The Tax Publishers2012 TaxPub(DT) 1030 (Del-HC) : (2012) 044 (I) ITCL 0457 : (2012) 247 CTR 0500 : (2012) 065 DTR 0391

INCOME TAX ACT, 1961

--Assessment--ValidityAssessment in the name of non-existing amalgamating company--For the previous year relevant to the assessment year 2002-03, 'S' Ltd. amalgamating company) filed its return of income on 30-10-2002 declaring nil' income. Subsequently, vide order dt. 11-2-2004, passed by this Court, the said company stood amalgamated with M/s. MCorp (P) Ltd. amalgamated company) w.e.f. 1-7-2003. The aforesaid return was selected for scrutiny and notice dt. 18-10-2003 was issued by the AO under section 143(2) in the name of S Ltd.” the amalgamating company. The factum of S Corp. Ltd., having been dissolved, as a result of its amalgamation with MCorp (P) Ltd. was duly brought to the notice of the AO vide letter dt. 2-4-2004. Despite the aforesaid, the AO, vide order dt. 28-3-2005 passed under section 143(3), framed the assessment on S Ltd., the amalgamating company. The aforesaid assessment order dt. 28-3-2005 was appealed against by M Global (P) Ltd. (erstwhile M (P) Ltd.) before the CIT(A), inter alia, on the ground that the same was bad in law and void ab initio, the assessment having been framed upon and in the name of a non-existent entity. The CIT(A), however, rejected the aforesaid ground, though, on merits, the appeal was allowed and all additions/disallowances were deleted. Held: It is clear that on amalgamation of a company, the assessment of assessee ought to have been made in the name of amalgamated company and it cannot be said that the assessment made by the AO in the name of 'S' was in fact in the name of amalgamated company and this was a procedural defect and provision of section 292B, therefore, could be applied. The assessment made in the name of non-existing company is a invalid assessment.

No doubt, M/s. S was an assessee and as an incorporated company and was in existence when it filed the returns in respect of two assessment years in question, however, before the case could be selected for scrutiny and assessment proceedings could be initiated, M/s. S got amalgamated with M (P) Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Court which was duly sanctioned vide orders dt. 11-2-2004. With this amalgamation made effective from 1-7-2003, M/s. S ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, M/s. S was also stood dissolved by specific order of this Court. With the dissolution of this company, its name was struck off from the rolls of companies maintained by the RoC. [Para 7] A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. This position is even accepted by the Tribunal in para 14 of its order. Having regard to this consequence provided in law, in number of cases, the Supreme Court held that assessment upon a dissolved company is impermissible as there is no provision in income-tax can to make an assessment thereupon. [Para 8] Strictly, amalgamation does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. [Para 8] After the sanction of the scheme on 11-2-2004, the S ceased to exist w.e.f. 1-7-2003. Even if S had filed the returns, it became incumbent upon the IT authorities to substitute the successor in place of the said 'dead person'. When notice under section 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the assessee on record. Instead, the AO made the assessment in the name of M/s. Spice which was non-existing entity on that day. In such proceedings an assessment order passed in the name of M/s. Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law. [Para 11] Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of section 292B. [Para 12] The irresistible conclusion would be provisions of section 292B are not applicable in such a case. The framing of assessment against a non-existing entity/person goes to the root of the matter, which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a 'dead person'. [Para 16] The order of the Tribunal is, therefore, clearly unsustainable. Thus, the questions of law in favour of the assessee and against the Revenue and allow these appeals. [Para 17] The returns were filed by M/s. S on the day when it was in existence it would be permissible to carry out the assessment on the basis of those returns after taking the proceedings afresh from the stage of issuance of notice under section 143(2). In these circumstances, it would be incumbent upon the AO to first substitute the name of the appellant in place of M/s. S and then issue notice to the appellant. However, such a course of action can be taken by the AO only if it is still permissible as per law and has not become time-barred. [Para 18]

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