International Hospital Limited Vs DCIT (Delhi High Court)
Conclusion: An assessment order issued in the name of the non-existent entity, following an amalgamation could not be cured u/s 292B as once the Scheme came to be approved, the transferor companies came to be dissolved by operation of law.
Held: In the instant case, the petition was filed impugning orders of assessment as well as reassessment action initiated by the respondents on the ground of the amalgamated entity having never been placed on notice. Assessee would contend that despite the respondents having been duly apprised of the factum of amalgamation, no notices were served upon the amalgamated entity and orders of assessment as well as notices of reassessment were maintained in the name of the amalgamating entity. This, according to the writ petitioners, would amount to a fatal defect rendering the final orders and notices as framed being null and void. Also, the impugned action of the respondents would not sustain in light of the decision rendered by the Supreme Court in Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki (India) Limited. The respondents, on the other hand, would urge us to hold that a failure to place the amalgamated entity on notice was curable and one which would fall within the ambit of Section 292B of the Income Tax Act, 1961. Additionally, the respondents rest their case on a subsequent decision of the Supreme Court in Principal Commissioner of Income Tax (Central)-2 vs. Mahagun Realtors (P) Ltd. It was held that the position in law appeared to be well-settled that a notice or proceedings drawn against a dissolved company or one which no longer existed in law would invalidate proceedings beyond repair. Maruti Suzuki conclusively answered this aspect and left us in no doubt that the initiation or continuance of proceedings after a company had merged pursuant to a Scheme of Arrangement and ultimately came to be dissolved, would not sustain. Assessee had 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 could not be validated by resort to Section 292B of the Act. Moreover, section 170 and which speaks of succession to a business “otherwise than on death”. It was thus concerned with a specific contingency pertaining to succession to a business and how the predecessor and successor were liable to be taxed. It had no concern with the question of whether a notice or order in the name of a non-existent entity could be treated as valid in law.
