Moonlight Equity (P.) Ltd. Vs Union of India (Delhi High Court)
Delhi High Court held that initiation of re-assessment proceedings under section 148 of the Income Tax Act against merged company is invalid as company is dissolved after Scheme of Arrangement. Thus, writ petition is allowed and notice/ order quashed.
Facts- The present writ petition impugns the notice dated 27 July 2022 issued under Section 148 of the Income Tax Act, 1961 and pertaining to Assessment Year 2014-15.
The challenge, which is principally mounted, is based on our decision in International Hospitals Limited. vs. DCIT Circle 12(2) and proceeds on the ground that the order under Section 148A(d) as well as the consequential notice under Section 148, have come to be framed in the name of a transferor entity and which had clearly ceased to exist on the relevant date.
Conclusion- Supreme Court in Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki (India) Limited and Principal Commissioner of Income Tax (Central)-2 vs. Mahagun Realtors (P) Ltd. has held that the assessees clearly appear to have apprised their respective AOs of the factum of amalgamation and merger at the first available instance. If the respondents chose to ignore or acknowledge those fundamental changes, they would have to bear the consequences which would follow. Once the Scheme came to be approved, the transferor companies came to be dissolved by operation of law. They, thus, ceased to exist in the eyes of law. Proceedings thus drawn in their name would be a nullity and cannot be validated by resort to Section 292B of the Act.
