Mere Amalgamation would not invalidate Income Tax Proceedings as It would not amount to Winding Up of Company, rules Supreme Court [Read Judgment]

The Supreme Court, on Tuesday, held that whether corporate death of amalgamating entity upon amalgamation per se invalidates an assessment order issued under the Income Tax Act, 1961 cannot be determined on a bare application of Section 481 of the Companies Act, 1956 or its equivalent in the 2013 Act, which deals with the dissolution of the said company.

The Apex Court stated that the same would depend on the terms of the amalgamation and the facts of each case.

A Bench comprising Justices U.U. Lalit and S. Ravindra Bhat allowed a plea assailing the order of the Delhi High Court affirming the order of the Income Tax Tribunal, which quashed the assessment order at the threshold without going into the merits of the matter. While allowing the appeal, the Bench restored the matter before the ITAT for determination on merits (Principal Commissioner of Income Tax (Central) v. M/s. Mahagun Realtors (P) Ltd.

After perusing the facts, the Court held that the amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group. A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL.

“Though that entity ceased to be in existence, in law, yet appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT. Even the affidavit before this court is on behalf of the director of MRPL. Furthermore, the assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special auditor’s report, brings specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of MRPL (as the assessee) – but represented by the transferee, MIPL. All these clearly indicate that the order adopted a particular method of expressing the tax liability,” the Court said.

“Before concluding, this Court notes and holds that whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case,” the Court concluded.

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