| The Tax Publishers2020 TaxPub(DT) 5185 (Del-Trib) INCOME TAX ACT, 1961
Section 147
When two companies amalgamate and merge into one, the transferor company loses its entity as the decisions to have its business, and their respective rights and liabilities are determined under the scheme of amalgamation, but the corporate entity of the transferor company ceases to exist with effect from the date the amalgamation is made effective, and if the AO has got knowledge about the merger and if jurisdictional notice is issued to the non-existent entity, the consequent assessment is bad under law.
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Reassessment - Notice under section 148 - Validity - Notice issued in name of non-existent company
The case of assessee-company for assessment year 2007-08 was reopened with issuance of notice under section 148 on 25-3-2014. Assessee filed objections on 3-4-2014 stating that with effective from 1-4-2006, it was merged with an entity 'A' and, therefore, the notice issued under section 148 upon it, which was a non-existent company, was bad in law. AO, however, by order dt. 28-1-2015, rejected the said contention raised by the assessee stating that the merger came into effect from 1-4-2006 and the assessee was in existence till 29-8-2007 and, therefore, the submission of the assessee that it was not in existence with effective from 1-4-2006 was false. Held: When two companies amalgamate and merge into one, the transferor company loses its entity as the decisions to have its business, and their respective rights and liabilities are determined under the scheme of amalgamation, but the corporate entity of the transferor-company ceases to exist with effect from the date the amalgamation is made effective, and if the AO has got knowledge about the merger and if jurisdictional notice is issued to the non-existent entity, the consequent assessment is bad under law. In instant case, original assessment under section 143(3) was completed by order dt. 18-12-2009 and in that order the AO categorically observed that during the financial year 2006-07, there was merger as per High Court order, of 'A' with assessee. However, AO despite having knowledge of the merger, issued notice under section 148 on 25-3-2014 upon the assessee, which was not in existence as on the said date. Therefore, the assumption of jurisdiction by the AO under section 147 was bad in law and consequently assessment also could not be sustained and the same was accordingly quashed.
REFERRED : Pr. CIT v. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC) : 2019 TaxPub(DT) 4931 (SC), Sky Light Hospitality LLP v. Asstt. CIT (2018) 405 ITR 296 (Del) : 2018 TaxPub(DT) 0762 (Del-HC) and Asstt. CIT v. Pride Residency (P) Ltd. ITA No. 4176/Del/2017 for the assessment year 2007-08 by order dt. 12-12-2019 : 2019 TaxPub(DT) 8312 (Del-Trib).
FAVOUR : In assessee's favour.
A.Y. : 2007-08
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