Marvell Mall Development Company Ltd. Vs ACIT (Gujarat High Court)
Summary: The Gujarat High Court quashed a notice dated 25.03.2019 issued under Section 148 of the Income Tax Act, 1961 in the name of Shalibhadra Finvest Services Private Limited for AY 2014-15, holding that the proceedings could not survive after the Revenue itself assessed the identical income in the hands of its amalgamated successor, Marvell Mall Development Company Limited. Shalibhadra had amalgamated with the petitioner pursuant to an NCLT order dated 01.03.2018 with effect from 01.04.2015 and consequently ceased to exist. Nevertheless, the impugned reassessment notice was issued in its name. During pendency of the writ petition, Revenue initiated fresh proceedings for the same AY against the petitioner and, by assessment order dated 15.05.2023 under Sections 147 read with 144 and 144B, added ₹1.40 crore under Section 68 read with Section 115BBE representing share application money of ₹80 lakh and ₹60 lakh received by the amalgamating company from Shukan Steel Private Limited and Vidhi Fabrics Private Limited respectively.
The High Court noted that Revenue had consciously proceeded on the footing that the amalgamating company had ceased to exist and that its income was assessable in the hands of the petitioner as successor. Relying on Laxmipat Singhania v. CIT, (1969) 72 ITR 291 (SC), the Court reiterated that, unless expressly provided otherwise, the same income cannot be taxed twice. It also relied on ITO v. Ch. Atchaiah, (1996) 218 ITR 239 (SC), for the principle that the Assessing Officer must assess income in the hands of the right person. Once Revenue had actually brought the identical ₹1.40 crore to tax in the amalgamated company’s hands, parallel reassessment of the same income for the same year in the amalgamating company’s hands could not continue. The Court therefore quashed the 25.03.2019 notice and all consequential proceedings. Significantly, it did not decide the separate contention based on Principal Commissioner of Income Tax v. Maruti Suzuki (India) Ltd., (2019) 416 ITR 613 (SC), concerning the validity of a Section 148 notice issued to a non-existent company, and expressly kept that contention open. It also expressed no opinion on the validity or merits of the later reassessment and assessment order dated 15.05.2023 against the petitioner.
Cases Discussed
- Principal Commissioner of Income Tax v. Maruti Suzuki (India) Ltd., (2019) 416 ITR 613 (SC) — The Coordinate Bench had taken note of this decision while granting ad-interim relief. The petitioner relied upon it on the validity of a Section 148 notice issued in the name of a non-existent company; however, the High Court found it unnecessary to decide that contention and expressly kept it open.
- Income Tax Officer v. Ch. Atchaiah, (1996) 218 ITR 239 (SC) — Relied upon for the principle that the Assessing Officer is bound to assess income in the hands of the right person and has no option in the matter.
- Laxmipat Singhania v. Commissioner of Income Tax, (1969) 72 ITR 291 (SC) — Relied upon for the fundamental rule that, unless otherwise expressly provided, the same income cannot be taxed twice.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. By way of this writ-petition under Article 226 of the Constitution of India, the petitioner has challenged the Notice dated 25.03.2019 issued by the respondent under the provision of Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) in the name of “Shalibhadra Finvest Services Private Limited”, seeking to reopen its Income Tax assessment for the Assessment Year (for short ‘A.Y.’) 2014-15.
FACTS OF THE CASE
2. The facts, as they emerge from the pleadings and the documents on record, are that Shalibhadra Finvest Services Private Limited (later known as Shalibhadra Infraspace Private Limited, and hereinafter referred to as ‘the amalgamating company’) filed its return of income for A.Y. 2014-15 on 24.11.2014 declaring its total income at Rs.1,40,94,230/-. The case was selected for scrutiny and the assessment was framed under Section 143(3) of the Act vide order dated 18.12.2016 without disturbing the returned income. Thereafter, by an order dated 01.03.2018 passed by the National Company Law Tribunal (for short ‘NCLT’), Mumbai Bench, the amalgamating company stood amalgamated with the petitioner, Marvell Mall Development Company Limited (hereinafter referred to as ‘the amalgamated company’), with effect from 01.04.2015, whereupon the amalgamating company ceased to exist in the eyes of the law.
2.1 Notwithstanding the aforesaid, the respondent issued the impugned Notice dated 25.03.2019 under Section 148 of the Act in the name of the amalgamating company. By a letter dated 22.03.2019, which was filed on 27.03.2019, the respondent was informed that the amalgamating company had merged with the petitioner pursuant to the order of the NCLT, and a copy of the said order together with the Scheme of amalgamation was also furnished. The respondent nonetheless proceeded to issue notices dated 19.09.2019 and 10.10.2019 under Section 142(1) of the Act. The petitioner raised objections against the reopening vide letter dated 22.10.2019, contending, inter alia, that a notice issued in the name of a non-existent entity is non-est. The objections came to be rejected by an order dated 04.11.2019, wherein the respondent took the view that since the amalgamating company was functioning independently during the year under consideration, the reassessment proceedings were independent of the subsequent merger.
2.2 Being aggrieved, the petitioner approached this Court by way of the present petition. By an order dated 06.12.2019, the Coordinate Bench of this Court after taking note of the judgment of the Supreme Court in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki (India) Ltd., (2019) 416 ITR 613 (SC), issued Notice and, by way of ad-interim relief, stayed further proceedings pursuant to the impugned Notice dated 25.03.2019.
2.3 During the pendency of the present petition, the Revenue initiated proceedings under Section 147 of the Act for the very same A.Y. 2014-15 in the hands of the petitioner, i.e. the amalgamated company (PAN: AAECM6565F), by issuing a Notice under Section 148 of the Act which ultimately culminated into an assessment order dated 15.05.2023 passed under Section 147 read with Section 144 read with Section 144B of the Act (DIN: ITBA/AST/S/147/2023-24/1052839797(1)) in the name of the petitioner, Marvell Mall Development Company Private Limited, for A.Y. 2014-15, making an addition of Rs.1,40,00,000/- under Section 68 read with Section 115BBE of the Act in respect of share application money of Rs.80,00,000/- and Rs.60,00,000/- received by the amalgamating company from M/s. Shukan Steel Private Limited and M/s. Vidhi Fabrics Private Limited respectively, and assessing the total income at Rs.1,40,00,000/-.
SUBMISSIONS ON BEHALF OF THE PETITIONER
3. Learned Senior Counsel Mr. Tushar Hemani appearing for the petitioner has invited the attention of this Court to the assessment order dated 15.05.2023 passed in the hands of the petitioner and, in particular, to the following portions thereof:
“The information pertains to M/s. Shalibhadra Finvest Services Pvt Ltd which had changed its name to Shrishalibhadra Infraspace Pvt Ltd which got amalgamated into assessee company vide amalgamation order dated 1.3.2018. Hence, notice was issued in the name of assessee company.”
“The case of Shalibhadra Finvest Services Pvt Ltd for AY 2014-15 was reopened on the basis of information available with the department regarding beneficiary of accommodation entry in the form of share application money. However the assessee filed writ petition before the Hon’ble High Court against reopening for AY 2014-15 stating that on the date of notice issued, company viz; Shalibhadra Finvest Services Pvt Ltd was not in existence and has already been merged with M/s Marvell Mall Development company Ltd vide order dated 01.03.2018 passed by National Company Law Tribunal, Mumbai Bench.
The information pertains to M/s Shalibhadra Finvest Services Pvt Ltd which got amalgamated into assessee company. Hence notice was issued in the name of the assessee company and addition proposed in the case of the assessee company in respect of share application money received by the company M/s Shalibhadra Finvest Services Pvt Ltd.”
3.1 It is submitted that the subject matter of the impugned Notice dated 25.03.2019, namely the share application money aggregating to Rs.1,40,00,000/- received by the amalgamating company from M/s. Shukan Steel Private Limited and M/s. Vidhi Fabrics Private Limited during the previous year relevant to A.Y. 2014-15, is the very same subject matter which has been brought to tax by the Revenue in the hands of the amalgamated company by the assessment order dated 15.05.2023. It is submitted that the Revenue has thus, by its own conduct, accepted the position that the amalgamating company was not in existence on the date of issuance of the impugned Notice and that the income, if any, of the amalgamating company for A.Y. 2014-15 could be assessed only in the hands of the petitioner as its successor, which is precisely what the Revenue has done.
3.2 It is further submitted that once the Revenue has elected to assess the very same income, for the very same assessment year and on the very same set of facts, in the hands of the amalgamated company, the proceedings initiated by the impugned Notice in the hands of the amalgamating company have been rendered wholly infructuous and cannot survive. It is submitted that the same income cannot be assessed twice, once in the hands of the amalgamating company and again in the hands of the amalgamated company, and that two parallel reassessment proceedings in respect of the same income for the same assessment year cannot be permitted to run simultaneously. It is, therefore, urged that on this short ground alone, without going into any other contention, the impugned Notice deserves to be quashed and set aside.
SUBMISSIONS ON BEHALF OF THE RESPONDENT
4. Opposing the present petition, learned Senior Standing Counsel for the Revenue has not been in a position to dispute that the assessment order dated 15.05.2023 has been passed in the hands of the petitioner for A.Y. 2014-15 in respect of the very same share application money of Rs.1,40,00,000/- which forms the subject matter of the impugned Notice. It is, however, submitted that the Revenue was within its rights to proceed against the successor entity and that the petitioner has an alternative remedy of appeal against the assessment order dated 15.05.2023. Thus, it is urged that the writ-petition may not be entertained.
ANALYSIS & OPINION
5. We have heard the learned advocates for the respective parties and have perused the material on record.
6. The undisputed position that emerges from the record is that the impugned Notice dated 25.03.2019 under Section 148 of the Act was issued in the name of the amalgamating company seeking to reopen its assessment for A.Y. 2014-15, on the basis of information that the amalgamating company had received share application money of Rs.80,00,000/- and Rs.60,00,000/- from M/s. Shukan Steel Private Limited and M/s. Vidhi Fabrics Private Limited, which the Revenue believed to be accommodation entries. During the pendency of this petition, and notwithstanding the ad-interim relief granted by this Court, the Revenue issued a fresh Notice under Section 148 of the Act to the petitioner, i.e. the amalgamated company, for the very same assessment year, and framed an assessment under Section 147 read with Section 144 read with Section 144B of the Act vide order dated 15.05.2023, adding the very same amount of Rs.1,40,00,000/- under Section 68 of the Act in the hands of the petitioner.
7. The assessment order dated 15.05.2023 is itself explicit as to the reason why the proceedings came to be initiated against the amalgamated company. The Assessing Officer has recorded that the information pertained to the amalgamating company; that the amalgamating company had got amalgamated into the petitioner by virtue of the order dated 01.03.2018 of the NCLT; that the reopening in the name of the amalgamating company had been challenged before this Court on the ground that the amalgamating company was not in existence on the date of the notice; and that “hence” the notice was issued in the name of the amalgamated company and the addition was proposed in its hands. The Revenue has, therefore, consciously and unequivocally proceeded on the footing that the amalgamating company ceased to exist upon the sanction of the scheme of amalgamation and that its successor, namely the petitioner, is the person in whose hands the income of the amalgamating company for A.Y. 2014-15 is to be assessed. Having so proceeded, and having actually brought the very same subject matter to tax in the hands of the amalgamated company, it is not open to the Revenue to simultaneously keep alive the reassessment proceedings initiated by the impugned Notice in the hands of the amalgamating company in respect of the very same income for the very same assessment year.
8. It is a fundamental rule of the law of taxation that, unless otherwise expressly provided, the same income cannot be taxed twice as per the ratio laid down by the Supreme Court in the case of Laxmipat Singhania vs. Commissioner of Income Tax, (1969) 72 ITR 291 (SC). Equally, the Assessing Officer is bound to assess the income in the hands of the right person and has no option in the matter as held by the Supreme Court in the case of Income Tax Officer vs. Ch. Atchaiah, (1996) 218 ITR 239 (SC). The Revenue has, in the present case, identified the petitioner as the person in whose hands the income in question is to be assessed and has completed the assessment accordingly. The consequence in law is that the proceedings initiated under the impugned Notice in the hands of the amalgamating company have been overtaken by, and have merged in, the assessment framed in the hands of the amalgamated company, and nothing survives for adjudication under the impugned Notice. To permit the impugned Notice to remain in operation would result in two parallel proceedings for reassessment of the same income for the same assessment year, one in the hands of a company which the Revenue itself accepts to be non-existent and the other in the hands of its successor, which is a course not countenanced by law.
9. We are, therefore, of the view that, in view of the very same subject matter having already been brought to tax in the hands of the amalgamated company by the assessment order dated 15.05.2023, the proceedings pursuant to the impugned Notice dated 25.03.2019 in the hands of the amalgamating company cannot survive, and the impugned Notice is required to be quashed and set aside on this ground alone. In view of this conclusion, it is not necessary for us to examine the other contention raised on behalf of the petitioner, founded upon the judgment of the Supreme Court in the case of Maruti Suzuki (India) Ltd. (supra), as to the validity of a notice under Section 148 of the Act issued in the name of a non-existent company, and the said contention is kept open.
10. We clarify that we have not examined, and express no opinion on, the validity or the merits of the Notice under Section 148 of the Act issued to the petitioner and the assessment order dated 15.05.2023 passed in the hands of the petitioner for A.Y. 2014-15, and all contentions of the petitioner in that regard, including as to the validity of the said reopening, are expressly kept open to be agitated in appropriate proceedings in accordance with law.
11. For the foregoing reasons, the writ-petition stands allowed. The impugned Notice dated 25.03.2019 issued by the respondent under Section 148 of the Act in the name of “Shalibhadra Finvest Services Private Limited” for the Assessment Year 2014-15 are hereby quashed and set aside along with all the subsequent proceedings pursuant thereto. Rule is made absolute to the aforesaid extent. No order as to costs.
