Vertiv Energy Pvt. Ltd. Vs ACIT (Bombay High Court)
Summary: The Bombay High Court, in Vertiv Energy Pvt. Ltd. Vs The Assistant Commissioner of Income Tax, Circle-3, Thane & Others, considered two writ petitions challenging income-tax reassessment proceedings for Assessment Years 2013-14 and 2014-15 initiated against a company that had ceased to exist following amalgamation. The petitioner, formerly known as Emerson Network Power (India) Pvt. Ltd., contended that its wholly owned subsidiary, Leroy Somer India Private Limited (LSIPL), had amalgamated with it under a scheme approved by the Delhi High Court on 19 November 2013, with effect from 1 April 2012. The amalgamation was communicated to the Assessing Officer through a letter dated 28 November 2013 and was also disclosed in the notes to the financial statements for the year ended 31 March 2013. Nevertheless, the Revenue issued reassessment notices in the name of the amalgamating company and subsequently passed reassessment orders and issued penalty notices against that non-existing entity.
The petitioner challenged the proceedings on jurisdictional grounds, relying on the Supreme Court’s decision in Principal Commissioner of Income Tax v. Maruti Suzuki India Limited, which concerned the validity of assessment proceedings against a non-existent entity. The Revenue explained that information generated through the Non-filers Monitoring System indicated that LSIPL had not filed income-tax returns for the relevant assessment years and that transactions were recorded under its PAN. However, the Revenue’s affidavit also expressly acknowledged that LSIPL was not required to file separate income-tax returns from the appointed date of amalgamation, namely 1 April 2012.
The Division Bench comprising Justice K. R. Shriram and Justice Dr. Neela Gokhale held that this admission destroyed the very foundation of the reassessment notices, which had been issued on the basis of alleged non-filing of returns. The Court therefore found it unnecessary to examine the remaining grounds raised in the petitions. Both writ petitions were allowed in terms of their respective prayer clauses, resulting in the quashing of the reassessment notices dated 27 March 2021, reassessment orders dated 27 March 2022 and consequential penalty notices dated 27 March 2022. The Court also accepted the petitioner’s undertaking to withdraw the appeals filed against the reassessment orders within two weeks.
Cases Discussed:
- Principal Commissioner of Income Tax v. Maruti Suzuki India Limited, (2019) 107 taxmann.com 375 (Supreme Court) / (2019) 416 ITR 613 (SC) — Relied upon by the petitioner for the proposition that a notice issued to a non-existent entity is non est. The High Court recorded the reliance but disposed of the petitions on the collapse of the Revenue’s stated basis for reopening, without separately adjudicating all other grounds.
FULL TEXT OF THE BOMBAY HIGH COURT JUDGMENT/ORDER
(Writ Petition No. 8384 of 2022 (for Assessment Year 2014-2015) is not listed, but taken on board as Petitioner is the same and issues are common, and heard alongwith this petition with the consent of Counsels.)
1. In Writ Petition No. 8388 of 2022, Petitioner is impugning a notice dated 27th March 2021 issued by Respondent No. 1 under Section 148 of the Income Tax Act, 1961 (“the Act”) for Assessment Year (“AY”) 2013-2014 alleging that there was reason to believe that income chargeable to tax for the said assessment year has escaped assessment and reassessment order dated 27th March 2022 passed by Respondent No. 2 and the consequent penalty notices dated 27th March 2022 also issued by Respondent No. 2.
2. The primary ground on which the petitions have been filed is that the notices issued, have been issued to a non-existent entity. The assessment order passed, also is on a non-existent entity.
3. Mr. Mistri submitted, relying on Principal Commissioner of Income Tax v. Maruti Suzuki India Limited1, the notice issued to a non-existent entity is non est.
4. Pursuant to a scheme of amalgamation approved by the Hon’ble Delhi High Court vide an order dated 19th November 2013, a wholly owned subsidiary of Petitioner Leroy Somer India Private Limited (“LSIPL”) stood amalgamated with Petitioner with effect from 1st April 2012. This was brought to the notice of Respondent No. 1 by a letter dated 28th November 2013. Petitioner mentioned in the notes to the Financial Statement as on 31st March 2013 that LSIPL stood amalgamated with Petitioner with the appointed date being 1st April 2012. Notwithstanding the same, the impugned notices have been issued. And also the impugned reassessment order.
5. In the affidavit-in-reply, it is stated that the notice was issued because information was received through NMS/ITBA system under Multiyear NMS which is Non-filers Monitoring System (Priority 1) that LSIPL had not filed its return of income for AY 2013-2014 and AY 2014-2015. It is stated that certain transactions were noticed under the PAN number of LSIPL during financial years pertaining to these assessment years, i.e., AY 2013-2014 and AY 2014-2015 and hence, for the purpose of applicability of provisions of the Act, LSIPL was not non-existing company. At the same time in the affidavit-in-reply it is further stated “It is accepted that company was not required to file its income tax return from the appointed date as per scheme of amalgamation. As noted earlier, the appointed date was 1st April 2012.”
6. The entire basis of notice, which according to Respondents was issued due to non-filing of income tax return, collapses.
7. In the circumstances, we see no reason to go into further averments made in the petitions or further grounds taken in the petitions.
8. Petitions allowed in terms of prayer clause (a), which reads as under :
WRIT PETITION NO. 8388 OF 2022 :
“a. that this Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ order or direction under Articles 226 and 227 of the Constitution of India calling for the records of the case leading to the issue of the impugned notice and passing of the impugned order and after going through the same and examining the question of legality thereof quash, cancel and set aside (i) the impugned notice (Exhibit K) dated March 27, 2021 issued by Respondent No. 1, (ii) the impugned reassessment order (Exhibit W) dated March 27, 2022 passed by Respondent No. 2 and (iii) impugned penalty notices (Exhibits X and Y) dated March 27, 2022 issued by Respondent No. 2.”
WRIT PETITION NO. 8384 OF 2022 :
“a. that this Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ order or direction under Articles 226 and 227 of the Constitution of India calling for the records of the case leading to the issue of the impugned notice and passing of the impugned order and after going through the same and examining the question of legality thereof quash, cancel and set aside (i) the impugned notice (Exhibit I) dated March 27, 2021 issued by Respondent No. 1, (ii) the impugned reassessment order (Exhibit U) dated March 27, 2022 passed by Respondent No. 2 and (iii) impugned penalty notices (Exhibits V and W) dated March 27, 2022 issued by Respondent No. 2.”
9. Petitions disposed.
10. Mr. Mistri states that to save on limitation, Petitioner had filed appeal against the impugned reassessment order. Mr. Mistri undertakes to have the appeals withdrawn within two weeks from today. Statement accepted.
Notes:-
1. 2019(107) taxmann.com 375.
