Assessment completed against an Amalgamating Company even after Amalgamation is Valid: Calcutta HC [Read Judgment]

assessment-Calcutta High Court-taxscan

 evaluationThe Calcutta High Court in a recent ruling validated the assessment order passed by the Income Tax Department against the assessee-company after amalgamation as it was found that the said company willfully concealed this matter from the Department and filed a return for the relevant AY even after amalgamation.

The Revenue completed the evaluation u/s 143(3) of the Income Tax Act against the assessee inconsequent to his income tax return for the year 2002-03. The assessing officer made additions and also initiated proceedings under section 271. On an appeal preferred by the assessee, they challenged the impugned evaluation and proceedings initiated against them on the ground that the assessee had merged with Maharashtra Distilleries Ltd. pursuant to an order passed by the High Court at Mumbai on March 2, 2003. Both the CIT(Appeal) and the Appellate Tribunal had accepted the contentions of the assessee and decided in favor of them. Therefore, the Revenue approached the High Court on appeal.

The High Court carefully verified the nullity of the impugned order. The Division Bench comprising of Justice Girish Chandra Gupta and Justice Asha Arora has found that on a plain reading of the definition of the expression of “amalgamation”, appearing in the Income Tax Act quoted above, the impression which one receives is that all the liabilities of the amalgamating company immediately before the amalgamation becomes become the liability of the amalgamated company. It was further observed that “we are, in this case, concerned, with the assessment year 2002-03, i.e. to say pertaining to the financial year which ended on March 31, 2002, whereas the amalgamation took place with effect from November 2002. There is, as such, no dispute on the fact that it is a liability of the amalgamating company which accrued prior to the amalgamation. The assessee maintained a studied silence and did not bring to the notice of the revenue, in particular, the assessing officer, about the amalgamation sanctioned by the High Court at Mumbai on March 26, 2003. The assessee not only did not bring this fact to the notice of the assessing officer, but the assessee also filed a return for the evaluation year 2003-04. Therefore, the assessee itself did not act upon the amalgamation. Be that as it may, by reason of the amalgamation, the order passed on 31st March 2005, pertaining to the assessment year 2002-2003 could not have become a nullity. The liability arising out of the evaluation order became the liability of the amalgamated company”

On the basis of the above findings, the Court held that the Order of the Tribunal as well as the CIT(Appeal)was wrong in law and decided the case in favor of the Department.

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