by the amalgamated company in the proceedings would be of no effect as there is no estoppel against law.
10. Similarly, this court, in the judgment in the case of Dharamnath Shares and Services (P) Ltd. (supra) while referring to its earlier decision in the case of Khurana Engineering Limited (supra) held that once the assessee company gets amalgamated with the transferee company, its independent existence does not survive and therefore it would no longer be amenable to the assessment proceedings. Thus, it is well settled proposition of law that upon its amalgamation the transferor company ceases to exist and becomes extinct, and it would no longer be amenable to the assessment proceedings considering the fact that the extinct entity would not be covered within the ambit of the provisions of the Act.
13. The Supreme Court in the case of Principal Commissioner of Income-tax Vs. Mahagun Realtors (P.) Ltd. was considering the case for the A.Y.2006-07, where there was no intimation regarding amalgamation of the company. The return of income was filed by the assessee on 30.06.2006 in the name of MRPL and MRPL amalgamated with MIPL on 11.05.2007, w.e.f. 01.04.2006. The proceedings against MRPL stated in 27.08.2008 – when search and seizure was first conducted on assessee group of companies. Notices under Section 153A and Section 143(2) were issued in the name of MRPL and the representative from MRPL corresponded with the revenue in the name of MRPL. The assessee filed its return of income in the name of MRPL in May, 2010 and in the ‘Business Reorganization’ column of the form mentioned ‘not applicable’ in amalgamation section. It had contended that the intimation was sent to the revenue on 22.07.2010. The same was for the A.Y.2007-08 and not for the A.Y.2006-07. The separate proceedings under Section 153A were initiated against MIPL for A.Y.2007-8 to 2008-09 and the proceedings against MRPL for those two assessment years were quashed by the Commissioner as the amalgamation was disclosed.
Since the amalgamation was known to the assessee, even at the stage when the search and seizure operations have taken place and statements were recorded by the revenue of the Directors and Managing Director of the group. A return was filed, pursuant to notice, which also suppressed the factum of amalgamation; on the contrary, the return was filed by MRPL – the company which has ceased to be in existence, and yet, the appeals were filed on behalf of it before the Commissioner and a cross appeal was filed before the Tribunal. An affidavit before the court was also on behalf of the Director of MRPL and the assessment order had attributed the specific amounts surrendered by MRPL and that too, after considering the special auditor’s report, bringing specific amounts to tax in the search assessment order.
14. All these according to the Court indicated that the order adopted a particular method of expressing the liability and it opined that the conduct of the assessee commencing from the date the search took place, and before all forums, reflected that it consistently held itself out as the assessee. It was held that the corporate death of an entity upon amalgamation per-se invalidate the assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, but, would depend on the terms of the amalgamation and the facts of each case. In light of this, the order of the High Court was not sustained and as the appeal of the revenue against the order of the Commissioner was not heard on merits, the Court had restored the matter on the file of Tribunal. While so holding the Court had taken note of decision of Principal CIT Vs. Maruti Suzuki Ltd. to hold thus:-
“31. In Maruti Suzuki (supra), the scheme of amalgamation was approved on 29.01.2013 w.e.f. 01.04.2012, the same was intimated to the AO on 02.04.2013, and the notice under Section 143(2) for AY 2012-13 was issued to amalgamating company on 26.09.2013. This court in facts and circumstances observed the following:
“35. 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 292B.
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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 20112012. 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 in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. 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.”
32. The court, undoubtedly noticed Saraswati Syndicate Further, the judgment in Spice (supra) and other line of decisions, culminating in this court’s order, approving those judgments, was also noticed. Yet, the legislative change, by way of introduction of Section 2(1A), defining “amalgamation” was not taken into account. Further, the tax treatment in the various provisions of the Act were not brought to the notice of this court, in the previous decisions.
33. There is no doubt that MRPL amalgamated with MIPL and ceased to exist thereafter; this is an established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to contend that the notice issued in the name of the amalgamating company is void and illegal. The facts of present case, however, can be distinguished from the facts in Spice and Maruti Suzuki on the following bases.
15. It is to be noticed that the Court specifically had held that the MRPL amalgamated with MIPL and ceased to exist thereafter. The contention of the respondent that the notice issued in the name of amalgamating company being void and illegal relying on the Spice and Maruti Suzuki (supra) was not sustained only on the robot facts which had been presented before this Court holding that can be distinguished from the facts existed in those matters.
16. According to this Court, the facts applicable to the present case are those which existed in case of Maruti Suzuki and not as were before the Apex Court in case of Mahagun Realtors (P.) Ltd. (Supra). Here of-course, the intimation was given in reply to the notice under Section142 in the month of March, 2018 by specifically intimating to the concerned officer of the factum of amalgamation by the petitioner and of its having acquired both the companies viz.Kaizen Stocktrade Pvt. Ltd. and Kaizen Finstock Pvt. Ltd. Again, it is the very officer who after three years of such amalgamation has issued notice which is impugned in the name of that company, which no longer existed on 30.03.2021 for the A.Y. 2016-17 and therefore, the grievance on the part of the petitioner requires to be sustained and the action of the respondent authority warrants interference.
17. We are conscious of the fact that the Income-tax Department had already been issued the notice by this Court at the time of considering the request for approving the scheme of amalgamation, however, that would in no manner absolve any party of its obligation to intimate the final order of amalgamation, as is otherwise expected under the law. The statute since has not provided any format nor has any specified format otherwise prescribed this intimation in response to the notice under Section-142 of the Income Tax Act should be construed as a sufficient compliance and hence, all the petitions deserve to be allowed, quashing and setting aside the show-cause notices with consequential reliefs.
This of-course in no manner preclude the respondent to initiate the action against the present petitioner in accordance with law. The petition stands disposed of in above terms.”
6. The Court has already decided issue involved in this petition, in similar facts in Special Civil Application No.935 of 2022 and allied matters. Thus, the petition here also is allowed. The actions of the respondent – authority regarding issuance of notice under Section-148 deserves to be interfered with. The show-cause notices issued by the respondents are quashed and set aside with consequential reliefs. This could not in any manner preclude the respondents to initiate the action against the present petitioners in accordance with law.”
7.3 Keeping in view the observations made in the decisions of the Hon’ble Apex Court as well as of this Court, this petition deserves to be allowed.
8. In the result, this petition is ALLOWED and the impugned notice, Dated: 27.03.2016, issued under Section 148 of the Act to the erstwhile Panchdhara Agro Farms Pvt. Ltd. is quashed and set aside. Rule is made absolute to the aforesaid extent.
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