Case Law Details
Uber India Systems Private Limited Vs Assistant Commissioner of Income & Ors. (Bombay High Court)
Bombay High Court quashed an income tax notice issued to Uber India Research and Development Private Limited, an entity that ceased to exist following its amalgamation with Uber India Systems Private Limited. The court held that issuing a notice to a non-existent company is legally untenable. The amalgamation was approved by the National Company Law Tribunal (NCLT) on November 1, 2023, and was effective from April 1, 2022. Despite being informed of this development in December 2023, the Income Tax Department issued a notice under Section 148A(b) of the Income Tax Act on March 31, 2024, seeking to reassess the company’s tax liabilities for the Assessment Year 2017-18. The petitioner objected to the notice on the grounds that it was issued to an entity that no longer existed, but the objections were rejected by the tax authorities, leading to further legal proceedings.
The court relied on precedents, including Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd. and Teleperformance Global Services (P.) Ltd. v. Assistant Commissioner of Income Tax, to reinforce the principle that tax notices issued to non-existent entities are invalid. The court also addressed jurisdictional concerns, concluding that since the petitioner received the notice in Mumbai, a part of the cause of action arose within the court’s jurisdiction. Ultimately, the court ruled that the notice was illegal and non-est (void from the outset), making the rule absolute in favor of the petitioner. However, it clarified that its decision was limited to the validity of the notice and did not adjudicate other potential tax liabilities of the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule returnable forthwith. Respondents waive service. As a short issue on law is involved, by consent of the parties, taken up for final disposal at the admission stage.
2. One Uber India Research and Development Private Limited stood amalgamated with the Petitioner by virtue of an Order dated 1 November 2023 passed by the National Company Law Tribunal (NCLT), approving a scheme of Such order is placed on record at Exhibit-S to this Petition.
3. The present proceedings concern, the amalgamating company, Uber India Research and Development Private Limited (for short “the Assessee”), which has become a non-existent company by virtue of its amalgamation with the Petitioner.
4. It is the Petitioner’s case that the fact of amalgamation of the assessee was intimated to Respondent 1 as also to Respondent No.3 by a communication dated 22 December 2023, which was received by the said Respondents on 27 December 2023. The amalgamation took effect from 01 April 2022. The Petitioner contends that, despite such intimation, Respondent No.1 issued a notice dated 31 March 2024 to the assessee, under Section 148A(b) of the Income Tax Act, 1961 (for short “the Act”), for the Assessment Year 2017-18, inter alia recording that Respondent No.1 had information which suggested that income chargeable to tax for the said Assessment Year had escaped assessment within the meaning of Section 147 of the Act. Such notice was served on the Petitioner calling upon the assessee to show cause, on the basis of materials enclosed to the said notice, as to why a notice under Section 148 of the Act be not issued to the assessee.
5. The Petitioner, by its letter dated 8 April 2024, replied to the said show cause notice inter alia pointing out that the notice was not maintainable on the primary ground that the same was issued to a non existent entity stating that the fact of which was already intimated to Respondent 1. The Petitioner opposed the notice on other grounds which, in our opinion, need not be discussed, considering the view we intend to take. It so transpired that Respondent No.1, considering such objections raised by the Petitioner, proceeded to pass an Order dated 10 April 2024, under Section 148A(d) of the Act, rejecting the Petitioner’s objections, and on the even date issued a notice under Section 148 of the Act, which is the subject matter of challenge in this Petition.
6. After issuance of the impugned notice under Section 148, the Petitioner addressed a letter dated 6 May 2024 to Respondent 1, raising objections against the said notice and pointing out the reasons as to why the proceedings cannot be taken forward, however there was no response to the Petitioner’s letters. It is at such stage the Petitioner has approached this Court by the present Petition inter alia praying for the following substantive reliefs :-
(a) that this Hon’ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, Order or direction, calling for the records of the Petitioner’s case and after going into the legality and propriety thereof, to quash and set aside the show cause notice issued u/s 148A(b) of the Act dated 03.2024 (“Exhibit T”), the impugned order dated 10.04.2024 passed under Section 148A( d) of the Act (“Exhibit V”) and the subsequent notice dated 10.04.2024 (“Exhibit W”) issued under Section 148 of the Act.
(b) This Hon’ble Court be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or direction, directing the Respondents, its servants, subordinates, agents and successors in office:
i. to forthwith withdraw and/or cancel the show cause notice issued u/s 148A(b) of the Act dated 03.2024 (“Exhibit T”), the impugned order dated 10.04.2024 passed under Section 148A(d) of the Act (“Exhibit V”) and the subsequent notice dated 10.04.2024 (“Exhibit W”) issued under Section 148 of the Act.
ii. to forthwith forbear from taking any steps whatsoever pursuant to or in implementation of the show cause notice issued u/s 148A(b) of the Act dated 03.2024 (“Exhibit T”), the impugned order dated 10.04.2024 passed under Section 148A(d) of the Act (“Exhibit V”) and the subsequent notice dated 10.04.2024 (“Exhibit W”) issued under Section 148 of the Act.
(c) that this Hon’ble Court be pleased to issue a writ of prohibition or a writ in the nature of prohibition or any other appropriate writ, order or direction under Article 226 of the Constitution of India prohibiting Respondents from taking any steps in furtherance of the show cause notice issued U/S 148A(b) of the Act dated 03.2024 (“Exhibit T”), the impugned order dated 10.04.2024 passed under Section 148A(d) of the Act (“Exhibit V”) and the subsequent notice dated 10.04.2024 (“Exhibit W”) issued under Section 148 of the Act.
7. We have heard Mistri, learned Senior Counsel for the Petitioner, and Mr. Sharma, learned Counsel for the Respondents. We have also perused the record.
8. Although Mistri has raised several contentions in assailing the impugned notice issued under Section 148 of the Act, his primary contention is that the impugned notice needs to be held invalid and illegal, primarily for the reason that the same has been issued to a non existent entity (Uber India Research and Development Private Limited). According to him, this is sufficient ground for the notice to be quashed and set aside and more particularly considering the settled position in law as laid down by the Supreme Court in the case of Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki India Ltd. 1 as also in a decision of this Court in Teleperformance Global Services (P.) Ltd. v. Assistant Commissioner of Income Tax, Central Circle 25(1), New Delhi2 Mr. Mistry relying on these decisions, would submit that it is an undisputed position that, in view of the Order passed by the National Company Law Tribunal, the scheme of amalgamation was approved, whereunder the Assessee – Uber India Research and Development Private Limited stood merged with the Petitioner, hence, the Assessee was a non existent entity. He submits that an intimation to this effect furnished to the Assessing Officer has not been taken into consideration before the impugned notice under Section 148 of the Act was issued by Respondent No.1.
9. On the other hand, Sharma, the learned Counsel for the Revenue, on instructions, would not dispute that the Assessee (Uber India Research and Development Private Limited) stood amalgamated with the Petitioner and therefore the assessee was a non-existing entity, so as to legally respond to the action being initiated by Respondent No.1, to reopen its assessment for the assessment year in question.
10. At the outset, we may observe that Respondent 1 is based at Hyderabad in the State of Telangana. Thus, at the outset, we address the issue as to whether this Court can exercise jurisdiction under Article 226 of the Constitution, when Respondent No.1, against whom the relief is sought, is not situated within the territorial jurisdiction of this Court. In this context, we may observe that it is not in dispute that, in the facts of the present case, although the impugned notice is issued to the assessee which is a non existent company, the same is served on the Petitioner, whose registered office is within the territorial jurisdiction of this Court, and who has received the impugned notice at Mumbai. It is the Petitioner which is required to defend such notice as served on it at Mumbai. The Petitioner is an Assessee within the jurisdiction of the Tax Authorities at Mumbai. In this situation, in our opinion, certainly a part of the cause of action, in terms of clause (2) of Article 226 of the Constitution of India, has arisen within the territorial jurisdiction of this Court, which, in our opinion, entitles the Petitioner to approach this Court invoking its jurisdiction under Article 226 of the Constitution, with a grievance of breach of its legal and constitutional rights. The position of law in this context is also considered and discussed in the decision of this Court in Teleperformance Global Services (P.) Ltd. (supra), which is aptly applicable to the case in hand. We are thus inclined to entertain this Petition, considering that a part cause of action has arisen within the territorial jurisdiction of this Court.
11. Now coming to the challenge to the impugned notice as raised by the Having perused the record as also the decisions as relied by Mr. Mistri, we are persuaded to accept Mr. Mistri’s contentions that Respondent No.1 could not have issued the impugned notices under section 148 A(b) and pass an order thereon under sub-section (d), as also issue notice under Section 148 of the Act to the assessee as it was a non-existent entity. In such context, Mr. Mistri’s reliance on the decision of the Supreme Court in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd.(supra) is apposite. In such decision the Supreme Court has held that once the amalgamating company had ceased to exist as a result of the scheme of amalgamation approved by the NCLT, there was no warrant in law for the Assessing Officer to proceed against a non-existent company. The relevant observations of the Supreme Court in the said decision are required to be noted which reads thus:-
33. 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 Enfotainment (supra) on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment (supra).
12. The decision of the Supreme Court in Maruti Suzuki India (supra) is followed by a Co-ordinate Bench of this Court to allow Teleperformance Global Services (P.) Ltd.(supra), the facts therein being identical to the case in hand. The relevant observations of this Court in the decision of Teleperformance Global Services (P.) Ltd. (supra) are required to be noted which read thus:-
“22. The Supreme Court in the case of Maruti Suzuki India Ltd. (supra) had considered that income, which was subject to be charged to tax for the assessment year 2012-13 was the income of erstwhile entity prior to amalgamation. Transferee had assumed liabilities of transferor company, including that of tax.The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under section 143(2) of the Act was issued on 26-9-2013, the scheme of amalgamation had been approved by the high court with effect from 1- 4-2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292(b) of the Act.The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Lid. v. CIT [1990] 53 Taxman 92/186 ITR 278. The Supreme Court has also referred to decision of Delhi high court in the case of CIT v. Spice Enfotainment Ltd. [2018] 12 ITR-OL 134 (SC) and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B. The Supreme Court had also taken note of decision in Spice Entertainment Ltd. (supra) was followed by Delhi high court in matters, viz. CIT v. Dimension Apparels (P.) Ltd. [2014].52 taxmann.com 356/[2015] 370 ITR 288, CIT v. Micron Steels (P.) Ltd. [2015] _59 taxmann.com 470/233 Taxman 120/372 ITR 386 (Mag.); CIT v. Micra India (P.) Ltd. [2015]_57 taxmann.com 163/231 Taxman 809 and in CIT v. Intel Technology India Ltd. [2016] 380 UTE 272 Karnataka high court has held, if a statutory notice is issued in the name of non-existing entity, entire assessment would be nullity in the eye of law. It has also been so held by Delhi high court in the case of Pr. CIT v. Nokia Solutions & Network India (P.) Ltd. [2018].90 taxmann.com 369/253 Taxman 409/402 ITR 21.
13. In the light of the above discussion, we are of the clear opinion that there was neither a legal basis nor jurisdiction with Respondent 1 to issue the impugned notice under Section 148 A(b) and pass an order thereon and further to issue the impugned notice under Section 148 to a non existing entity- “Uber India Research and Development Private Limited”. Such notices at the threshold were illegal, invalid and non-est.
14. In the light of the above discussion, the Petition needs to It is accordingly allowed in terms of prayer clause (a).
15. We however clarify that, except for what has been held hereinabove, we have not delved on any other issue on the entitlement of the Revenue and/or any of the rights and liabilities of the Petitioner, which are expressly kept open.
16. Rule is made absolute in the aforesaid No order as to costs.
Notes:
1 [2019] 107 taxmann.com 375 (SC),
2 [2021] 127 taxmann.com 46 (Bombay)
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