Delhi High Court – Orders
Relief) M/S Ebix Singapore Pte Ltd. … vs The Assistant Commissioner Of Income … on 13 December, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Dharmesh Sharma
$~24
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 13361/2023 and CM APPL. 52762/2023 (Interim
Relief)
M/S EBIX SINGAPORE PTE LTD. SUCCESSOR TO EBIX
FINCORP EXCHANGE PTE LTD. .....Petitioner
Through: Mr. Sachit Jolly, Sr. Adv. with
Mr. Runjhun Pare, Mr.
Abhyudaya Shankar Bajpai,
Advs.
versus
THE ASSISTANT COMMISSIONER OF INCOME TAX,
CIRCLE INTERNATIONAL TAXATION (1)(2)(2) NEW
DELHI .....Respondent
Through: Mr. Sunil Agarwal, Sr. SC with
Mr. Shivansh B. Pandya, Jr.
SC, Mr. Viplav Acharya, Jr.
SC, Ms. Priya Sarkar, Jr. SC
and Mr. Utkarsh Tiwari, Adv.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE DHARMESH SHARMA
ORDER
% 13.12.2024
1. The writ petitioner has approached this Court seeking the
following reliefs:-
“a. That this Hon‟ble Court be pleased to issue a Writ of certiorari,
or any other appropriate Writ, Order, or direction, quashing the
Impugned Order dated 30.08.2023 (Annexure P1 at Pg. Nos. 40-
47) passed by the Respondent;
b. That this Hon‟ble Court be pleased to issue a Writ of certiorari,
or any other appropriate Writ, Order, or direction, quashing the
Impugned Notice dated 30.08.2023 (Annexure P2 at Pg. 48-49)
issued by the Respondent;
W.P.(C) 13361/2023 Page 1 of 18
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c. That this Hon‟ble Court be pleased to issue a Writ of mandamus,
or any other appropriate Writ, Order or direction to the
Respondents directing to drop the proceedings initiated under
Section 148A and 148 of the Act against the Petitioner;
d. For such further and other reliefs, including costs of this
Petition, as this Hon‟ble Court may deem fit and proper in the
nature and circumstances of the case.”
2. The challenge essentially is to the initiation of the reassessment
action and which stands embodied in the order under Section 148A(d)
of the Income Tax Act, 19611 dated 30 August 2023 and the issuance
of a consequential notice under Section 148 of the Act, bearing the
same date.
3. For the purpose of examining the challenge which stands raised,
we take note of the following essential facts. Ebix Fincorp Exchange
Pte Ltd.2 was incorporated in Singapore and is a tax resident of that
country. It had in Assessment Year3 2019-2020 invested in the equity
shares of BSE Ebix Insurance Broking Private Limited4, which was
a newly incorporated company set up in India in 2018 as a joint
venture between BSE Ltd. and the Ebix Group to undertake insurance
distribution business. It is further averred that Ebix Fincorp
subsequently merged with M/s Ebix Singapore Pte Ltd5., the
petitioner before us.
4. On 14 March 2023, a notice under Section 148A(b) came to be
issued in the name of Ebix Fincorp alleging that various transactions
pertaining to the purchase of shares and amounting to INR
2,00,40,000/- in AY 2019-2020 had not been disclosed in the return
of income as submitted. While responding to the said notice, Ebix
1
Act
2
Ebix Fincorp
3
AY
4
BEIPL
5
Ebix Singapore
W.P.(C) 13361/2023 Page 2 of 18
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Singapore, the petitioner herein, duly apprised the respondents of Ebix
Fincorp having since merged with the petitioner. However,
notwithstanding the said disclosure having been duly made and the
respondents having been apprised of the amalgamation, the final order
under Section 148A(d) of the Act came to be framed in the name of
Ebix Fincorp.
5. At this stage, we deem it apposite to note that the petitioner had
assailed the first round of proceedings of reassessment by way of
W.P.(C) No. 7837/2023 before this Court. The said writ petition came
to be disposed of on 31 May 2023 with the Court ultimately setting
aside the impugned order under Section 148A(d) and remanding the
matter for consideration afresh. It is pursuant to the said remit that the
impugned orders have come to be passed.
6. Undisputedly, the investment in shares of BEIPL would
constitute a transaction which would be capital in nature and clearly
not “income” which could have been subjected to reopening under
Section 148 of the Act. We in this regard bear in consideration the
decision of our Court in Angelantoni Test Technologies Srl vs.
Assistant Commissioner of Income-tax and Ors6 and where it was
held as follows: –
“6. It is settled law that investment in shares in an Indian subsidiary
cannot be treated as „income‟ as the same is in the nature of “capital
account transaction” not giving rise to any income. In Nestle
SA v. Assistant Commissioner of Income Tax (W.P.(C) No.
12643/2018), this Court held that the allegation of the Revenue that
the investment in the shares of Indian subsidiary amounted to
„income‟ is flawed. The relevant portion of the said judgment is
reproduced hereinunder:
“24. The principal objection of the Petitioner that its
investment in the shares of its subsidiary cannot be treated as6
2023 SCC OnLine Del 8486W.P.(C) 13361/2023 Page 3 of 18
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„income‟ is well founded. The decision of the Bombay High
Court in Vodafone India Services Pvt. Ltd. v. Union of
India (supra) holding such investment in shares to be a
„capital account transaction‟ not giving rise to income was
accepted by the CBDT. Para 2 of Instruction No. 2 of 2015
dated 29th January, 2015 reads thus:
“2. It is hereby informed that the Board has accepted the
decision of the High Court of Bombay in the above
mentioned Writ Petition. In view of the acceptance of the
above judgment, it is directed that the ratio decidendi of
the judgment must be adhered to by the field officers in all
cases where this issue is involved. This may also be
brought to the notice of the ITAT, DRPs and CIT
(Appeals).”
25. Therefore, the fundamental premise of the Respondent
that the above investment by the Petitioner in the shares of its
subsidiary amounted to „income‟ which had escaped
assessment was flawed. The question of such a transaction
forming a live link for reasons to believe that income had
escaped assessment is entirely without basis and is rejected
as such.”
7. Further, the action of the Respondents is in contravention of the
CBDT Instruction No. 2 of 2015 dated 29th January, 2015
reiterating the view expressed by the Bombay High Court
in Vodafone India Services Pvt. Ltd. v. Union of India ((2014) 368
ITR 1 (Bom)) that no income arises on investment in shares since it
is a capital account transaction.
8. In fact, the judgment of the Bombay High Court was accepted by
the Union Cabinet and a press note dated 28th January, 2015 was
issued by the Press Information Bureau, Government of India. The
relevant portion of the said press note is reproduced hereinbelow:
“Acceptance of the Order of the High Court of Bombay in
the case of Vodafone India Services Private Limited
The Union Cabinet, chaired by the Prime Minister Shri
Narendra Modi, in a major decision, has decided to accept
the order of the High Court of Bombay in the case
of Vodafone India Services Private Limited (VISPL) dated
10.10.2014. This is a major correction of a tax matter which
has adversely affected investor sentiment.
Based on the opinion of Chief Commissioner of Income-tax
(International Taxation), Chairperson (CBDT) and the
Attorney General of India, the Cabinet decided toW.P.(C) 13361/2023 Page 4 of 18
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i. accept the order of the High Court of Bombay in WP No.
871 of 2014, dated 10.10.2014; and not to file SLP against it
before the Supreme Court of India;
ii. accept of orders of Courts/IT AT/DRP in cases of other
taxpayers where similar transfer pricing adjustments have
been made and the Courts/IT AT/DRP have decided/decide in
favour of the taxpayer.
The Cabinet decision will bring greater clarity and
predictability for taxpayers as well as tax authorities, thereby
facilitating tax compliance and reducing litigation on similar
issues. This will also set at rest the uncertainty prevailing in
the minds of foreign investors and taxpayers in respect of
possible transfer pricing adjustments in India on transactions
related to issuance of shares, and thereby improve the
investment climate in the country.
The Cabinet came to this view as this is a transaction on the
capital account and there is no income to be chargeable to
tax. So applying any pricing formula is irrelevant.
xxxxxxxxx
VISPL filed a 2nd Writ Petition in the High Court of Bombay.
The High Court, on 10.10.2014, has amongst other things
observed:
xxxxxxxxx
e) The issue of shares at a premium is on Capital account
and gives rise to no income. The submission on behalf of the
revenue that the shortfall in the ALP as computed for the
purposes of Chapter X of the Act is misplaced. The ALP is
meant to determine the real value of the transaction entered
into between AEs. It is a re-computation exercise to be
carried out only when income arises in case of an
International transaction between AEs. It does not warrant
re-computation of a consideration received/given on capital
account.”
9. Further, this Court in Divya Capital One Private Limited (Earlier
Known as Divya Portfolio Private Limited) v. Assistant
Commissioner of Income Tax Circle 7(1) Delhi, 2022 SCC OnLine
Del 1461 held that „Whether it is “information to suggest” under
amended law or “reason to believe” under erstwhile law the
benchmark of “escapement of income chargeable of tax” still
remains the primary condition to be satisfied before invoking
powers under Section 147 of the Act‟.”
W.P.(C) 13361/2023 Page 5 of 18
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7. Apart from the aforesaid fundamental error which besets the
reassessment action we find that the impugned proceedings are
additionally liable to be invalidated on the ground of the same having
been framed in respect of a non-existent entity. We had while dealing
with the issue of the impact of an amalgamation and the continuation
of proceedings against the amalgamating entity, in International
Hospital Limited v. DCIT Circle 12 (2)7 held as follows:-
“13. According to the writ petitioners, the challenge on grounds
noticed above is no longer res integra and stands conclusively
answered by the Supreme Court in Maruti Suzuki. It becomes
pertinent to note that the judgment of the Supreme Court in Maruti
Suzuki had come to be rendered on an appeal which arose from a
judgment of this Court and which while upholding the decision
rendered by the Tribunal had held that an assessment made in the
name of Suzuki Powertrain India Ltd., and which had evidently
under an approved Scheme amalgamated with Maruti Suzuki
India Ltd., was a nullity. On facts it emerged that MSIL had duly
intimated the AO of the amalgamation prior to the case being
selected for scrutiny assessment. Notwithstanding that information
being available, the AO appears to have framed a draft assessment
order in the name of SPIL.
xxxx xxxx xxxx
14. It was in the aforesaid backdrop that the Supreme Court firstly
took note of an earlier decision of this Court in Spice
Entertainment Ltd. v. Commissioner of Service Tax, where it had
been held that an assessment made in the name of a transferor
company would be void ab initio and could not possibly be viewed
as a procedural defect curable or rectifiable under Section 292B of
the Act.
xxxx xxxx xxxx
18. Arguments flowing on lines similar to those which were
addressed before us in this batch appear to have been urged before
the Supreme Court in Maruti Suzuki with it being argued that a
notice in the name of a company which stood dissolved would be a
curable mistake and that in any case, Section 170 of the Act would
save those notices. This becomes apparent from a reading of7
2024 SCC OnLine Del 6730W.P.(C) 13361/2023 Page 6 of 18
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paragraphs 32 and 33 of the report which are extracted
hereinbelow:
“32. Mr. Zoheb Hossain, learned counsel appearing on
behalf of the Revenue urged during the course of his
submissions that the notice that was in issue in Skylight
Hospitality Pvt. Ltd. was under Sections 147 and 148.
Hence, he urged that despite the fact that the notice is of a
jurisdictional nature for reopening an assessment, this
Court did not find any infirmity in the decision of the
Delhi High Court holding that the issuance of a notice to
an erstwhile private limited company which had since
been dissolved was only a mistake curable under Section
292-B. A close reading of the order of this Court dated 6-
4-2018 [Skylight Hospitality LLP v. CIT, (2018) 13 SCC
147], however indicates that what weighed in the
dismissal of the special leave petition were the peculiar
facts of the case. Those facts have been noted above. What
had weighed with the Delhi High Court was that though
the notice to reopen had been issued in the name of the
erstwhile entity, all the material on record including the
tax evasion report suggested that there was no manner of
doubt that the notice was always intended to be issued to
the successor entity. Hence, while dismissing the special
leave petition this Court observed that it was the peculiar
facts of the case which led the Court to accept the finding
that the wrong name given in the notice was merely a
technical error which could be corrected under Section
292-B. Thus, there is no conflict between the decisions
in Spice Enfotainment [CIT v. Spice Enfotainment
Ltd., (2020) 18 SCC 353] on the one hand and Skylight
Hospitality LLP [Skylight Hospitality LLP v. CIT, (2018)
13 SCC 147] on the other hand. It is of relevance to refer
to Section 292-B of the Income Tax Act which reads as
follows:
“292-B. Return of income, etc., not to be invalid on
certain grounds.–No return of income, assessment,
notice, summons or other proceeding, furnished or
made or issued or taken or purported to have been
furnished or made or issued or taken in pursuance of
any of the provisions of this Act shall be invalid or
shall be deemed to be invalid merely by reason of any
mistake, defect or omission in such return of income,
assessment, notice, summons or other proceeding if
such return of income, assessment, notice, summons or
other proceeding is in substance and effect in
conformity with or according to the intent and purpose
of this Act.”
W.P.(C) 13361/2023 Page 7 of 18
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In this case, the notice under Section 143(2) under which
jurisdiction was assumed by the assessing officer was
issued to a non-existent company. The assessment order
was issued against the amalgamating company. This is a
substantive illegality and not a procedural violation of the
nature adverted to in Section 292-B.
33. In this context, it is necessary to advert to the
provisions of Section 170 which deal with succession to
business otherwise than on death. Section 170 provides as
follows:
“170. Succession to business otherwise than on
death.– (1) Where a person carrying on any business
or profession (such person hereinafter in this section
being referred to as the predecessor) has been
succeeded therein by any other person (hereinafter in
this section referred to as the successor) who continues
to carry on that business or profession– (a) the
predecessor shall be assessed in respect of the income
of the previous year in which the succession took place
up to the date of succession; (b) the successor shall be
assessed in respect of the income of the previous year
after the date of succession.
(2) Notwithstanding anything contained in sub-section
(1), when the predecessor cannot be found, the
assessment of the income of the previous year in which
the succession took place up to the date of succession
and of the previous year preceding that year shall be
made on the successor in like manner and to the same
extent as it would have been made on the predecessor,
and all the provisions of this Act shall, so far as may be,
apply accordingly.
(3) When any sum payable under this section in respect
of the income of such business or profession for the
previous year in which the succession took place up to
the date of succession or for the previous year
preceding that year, assessed on the predecessor, cannot
be recovered from him, the assessing officer shall
record a finding to that effect and the sum payable by
the predecessor shall thereafter be payable by and
recoverable from the successor and the successor shall
be entitled to recover from the predecessor any sum so
paid.
(4) Where any business or profession carried on by a
Hindu undivided family is succeeded to, andW.P.(C) 13361/2023 Page 8 of 18
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simultaneously with the succession or after the
succession there has been a partition of the joint family
property between the members or groups of members,
the tax due in respect of the income of the business or
profession succeeded to, up to the date of succession,
shall be assessed and recovered in the manner provided
in Section 171, but without prejudice to the provisions
of this section. Explanation.–For the purposes of this
section, “income” includes any gain accruing from the
transfer, in any manner whatsoever, of the business or
profession as a result of the succession.”
19. The Supreme Court in Maruti Suzuki ultimately held:
“36. In the present case, despite the fact that the assessing
officer was informed of the amalgamating company
having ceased to exist as a result of the approved scheme
of amalgamation, the jurisdictional notice was issued only
in its name. The basis on which jurisdiction was invoked
was fundamentally at odds with the legal principle that the
amalgamating entity ceases to exist upon the approved
scheme of amalgamation. Participation in the proceedings
by the appellant in the circumstances cannot operate as an
estoppel against law. This position now holds the field in
view of the judgment of a coordinate Bench of two learned
Judges which dismissed the appeal of the Revenue
in Spice Enfotainment [CIT v. Spice Enfotainment
Ltd., (2020) 18 SCC 353] on 2-11-2017. The decision
in Spice Enfotainment [CIT v. Spice Enfotainment
Ltd., (2020) 18 SCC 353] has been followed in the case of
the respondent while dismissing the special leave petition
for AY 2011-2012. In doing so, this Court has relied on
the decision in Spice Enfotainment [CIT v. Spice
Enfotainment Ltd., (2020) 18 SCC 353].
37. We find no reason to take a different view. There is a
value which the Court must abide by in promoting the
interest of certainty in tax litigation. The view which has
been taken by this Court in relation to the respondent for
AY 2011-2012 must, in our view be adopted in respect of
the present appeal which relates to AY 20122013. Not
doing so will only result in uncertainty and displacement
of settled expectations. There is a significant value which
must attach to observing the requirement of consistency
and certainty. Individual affairs are conducted and
business decisions are made in the expectation of
consistency, uniformity and certainty. To detract from
those principles is neither expedient nor desirable.”
W.P.(C) 13361/2023 Page 9 of 18
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20. As is evident from the above, Maruti Suzuki came to affirm the
view which was expressed by this Court in Spice Entertainment.
The Court in Spice Entertainment had identified the principal
question to be whether the provisions of Section 292B could be
invoked to salvage a situation where an assessment comes to be
framed in the name of the transferor company. The Court was
called upon to examine whether such an order of assessment would
be a nullity or one which could be viewed as suffering from a
procedural defect which could be validated by invoking Section
292B. Dealing with this aspect, the Court in Spice
Entertainment had observed as follows:–
“8. 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 extracted above. Having
regard 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 to make an assessment
thereupon. In the case of Saraswati Industrial Syndicate
Ltd. v. CIT, 186 ITR 278 the legal position is explained in
the following terms:
“The question is whether on the amalgamation of the
Indian Sugar Company with the appellant Company,
the Indian Sugar Company continued to have its entity
and was alive for the purposes of Section 41(1) of the
Act. The amalgamation of the two companies was
effected under the order of the High Court in
proceedings under Section 391 read with Section 394 of
the Companies Act. The Saraswati Industrial Syndicate,
the trans free Company was a subsidiary of the Indian
Sugar Company, namely, the transferor Company.
Under the scheme of amalgamation the Indian Sugar
Company stood dissolved on 29th October, 1962 and it
ceased to be in existence thereafter. Though the scheme
provided that the transferee Company the Saraswati
Industrial Syndicate Ltd. undertook to meet any
liability of the Indian Sugar Company which that
Company incurred or it could incur, any liaiblity,
before the dissolution or not thereafter.
Generally, where only one Company is involved in
change and the rights of the share holders and creditors
are varied, it amounts to reconstruction orW.P.(C) 13361/2023 Page 10 of 18
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reorganisation or scheme of arrangement. In
amalgamation two or more companies are fused into
one by merger or by taking over by another.
Reconstruction or amalgamation has no precise legal
meaning. The amalgamation is a blending of two or
more existing undertakings into one undertaking, the
share holders of each blending Company become
substantially the share holders in the Company which is
to carry on the blended undertakings. There may be
amalgamation either by the transfer of two or more
undertakings to a new Company, or by the transfer of
one or more undertakings to an existing Company.
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. See Halsburys Laws of England 4th Edition
Vol. 7 Para 1539. Two companies may join to form a
new Company, but there may be absorption or blending
of one by the other, both amount to amalgamation.
When two companies are merged and are so joined, as
to form a third Company or one is absorbed into one or
blended with another, the amalgamating Company
loses its entity.”
xxxx xxxx xxxx
21. A few years after Spice Entertainment, a similar question arose
yet again in Sky Light Hospitality. Our Court on that occasion came
to the conclusion that the mistake in that particular case was a
technical error which could be attended to and saved by virtue of
Section 292B of the Act. However, and as the Supreme Court itself
had an occasion to note in Maruti Suzuki, the Court while coming
to hold that Section 292B would apply, had pertinently observed
that the material on record was indicative of the Revenue having
always intended the notice to be addressed to the successor entity.
It becomes pertinent to note that the Court in Sky Light
Hospitality had alluded to “substantial and affirmative material
and evidence on record” which indicated that the issuance of the
notice in the name of the dissolved entity was a mistake. In arriving
at that conclusion, it had not only borne in consideration the
material which existed on the record as also the tax evasion report
which had duly taken note of the conversion of the Private Limited
Company into an LLP. It is thus apparent that Sky Light
Hospitality came to be rendered in its own peculiar facts. It was in
the aforesaid factual backdrop that the Supreme Court in Maruti
Suzuki ultimately came to hold that there was no apparent conflictW.P.(C) 13361/2023 Page 11 of 18
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between Spice Entertainment and Sky Light Hospitality with the
latter turning upon its individual facts.
22. However, the sheet anchor of the submission of the respondents
was, as noticed in the prefatory parts of this decision, the judgment
in Mahagun Realtors. However, and as was noticed by a Division
Bench of our Court in Commissioner of Income Tax v. Sony Mobile
Communications India Pvt. Ltd., and which decision we shall
advert to a little later, that decision of the Supreme Court itself
turned upon the facts of that particular case.
23. In Mahagun Realtors, while expounding upon the effect of
merger of two corporate entities consequent to a Scheme of
Arrangement being sanctioned, the Supreme Court pertinently
observed:–
“18. Amalgamation, thus, is unlike the winding up of a
corporate entity. In the case of amalgamation, the outer
shell of the corporate entity is undoubtedly destroyed; it
ceases to exist. Yet, in every other sense of the term, the
corporate venture continues – enfolded within the new or
the existing transferee entity. In other words, the business
and the adventure lives on but within a new corporate
residence, i.e., the transferee-company. It is, therefore,
essential to look beyond the mere concept of destruction
of corporate entity which brings to an end or terminates
any assessment proceedings. There are analogies in civil
law and procedure where upon amalgamation, the cause of
action or the complaint does not per se cease-depending of
course, upon the structure and objective of enactment.
Broadly, the quest of legal systems and courts has been to
locate if a successor or representative exists in relation to
the particular cause or action, upon whom the assets might
have devolved or upon whom the liability in the event it is
adjudicated, would fall.”
xxxx xxxx xxxx
27. After copiously taking note of the disclosures which were made
in the course of assessment, it found that the following salient facts
emerged in the case of Mahagun Realtors:–
“40. The facts of the present case are distinctive, as
evident from the following sequence:
“1. The original return of MRPL was filed under section
139(1) on June 30, 2006.
W.P.(C) 13361/2023 Page 12 of 18
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2. The order of amalgamation is dated May 11, 2007 – but
made effective from April 1, 2006. It contains a condition-
clause 2 – whereby MRPL’s liabilities devolved on MIPL.
3. The original return of income was not revised even
though the assessment proceedings were pending. The last
date for filing the revised returns was March 31, 2008,
after the amalgamation order.
4. A search and seizure proceeding was conducted in
respect of the Mahagun group, including the MRPL and
other companies:
(i) When search and seizure of the Mahagun group took
place, no indication was given about the amalgamation.
(ii) A statement made on March 20, 2007 by Mr. Amit
Jain, MRPL’s managing director, during statutory survey
proceedings under section 133A, unearthed discrepancies
in the books of account, in relation to amounts of money
in MRPL’s account. The specific amount admitted was Rs.
5.072 crores, in the course of the statement recorded.
(iii) The warrant was in the name of MRPL. The directors
of MRPL and MIPL made a combined statement under
section 132 of the Act, on August 27, 2008.
(iv) A total of Rs. 30 crores cash, which was seized – was
surrendered in relation to MRPL and other transferor
companies, as well as MIPL, on August 27, 2008 in the
course of the admission, when a statement was recorded
under section 132(4) of the Act, by Mr. Amit Jain.
5. Upon being issued with a notice to file returns, a return
was filed in the name of MRPL on May 28, 2010. Before
that, on two dates, i.e., July 22/27, 2010, letters were
written on behalf of MRPL, intimating about the
amalgamation, but this was for the assessment year 2007-
2008 (for which separate proceedings had been initiated
under section 153A) and not for the assessment year 2006-
2007.
6. The return specifically suppressed – and did not disclose
the amalgamation (with MIPL) – as the response to query
27(b) was „N.A.‟.
7. The return – apart from specifically being furnished in
the name of MRPL, also contained its permanent account
number.
W.P.(C) 13361/2023 Page 13 of 18
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8. During the assessment proceedings, there was full
participation-on behalf of all transferor companies, and
MIPL. A special audit was directed (which is possible
only after issuing notice under section 142). Objections to
the special audit were filed in respect of portions relatable
to MRPL.
9. After fully participating in the proceedings which were
specifically in respect of the business of the erstwhile
MRPL for the year ending March 31, 2006, in the cross
objection before the Income-tax Appellate Tribunal, for
the first time (in the appeal preferred by the Revenue), an
additional ground was urged that the assessment order was
a nullity because MRPL was not in existence.
10. Assessment order was issued – undoubtedly in relation
to MRPL (shown as the assessee, but represented by the
transferee company MIPL).
11. Appeals were filed to the Commissioner of Income-tax
(and a cross-objection, to the Income-tax Appellate
Tribunal) – by MRPL „represented by MIPL‟.
12. At no point in time – the earliest being at the time of
search, and subsequently, on receipt of notice, was it
plainly stated that MRPL was not in existence, and its
business assets and liabilities, taken over by MIPL.
13. The counter-affidavit filed before this court – (dated
November 7, 2020) has been affirmed by Shri. Amit Jain
S/o Shri. P. K. Jain, who-is described in the affidavit as
„Director of M/s. Mahagun Realtors (P.) Ltd., R/o…‟.””
28. It was on the aforesaid set of facts that it ultimately came to
hold as under:
“41. In the light of the facts, what is overwhelmingly
evident – is 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 Commissioner of Incometax, and a cross-appeal
was filed before the Income-tax Appellate Tribunal. Even
the affidavit before this court is on behalf of the director of
MRPL. Furthermore, the assessment order painstakinglyW.P.(C) 13361/2023 Page 14 of 18
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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 Assessing
Officer, on the other hand, had the option of making a
common order, with MIPL as the assessee, but containing
separate parts, relating to the different transferor
companies (Mahagun Developers Ltd., Mahagun Realtors
Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home
D‟cor Pvt. Ltd.). The mere choice of the Assessing Officer
in issuing a separate order in respect of MRPL, in these
circumstances, cannot nullify it. Right from the time it was
issued, and at all stages of various proceedings, the parties
concerned (i. e., MIPL) treated it to be in respect of the
transferee company (MIPL) by virtue of the amalgamation
order – and section 394(2). Furthermore, it would be
anybody’s guess, if any refund were due, as to whether
MIPL would then say that it is not entitled to it, because
the refund order would be issued in favour of a non-
existing company (MRPL). Having regard to all these
reasons, this court is of the opinion that in the facts of this
case, the conduct of the assessee, commencing from the
date the search took place, and before all forums, reflects
that it consistently held itself out as the assessee. The
approach and order of the Assessing Officer is, in this
court’s opinion in consonance with the decision in
Marshall and Sons (supra), which had held that:
“an assessment can always be made and is supposed to
be made on the transferee company taking into account
the income of both the transferor and transferee
company.”
42. 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.
43. In view of the foregoing discussion and having regard
to the facts of this case, this court is of the considered
view, that the impugned order of the High Court cannot be
sustained; it is set aside. Since the appeal of the Revenue
against the order of the Commissioner of Income-tax was
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not heard on the merits, the matter is restored to the file of
the Income-tax Appellate Tribunal, which shall proceed to
hear the parties on the merits of the appeal – as well as the
cross objections, on issues, other than the nullity of the
assessment order, on merits. The appeal is allowed, in the
above terms, without order on costs.”
29. As is apparent from the aforesaid extracts, what appears to have
weighed upon the Supreme Court in Mahagun Realtors was a
deliberate attempt on the part of the successor assessee to
misrepresent and perhaps an evident failure to make a candid and
full disclosure of material facts. The Court in Mahagun
Realtors noticed that even though the factum of amalgamation was
known to the assessee, it failed to make appropriate disclosures
either at the time of search or in the statements which came to be
recorded in connection therewith. Even the Return of Income
which came to be filed had suppressed the factum of
amalgamation. It also bore in consideration that the Return itself
was submitted in the name of the amalgamating entity. It was that
very entity in whose name further appeals came to be instituted. It
was in the aforesaid backdrop that the Supreme Court was
constrained to observe that the conduct of the assessee was
evidence of it having held itself out to be the entity which had
ceased to exist in the eyes of law coupled with an abject failure on
its part to have made a complete disclosure.
30. These distinguishing features which imbue Mahagun Realtors
were succinctly noticed in Sony Mobile Communications with the
Court observing as under:–
“22. As is evident upon a perusal of the aforementioned
extracts from Mahagun Realtors the court distinguished the
judgment rendered in Maruti Suzuki, on account of the
following facts obtaining in that case:
(i) There was no intimation by the assessee regarding
amalgamation of the concerned company.
(ii) The return of income was filed by the amalgamating
company, and in the “business reorganisation” column,
curiously, it had mentioned “not applicable”.
(iii) The intimation with regard to the fact that the
amalgamation had taken place was not given for the
assessment year in issue.
(iv) The assessment order framed in that case mentioned not
only the name of the amalgamating company, but also the
name of the amalgamated-company.
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(v) More crucially, while participating in proceedings
before the concerned authorities, it was represented that the
erstwhile company, i.e., the amalgamating company was in
existence.
23. Clearly, the facts obtaining in Mahagun Realtors do not
obtain in this matter.
24. As noticed above, even after the Assessing Officer was
informed on December 6, 2013, that the amalgamation had
taken place, and was furnished a copy of the scheme, he
continued to proceed on the wrong path. This error
continued to obtain, even after the Dispute Resolution Panel
had made course correction.
25. Thus, for the foregoing reasons, we are unable to
persuade ourselves with the contention advanced on behalf
of the appellant Revenue, that this is a mistake which can be
corrected, by taking recourse to the powers available with
the Revenue under section 292B of the Act.”
31. We thus find ourselves unable to read Mahagun Realtors as a
decision which may have either diluted or struck a discordant
chord with the principles which came to be enunciated in Maruti
Suzuki. We also bear in mind the indisputable position of both
judgments having been rendered by co-equal Benches of the
Supreme Court. Mahagun Realtors is ultimately liable to be
appreciated bearing in mind the peculiar facts of that case
including the conduct of the assessee therein. It was those facets
which appear to have weighed upon the Supreme Court to hold
against the assessee.
32. In view of the aforesaid, the position in law appears to be well-
settled that a notice or proceedings drawn against a dissolved
company or one which no longer exists in law would invalidate
proceedings beyond repair. Maruti Suzuki conclusively answers
this aspect and leaves us in no doubt that the initiation or
continuance of proceedings after a company has merged pursuant
to a Scheme of Arrangement and ultimately comes to be dissolved,
would not sustain.”
The initiation of reassessment is thus liable to be quashed and set
aside on both the aforenoted scores.
8. The writ petition is accordingly allowed. The impugned order
referable to Section 148A(d) as well as notice under Section 148, both
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dated 30 August 2023 are hereby quashed and set-aside. This order,
however, shall be without prejudice to the rights of the respondents to
draw proceedings afresh if otherwise permissible in law.
YASHWANT VARMA, J.
DHARMESH SHARMA, J.
DECEMBER 13, 2024
sp
W.P.(C) 13361/2023 Page 18 of 18
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