In a recent decision a Division Bench of the Gujarat High Court quashed an assessment notice issued against non-existent company observed that amalgamating entity ceases to exist upon approved scheme of amalgamation.
The petitioner in the present matter is Anokhi Realty Private Limited. Satyasarthi Estate Organisers Private Limited along with three other companies ceased to exist with effect from 01.04.2009 subsequent to their amalgamation with the petitioner company being the transferee company. The amalgamation was effectuated vide scheme of amalgamation in accordance with the provisions of the Companies Act.
The erstwhile company therefore viz. Satyasarthi Estate Organisers Private Limited addressed a letter to the jurisdictional Assessing Officer intimating that it had amalgamated with Anokhi Reality Private Limited. Subsequently, Satyasarthi Estate Organisers Private Limited received notices under Section 148 of the Income Tax Act for the years 2014-15 to 2017-18 on various dates. Notice under Section 142(1) of the Income Tax Act was also issued
Nupur Shah, advocate appearing for the petitioner contended that as per the provisions of the scheme, the amalgamation was effective from 01.04.2019. In other words, the erstwhile company viz. Satyasarthi Estate Organisers Private Limited had ceased to exist where notices under Section 148 of the Income Tax Act were issued and that assessment proceedings in the case of amalgamated company is impermissible as there is no provision in the Income Tax Act to make an assessment on a non-existent company.
Varun Patel, Senior Standing Counsel for the Revenue submitted that the notices are valid in eyes of law. It is a matter of fact that the scheme of amalgamation was sanctioned on 13.11.2019 with effect from 01.04.2019 so the letter categorically stated that the approval for sanctioning the scheme is being sought for.
The Court of Justices Biren Vaishnav and Devan M Desai observed that “The Supreme Court in Principal Commissioner of Income-tax v. Mahagun Realtors (P.) Ltd and Adani Wilmar Ltd clearly held that the Assessing Officer though was informed of the Amalgamating Company having ceased to exist, issued notice, which was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation.”
“The ratio laid down in those judgements would squarely apply and since the notices for the assessment years 2014-15 to assessment years 2017-18 have been issued to the non-existing entity viz. Satyasarthi Estate Organisers Private Limited, such notices are quashed and set aside” the Court concluded.
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