Case Law Details
Case Name : CIT Vs Micron Steel Pvt. Ltd. & M/s Steels Pvt. Ltd. (Delhi High Court)
Appeal Number : ITA No. 19/2014 & ITA Nos. 21-24/2014
Date of Judgement/Order : 11/02/2015
Related Assessment Year :
Courts :
All High Courts Delhi High Court
Issue before Court:
Whether assessment framed in the name of assessee who had amalgamated in other entity is liable to be void for the relevant period for which assessment was made.
Brief facts:
- During a search & seizure operation AO found some seized material related to assessee and accordingly he issued notice to the assessee. By that assessee had been amalgamated with some other entity.
- But assessee on the basis of seized material made various additions in the name of assessee.
- On appeal CIT (A) set aside the assessment order on account of various judicial pronouncement and held that AO was in knowledge of amalgamation of assessee into another entity and hence assessment framed were unsustainable.
Contention of the revenue:
- Besides the facts of knowledge of amalgamation AO noticed that assessee participated in the assessment proceedings and under the purview of section 292 B assessee was precluded from any nullity of assessment framed.
Contention of the assessee:
- The income tax authorities were under a duty, upon receipt of information, to initiate complete proceedings against the transferee company which they had not done.
- Issuance of notice u/s 153C against a non-existent company is bad in law and invoking provision of section 292 B is not applicable in case that company.
Held by the Court:
- Hon’ble Delhi Court in the matter Spice Entertainment (ITA no. 475/2011) give finding on the proposition that completion of assessment in respect of a non-existent company due to the amalgamation would result assessment in the name and in respect of the original assessee company, a nullity.
- The Court further held that a jurisdictional defect such as nullity shakes the entire proceedings and does not render the order a mere irregularity. For this purpose the Court has relied upon CIT vs. Norton Motors 275 ITR 595.
Conclusion: A company ceases to exist after amalgamation. Thus, assessment upon a dissolved company is impermissible as there is no provision in Income Tax Act to make an assessment thereupon.
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OFFHAND
Perforce being driven to think aloud:
In the cited case, as understood, the amalgamated and amalgamating companies are, per one’s understanding, Indian companies; and the fact of amalgamation has admittedly been within the knowledge of the Department / the concerned AO.
More than one intriguing point of doubt/ grave concern arise: Had the facts been different, e.g.,-
(i) amalgamation is of 2 foreign entities, one of which has o/s tax liability, finally determined or otherwise, or
(ii) in any other type of ‘succession’ as envisaged in the extant provisions of the Act, but the fact of succession is not known or happens to escape attention, and /or comes to be known not until after the expiry of the time limit for the department initiating any action/proceedings,-
is there any provision of law to which the Revenue can have recourse ?
Perhaps, tax pundits at large, more so in active practice may have, if familiar with such exigencies, a satisfactory solution to offer; of course, for a change and betterment, but in the righteous interests of the Revenue!
Disclaimer: So far as is seen, there appears to be no possible clear-cut answer or solution; should, however,it be otherwise,self open/remain to be enlightened!