Vedanta Limited Vs ACIT (Bombay High Court)
Summary: The Bombay High Court in Vedanta Limited Vs Assistant Commissioner of Income Tax examined the validity of reassessment proceedings initiated against a non-existent entity. Vedanta Limited, successor to Sterlite Energy Limited (SEL), challenged notices dated 30 March 2021 issued under Section 148 of the Income-tax Act, 1961, reassessment orders dated 24 March 2022 under Sections 147, 144 and 144B, and consequential recovery notices dated 23 August 2022 concerning assessment years 2013-14 and 2014-15.
The petitioner was originally known as Sesa Goa Limited, subsequently renamed Sesa Sterlite Limited and thereafter Vedanta Limited. Pursuant to a scheme of amalgamation approved by the Bombay and Madras High Courts, Sterlite Energy Limited stood amalgamated with the petitioner with effect from 1 January 2011 and ceased to exist. Although the scheme was challenged before the Supreme Court through a pending special leave petition, there was no stay of the amalgamation. The Income Tax Department had been informed of the merger through a letter dated 22 August 2013 and had acknowledged it in earlier assessment orders.
The Court found that the reopening notices had nevertheless been issued in the name of SEL, which was no longer legally in existence. The consequential reassessments had been completed on a best-judgment basis, while notices reportedly sent to the former company’s consultant had bounced. The Court held that the impugned notices and reassessment orders could not be sustained and quashed them along with the recovery notices. The Revenue was permitted to seek appropriate relief from the Supreme Court if it succeeded in the pending SLP. The decision concerns the jurisdictional invalidity of proceedings against a non-existent amalgamated company.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Petitioner is impugning notices dated 30th March 2021 issued under Section 148 of the Income Tax Act, 1961 (“the Act”), reassessment orders dated 24th March 2022 issued under Section 147 read with Section 144 read with Section 144B of the Act and recovery demand notices dated 23rd August 2022 for Assessment Year (“AY”) 2014-15 and AY 2013-14 in Writ Petition No.1617 of 2023 and Writ Petition No.1616 of 2023, respectively.
2. Various grounds have been raised but the main ground is that the notices have been issued and assessment orders have been passed on a nonexistent entity and hence, same are invalid and bad in law.
3. Petitioner was originally called Sesa Goa Limited. It was changed to Sesa Sterlite Limited on 18th September 2013 and later, with effect from 21st April 2015, to Vedanta Limited.
4. Pursuant to a scheme of amalgamation and arrangement approved by this Court vide order dated 3rd April 2013 and affirmed by the Division Bench of this Court vide order dated 12th August 2013 and by the Hon’ble Madras High Court by order dated 25th July 2013, Sterlite Energy Limited (“SEL”) stood amalgamated with Petitioner with effect from the appointed date being 1st January 2011. The scheme and the order approving the amalgamation also provided for dissolution without winding up of SEL. Consequently, from 1st January 2011, SEL ceased to exist. The orders passed by this Court and the Hon’ble Madras High Court have been challenged before the Hon’ble Supreme Court of India by way of a Special Leave Petition (“SLP”), which is admitted and still pending.
5. By a letter dated 22nd August 2013, Petitioner, during the course of assessment proceedings for AY 2011-12, brought to the notice of the Assessing Officer (“AO”) the scheme of the amalgamation and arrangement, etc. Petitioner also filed revised return of income (“ROI”) to give effect to the scheme of amalgamation. The fact that the amalgamation has taken place was known to the Department because the same is referred to in the assessment order for AY 2013-14 passed on 25th January 2017 in Writ Petition No.1617 of 2023. Similarly, it is referred to in the assessment order dated 27th February 2017 for AY 2012-13 as well, in Writ Petition No.1616 of 2023.
In the assessment orders of-course, the AO has mentioned about the filing of the SLP by the Ministry of Corporate Affairs. The AO also stated that the assessment orders have been passed in the name of Petitioner in obedience with the orders passed by this Court and the Hon’ble Madras High Court with a rider that this case is liable for change/modification if required as per the outcome of the decision pronounced by the Hon’ble Apex Court. Admittedly, there is no stay on the scheme of amalgamation or arrangement passed by the Hon’ble Apex Court.
6. In the circumstances, as things stand, the reopening notices dated 30th March 2021 issued under Section 148 of the Act impugned in the Petitions are in the name of a non-existing entity. In the affidavit in reply filed also, the stand taken is of the pendency of the SLP.
The reassessment orders impugned in the Petitions have been passed under Section 144 of the Act on best assessment basis.
7. Mr. Mistry states, the notices were issued on the email of a consultant of the SEL and, therefore, the notices sent have bounced.
Infact in the reassessment orders, it is also mentioned that notices were sent by the AO to DVU for service but the DVU did not respond and in view of this situation, there was no way except to complete the assessment on the basis of material available on record.
8. In these circumstances, we are satisfied that the reassessment orders dated 24th March 2022 and the notices dated 30th March 2021 issued under Section 148 of the Act cannot be sustained and the same are hereby quashed and set aside. Consequently, the recovery notices dated 23rd August 2022 also stand quashed and set aside.
9. Mr. Sharma states if the Revenue succeeds in the SLP, it should be given an opportunity to issue fresh notice under Section 148 of the Act. Of-course if the Revenue succeeds in the SLP, it may apply to the Hon’ble Apex Court for appropriate reliefs including for liberty to issue fresh notices under Section 148 of the Act. It is open for the Revenue to apply and the Hon’ble Apex Court will decide. We are expressing no opinion.
10. Petitions dismissed. No order as to costs.
