[2023] 156 taxmann.

com 644 (Jharkhand)[27-03-2023]

INCOME TAX : Where assessee-company amalgamated with a company and thereby

lost its existence and same was informed to Assessing Officer, assessment order
passed in name of non-existent company was bad in law

■■■

[2023] 156 taxmann.com 644 (Jharkhand)

HIGH COURT OF JHARKHAND
Principal Commissioner of Income-tax
v.
Mount View Dealmark (P.) Ltd.*
APARESH KUMAR SINGH AND DEEPAK ROSHAN, JJ.
T.A.NO. 10 OF 2021 †
MARCH 27, 2023

Section 143 of the Income-tax Act, 1961 - Assessment - General (Non-existing company) -
Assessment year - Whether where assessee-company amalgamated with a company and
thereby lost its existence and same was informed to Assessing Officer, assessment order
passed in name of non-existent company is bad in law - Held, yes [Para 13] [In favour of
assessee]
Circulars & Notifications : Circular No. 17/2019, dated 8-8-2019, Circular No. 23/2019, dated 6-
9-2019
FACTS

■ The assessee had issued equity shares at premium and received share premium.
■ The Assessing Officer treated the share premium so received as unexplained cash credit and issued a
notice under section 148.
■ Having received the notice, the assesse-company sought for reasons to believe for reopening of the
concluded assessment. The reasons were provided as against which the company filed its objection which
was also disposed of.
■ In the meantime, the assessee-company amalgamated with VMPL and this information was duly informed
to the Assessing officer.
■ However, the Assessing Officer passed an assessment order in the name of the assessee-company in
question, which had lost its existence.
■ On appeal, the Commissioner (Appeals) held that the initiation of the proceeding itself was bad in law as
the Assessing Officer did not have reasons to believe that the income chargeable to tax has escaped
assessment.
■ On second appeal, the Tribunal held that the assessee-company was not in existence as on the dated of
passing of the assessment order. Hence, assessment order passed on a non-existent company was bad in
law.
■ On the revenue's appeal to the High Court :
HELD

■ It is crystal clear that the Tribunal has not committed any error in rejecting the appeal filed by the revenue,
in as much as, admittedly; the assessee-company was not in existence as on the date of passing of the
assessment order and this fact was duly informed and was in the knowledge of the Assessing Officer.
Hence, it is to be held that the assessment order passed on a non-existent Company is bad in law,
inasmuch as, on the date of passing of the assessment order, the assessee-company was not in existence,
and as such no any liability can be fastened on a non-existent entity. The Tribunal has rightly held that
assessment order passed on a non-existent Company is bad in law. [Para 13]
CASE REVIEW

Order of Tribunal in IT Appeal No. 290 (Ran) of 2017, dated 16-9-2020 (para 13) affirmed.
Pr. CIT v. Maruti Suzuki (India) Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para
11) and Sandeep Chopra v. Pr. CIT [2023] 149 taxmann.com 225/292 Taxman 269 (Jhar.) (para 12) followed.
CASES REFERRED TO

Pr. CIT v. Mahagun Realtors (P) Ltd. [2022] 137 taxmann.com 91/287 Taxman 566/443 ITR 194 (SC) (para
7), Marshall Sons and Co. (India) Ltd. v. ITO [1997] 115 SCL 6 (SC) (para 7), Pr. CIT v. Chain House
International (P.) Ltd. [2018] 98 taxmann.com 47/[2019] 408 ITR 561 (M.P.) (para 8), Pr. CIT v. Chain House
International (P.) Ltd. [2019] 103 taxmann.com 435/262 Taxman 207 (SC) (para 8), Pr. CIT v. Maruti Suzuki
(India) Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 9) and Sandeep Chopra v.
Pr. CIT [2023] 149 taxmann.com 225/292 Taxman 269 (Jhar.) (para 12).
R.N. Sahay, Sr. S.C. for the Appellant. Nitin Kumar Pasari and Ms. SidhiJalan, Advs. for the Respondent.
ORDER

1. The instant appeal is directed against the order dated 16-9-2020 passed by the learned Income-tax Appellate
Tribunal, Ranchi Bench, Ranchi (hereinafter to be referred as ITAT); in I.T.A. No. 290/Ran/2019 along with
Cross Objection No. 05/Ran/2020 for the Assessment Year 2011-12, whereby, the learned ITAT has rejected
the appeal of the Revenue.
2. The brief fact as can be gathered from the records of the case is that the assessee M/s. Mount View
Dealmark Private Limited had declared a total income of Rs. 2081/- for the assessment year in question. On
12-2-2018, notices were issued under section 133(6) of the Income-tax Act, 1961 (hereinafter to be referred as
the Act) for furnishing details and documents for carrying out inquiry as the respondent Company had issued
156000 equity shares of Rs. 10/- value at a share premium of Rs. 190/-and the Company had received total
share premium of Rs. 2,96,40,000/. Based upon the same, treating the share premium so received to be
unexplained cash credit, notice under section 148 was issued on 29-3-2018. Having received the notice, the
assessee Company sought for "reasons to believe" for reopening of the concluded assessment on 7-5-2018.
The reasons were provided as against which the company filed its objection which was also disposed of on
11-7-2018.
3. In the meantime, the respondent assessee Company was amalgamated with M/s. Vishesh Marketing Private
Limited after due sanction from the Regional Director, Ministry of Corporate Affairs, Kolkata. This
information was duly informed to the Income Tax Officer vide letter dated 14-11-2018 received by the
Assessing Officer on 19-11-2018.
The Scheme of Amalgamation had duly been submitted before the Assessing Officer and a perusal of the
scheme would transpire that clause 1.1 of the said scheme dealt with transfer of asset, clause 1.2 dealt with
transfer of liabilities and clause 7 dealt with treatment of taxes. However, the Assessing Officer(In short AO)
went ahead to assess the respondent Company in question, which had lost its existence, as on the day of
passing of the assessment order dated 20-12-2018 though the same was well within the knowledge of the AO.
4. Being aggrieved, the respondent Company preferred an appeal before the Commissioner of Income Tax
(Appeal), and the appellate authority vide its order dated 3-9-2019 without touching upon the issues of share
premium or non-existent Company, held the initiation of the proceeding itself to be bad in law and declared as
under. For brevity, relevant part of order passed by the CIT (Appeal) is quoted herein below:
 "In the instant case the "reason to believe" as recorded have been examined on the basis of the above and
do not stand up to the test and therefore, the contention of the appellant, that the reassessment
proceedings having been initiated merely for the reason of high share premium and the reasons recorded
by the AO are vague and self contradictory appears to be tenable.
In view of the foregoing discussion, and respectfully following the ratios as laid down in the cases quoted
above, I am of the opinion that, as the Assessing Officer has not brought on record any proper
"satisfaction" or "reason to believe" that the identity, creditworthiness or genuineness of the transactions
are suspected, and has merely stated that the shares have been issued at a premium and the appellant has
no business activity, does not qualify as sufficient basis to initiate proceedings and therefore, the notice
issued under section 148 of the Income-tax Act, 1961 is defective, and as the Assessing Officer did not
have reasons to believe that the income chargeable to tax has escaped assessment, therefore the notice
itself issued under section 148 of the Income-tax Act, 1961 is void ab-initio and liable to be quashed."
5. Aggrieved thereof, the Revenue preferred an appeal before the learned ITAT which was also dismissed with
following finding:
"The assessee-company was merged with M/s. Vishesh Marketing Pvt. Ltd. This fact was reported to the
AO vide a letter dated 14-11-2018, a copy of which is at page 177 of paper book. Date of amalgamation
was 09-8-2018. The assessment order was passed on 20-12-2018. The assessee-company M/s. Mount
View Dealmark Pvt. Ltd. was not in existence as on the dated of passing of the assessment order. Hence,
assessment order passed on a non-existent Company is bad in law. We are holding so by respectfully
following the judgment passed by the Hon'ble Supreme Court in the case of PCIT v. Maruti Suzuki India
Ltd. [2019] 416 ITR 613 (SC).
This ground was taken before the CIT(A) but the ld. CIT(A) has granted relief to the assessee as another
ground but had not adjudicated this issue. He held that the re-opening is bad in law. As the assessment
itself is bad in law as it was made on a non-existent Company, no separate orders need to be passed on
the Revenue appeal."
6. The instant appeal was admitted with following question of law:
"(i) Whether on the facts and in the circumstances of the case and in law, the learned ITAT is justified in
dismissing the department's appeal on the basis of false information submitted by the assessee stating that
on the date of initiation of proceedings u/s 147 of the I.T. Act on 29-3-2018, the assessee was merged
with M/s. Vishesh Marketing Private Limited. The Hon'ble ITAT failed to verify the fact evident from the
assessment order that the merger with M/s. Vishesh Marketing Private Limited took place on 9-8-2018
and NOT on 29-3-2018 as assumed by the Hon'ble ITAT for granting relief.
(ii) Whether on the facts and in the circumstances of the case and in law, the learned ITAT is justified in
granting relief in respect of the organized tax evasion activity adopted by the assessee through
introduction of unexplained share capital and share premium by seven companies, whose identity,
creditworthiness and genuineness of transactions are doubtful"
7. Mr. R. N. Sahay, learned counsel appearing for the Revenue assailed the impugned order and submitted that
the learned ITAT was not correct in rejecting the appeal on the basis of false information submitted by the
assessee stating that on the date of initiation of proceedings u/s 147 of the I.T. Act on 29-3-2018, the assessee
was merged with M/s. Vishesh Marketing Private Limited. The tribunal has not verified the fact that the
merger with M/s. Vishesh Marketing Private Limited took place on 9-8-2018 and not on 29-3-2018.
Learned counsel for the appellant department has relied upon the judgment of Pr. CIT v. Mahagun Realtors
(P) Ltd., reported in 2022 SCC Online SC 407/[2022] 137 taxmann.com 91/287 Taxman 566/443 ITR 194
(SC) in particular paragraphs 42 and 43 and sought to distinguish the case of the present appellant. It is
submitted that a perusal of para-42.8 of Mahagun Realtors (P.) Ltd. would indicate that the transferor
company had duly participated in the assessment proceedings like the present assessee. The proceedings in the
said case related to assessment year 2006-07. Therefore, the Apex Court observed that the facts of the said
case overwhelmingly showed that amalgamation was known to the assessee at the stage of search and seizure
operations as well as statements recorded by the revenue of the Directors and Managing Director of the group.
A return was filed pursuant to the notice which suppressed the fact of amalgamation; on the contrary the
return was of MRPL. Though that entity had ceased to be in existence in law yet appeals were filed on its
behalf before the CIT and a cross appeal was filed before the ITAT. The Apex Court noted that the assessment
order no doubt was expressed to be of MRPL (as the assessee), but represented by the transferee MIPL.
Having regard to all these reasons, the Court was of the opinion that in the facts of the case the conduct of the
assessee commencing from the date the search took place and before all forums reflected that it consistently
held itself out as the assessee. The approach of the assessing officer was found to be in consonance with the
decision in Marshall Sons and Co. (India) Ltd. v. ITO [1997] 115 SCL 6 (SC) 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.
In the light of the aforesaid discussions and having regard to the facts of the case, the Apex Court set aside the
impugned order of the High Court and the matter was restored to the file of ITAT to hear the parties on issues
other than the nullity of the assessment order on merits. The present assesse like Mahagun Realtors (P.) Ltd.
had consciously participated in the assessment proceedings. However, learned counsel for the revenue has not
disputed that the factum of amalgamation was duly brought to the notice of the assessing officer vide letter
dated 14th November 2018 received by the Assessing Officer on 19th November, 2018 prior to passing of the
assessment order dated 20th December 2018.
He further contended that the learned ITAT should have appreciated that it was a case of organized tax evasion
adopted by the assessee-company through introduction of unexplained share capital and share premium by
seven companies, whose identity, creditworthiness and genuineness of transactions were doubtful.
Thus, the instant appeal should be allowed and the order of the AO may be restored.
8. Mr. Nitin Kr. Pasari learned counsel for the respondent assessee assisted by Ms. Sidhi Jalan, relying upon
its counter affidavit raised issues on maintainability of the Tax Appeal for the reasons that the Circular No.
17/2019 dated 8-8-2019 issued by the CBDT prescribes revised monetary limit for filing any appeal by the
Revenue before the High Court to be above Rs. 1.00 Crore. Further, Circular No. 23/2019 dated 6-9-2019 has
also been brought on record in order to satisfy that the present is a case where no tax evasion through long-
term capital gains/short-term capital loss through penny stock is involved and in view thereof, the present
appeal is not maintainable.
It has also been pointed out by the learned counsel that on account of merits also, the appeal is devoid of any
merit, since:—
(i) Initiation of proceedings and reasons to believe was completely lacking.
(ii) Issuance of share at premium cannot be adjudicated by the department, in the manner the Assessing
Officer did and has relied the judgment of the Hon'ble Madhya Pradesh High Court having bench at
Indore in I.T.A. No. 112/2018 (Pr. CIT v. Ms. Chain House International (P.) Ltd. [2018] 98
taxmann.com 47/[2019] 408 ITR 561), wherein the Hon'ble Court has dealt with the issue in great detail
and has been pleased to hold that issuance of share at premium is an arrangement between the investor
and the Company and no addition could be made under section 68 of the Act, in the absence of any
positive evidence against the Company.
The Revenue had preferred an appeal before the Hon'ble Apex Court against the aforesaid order in Pr.
CIT v. Chain House International (P.) Ltd. [2019] 103 taxmann.com 435/262 Taxman 207 (SC) Special
Leave Petition (Civil) Diary No. 1992/2019 which was also dismissed by the Hon'ble Apex Court vide its
order dated 18-2-2019.
(iii) The Company in question lost its existence as on the day the assessment order was passed and as
such, no order as against a non-existent Company could have been passed which was well within the
knowledge of the Assessing Officer.
(iv) In reply to the contention of the petitioner as regards the applicability of the decision in Mahagun
Realtors (P.) Ltd. (supra) learned counsel for the respondent assessee has specifically placed reliance on
para-35 to 37 of the same judgment to distinguish the case of that assessee for the year 2006-07. He has
submitted that relief was denied to the said assessee for the relevant year on the plea of amalgamation
though the said plea of amalgamation was accepted in respect of the same assessee for the subsequent
years 2007-08 and 2008-09 since for the A.Y. 2006-07 there was no intimation by the assessee regarding
amalgamation of the company. The ROI for the AY 2006-07 first filed by the MRPL on 30-6-2006 was in
the name of MRPL.
9. Having heard learned counsel for the rival parties and after going through the impugned order it is crystal
clear that the respondent Company lost its existence as on the day the assessment order was passed and as
such, no order as against a non-existent Company could have been passed which was well within the
knowledge of the Assessing Officer. Reliance is this regard may be made to the judgment rendered by the
Hon'ble Apex Court in the case of Mahagun Realtors (P.) Ltd. (supra) which has dealt a similar issue and also
referred to the case of Pr. CIT v. Maruti Suzuki (India) Ltd. (2020) 18 SCC 331/[2019] 107 taxmann.com
375/265 Taxman 515/416 ITR 613 (SC). The Apex Court however denied relief to assessee MRPL as its case
was indistinguishable on facts so far as AY 2006-07 is concerned though the plea of amalgamation of MRPL
with MIPL was accepted for the subsequent AY 2007-08 and 2008-09 as the fact of amalgamation was duly
brought to the A.O. Relevant paragraph of the decision in Mahagun Realtors (P.) Ltd. is quoted herein below:
"18. The amalgamation of two or more entities with an existing Company or with a Company created a
new was provided for, statutorily, under the old Companies Act, 1956, under section 394(1)(a). Section
394 empowered the court to approve schemes proposing amalgamation, and oversee the various steps and
procedures that had to be undertaken for that purpose, including the apportionment of and devolution of
assets and liabilities, etc. Section 394(2) provided as follows:
"(2) Where an order under this section provides for the transfer of any property or liabilities, then, by
virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be
transferred to and become the liabilities of, the transferee Company; and in the case of any property, if
the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to
cease to have effect."
19. Section 394(4)(a) defined "property" for the purpose of devolution of assets and liabilities: "394….
(4) In this section-
(a) "property" includes property, rights and powers of every description and" liabilities" includes duties
of every description; and.."
20. 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.
24. The effect of amalgamation in the context of income tax, was again considered in another earlier
decision, i.e., Marshall Sons and Co. (India) Ltd. v. Income-tax Officer. There, the court held that:
"14. Every scheme of amalgamation has to necessarily provide a date with effect from which the
amalgamation/transfer shall take place. The scheme concerned herein does so provide viz., January 1,
1982. It is true that while sanctioning the scheme, it is open to the Court to modify the said date and
prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circumstances of the
case. If the Court so specifies a date, there is little doubt that such date would be date of
amalgamation/date of transfer. But where the Court does not prescribed any specific date but merely
sanctions the scheme presented to it - as has happened in this case - it should follow that the rate of
amalgamation/date of transfer is the date specified in the scheme as "the transfer date". It cannot be
otherwise. It must be remembered that before applying to the Court under section 391(1), a scheme has to
be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the
court may take some time; indeed, they are bound to take some time because several steps provided by
Sections 391 to 394 and the relevant Rules have to be followed and complied with. During the period the
proceedings are pending before the Court, both the amalgamation units, i.e., the Transferor Company and
the Transferee Company may carry on business, as has happened in this case but normally provision is
made for this aspect also in the scheme of amalgamation. In the present scheme, clause 6(b) does
expressly provide that with effect from the transfer date, the Transferor Company (Subsidiary Company)
shall be deemed to have carried on the business for and on behalf of the Transferee Company (Holding
Company) with all attendant consequences. It is equally relevant to notice that the Courts have not only
sanctioned the scheme in this case but have also not specified any other date as the date of
transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of
amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore, of
the opinion that the notices issued by the Income-tax Officer (impugned in the writ petition) were not
warranted in law. The business carried on by the Transferor Company (Subsidiary Company) should be
deemed to have been carried on for and on behalf of the Transferee Company. This is the necessary and
the logical consequence of the court sanctioning the scheme of amalgamation as presented to it. The
order of the Court sanctioning the scheme, the filing of the certified copies of the orders of the court
before the Registrar of Companies, the allotment of shares etc. may have all taken place subsequent to the
date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be
January 1, 1982. This is also the ratio of the decision of the Privy Council in Raghubar Dayal v. The
Bank of Upper India Ltd. AIR 1919 PC 9, relied on.
15. Counsel for the Revenue contended that if the aforesaid view is adopted then several complications
will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basis for
this apprehension. Firstly, 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.
Secondly, and probably the more advisable course from the point of view of the Revenue would be to
make one assessment on the Transferee Company taking into account the income of both, of Transferor
or Transferee Companies and also to make separate protective assessments on both the Transferor and
Transferee Companies separately. There may be a certain practical difficulty in adopting this course
inasmuch as separate balance-sheets may not be available for the Transferor and Transferee Companies.
But that may not be an insuperable problem inasmuch as assessment can always be made, on the
available material, even without a balance-sheet. In certain cases, best-judgment assessment may also be
resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for
consideration in these cases directly."
25. Many High Courts in recent years, had mostly relied upon Saraswati Syndicate which was a case
where the transferor entity had claimed a certain relief on the basis of the agreed method of accounting.
The corresponding obligation to recognise the demands was sought to be disallowed in the subsequent
year, in the case of the then transferee Company. The decision of the Delhi High Court, in Spice (supra),
after discussing the decision in Saraswati Syndicate, went on to explain why assessing an amalgamating
Company, without framing the order in the name of the transferee Company is fatal:
"10. Section 481 of the Companies Act provides for dissolution of the Company. The Company Judge in
the High Court can order dissolution of a Company on the grounds stated therein. The effect of the
dissolution is that the Company no more survives. The dissolution puts an end to the existence of the
Company. It is held in M.H. Smith (Plant Hire) Ltd. v. D.L. Mainwaring (T/A Inshore), 1986 BCLC 342
(CA) that "once a Company is dissolved it becomes a non-existent party and therefore no action can be
brought in its name. Thus an insurance Company which was subrogated to the rights of another insured
Company was held not to be entitled to maintain an action in the name of the Company after the latter
had been dissolved".
11. After the sanction of the scheme on 11 April, 2004, the Spice ceases to exit w.e.f. 1 July, 2003. Even
if Spice had filed the returns, it became incumbent upon the Income-tax 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 appellant on record. Instead, the Assessing Officer made the
assessment in the name of M/s. Spice which was non existing entity on that day. In such proceedings and
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.
12. 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 of
the Act."
33. In Maruti Suzuki (supra), the scheme of amalgamation was approved on 29-1-2013 w.e.f. 1-4-2012,
the same was intimated to the AO on 2-4-2013, and the notice under section 143(2) for AY 2012-2013
was issued to amalgamating Company on 26-9-2013. This court in facts and circumstances observed the
following:
"35. 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 292B.
39. 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 co-ordinate Bench of
two learned judges which dismissed the appeal of the Revenue in Spice Entertainment on 2 November,
2017. The decision in Spice Entertainment 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 Entertainment.
40. 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 2012-2013. 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."
35. There is no doubt that MRPL amalgamated with MIPL and ceased to exist thereafter; this is an
established fact and not in contention. The respondent has relied upon Spice and Maruti Suzuki (supra) to
contend that the notice issued in the name of the amalgamating Company is void and illegal. The facts of
present case, however, can be distinguished from the facts in Spice and Maruti Suzuki on the following
bases.
36. Firstly, in both the relied upon cases, the assessee had duly informed the authorities about the merger
of companies and yet the assessment order was passed in the name of amalgamating/non-existent
Company. However, in the present case, for AY 2006-2007, there was no intimation by the assessee
regarding amalgamation of the Company. The ROI for the AY 2006-2007 first filed by the respondent on
30-6-2006 was in the name of MRPL. MRPL amalgamated with MIPL on 11-5-2007, w.e.f. 1-4-2006. In
the present case, the proceedings against MRPL started in 27-8-2008- when search and seizure was first
conducted on the Mahagun group of companies. Notices under section 153A and Section 143(2) were
issued in the name MRPL and the representative from MRPL corresponded with the department in the
name of MRPL. On 28-5-2010, the assessee filed its ROI in the name of MRPL, and in the 'Business
Reorganization' column of the form mentioned 'not applicable' in amalgamation section. Though the
respondent contends that they had intimated the authorities by letter dated 22-7-2010, it was for AY
2007-2008 and not for AY 2006-2007. For the AY 2007-2008 to 2008- 2009, separate proceedings under
section 153A were initiated against MIPL and the proceedings against MRPL for these two assessment
years were quashed by the Additional CIT by order dated 30-11-2010 as the amalgamation was disclosed.
In addition, in the present case the assessment order dated 11-8-2011 mentions the name of both the
amalgamating (MRPL) and amalgamated (MIPL) companies.
37. Secondly, in the cases relied upon, the amalgamated companies had participated in the proceedings
before the department and the courts held that the participation by the amalgamated Company will not be
regarded as estoppel. However, in the present case, the participation in proceedings was by MRPL-which
held out itself as MRPL.
42. 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 30-6-2006.
2. The order of amalgamation is dated 11-5-2007 - but made effective from 1-4-2006. It contains a
condition - clause 220 - 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 31-3-2008, 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 20-3-2007 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 27-8-2008.
(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 27-8-2008 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 28-5-2010.
Before that, on two dates, i.e., 22/27-7-2010, letters were written on behalf of MRPL, intimating about
the amalgamation, but this was for AY 2007-2008 (for which separate proceedings had been initiated
under section 153A) and not for AY 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 PAN
number.
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 31-3-2006, in the cross-objection before the ITAT, 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 CIT (and a cross-objection, to ITAT) - 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 7-11-2020) has been affirmed by Shri Amit Jain
S/o Shri P.K. Jain, who-is described in the affidavit as "Director of M/s. MahagunRealtors(P) Ltd.,
R/o…".
43. 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 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 AO, 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 Décor Pvt.
Ltd.). The mere choice of the AO 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 AO is, in this court's opinion in consonance with the decision in Marshall &
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."
10. A perusal of the aforesaid discussion shows that the argument of learned counsel for the appellant based
upon para-42 of the decision in Mahagun Realtors (P) Ltd.to distinguish the case of the present assessee is not
acceptable for the following reasons:
In the said case the proceedings against MRPL started on 27th August, 2008 when search and seizure was first
conducted on the Mahagun group of companies. Notices under section 153A and Section 143(2) were issued
in the name of MRPL and the representative from MRPL corresponded with the department in the name of
MRPL. On 28th May, 2010 the assessee filed its ROI in the name of MRPL and in the 'Business
Reorganisation' column of the form mentioned 'not applicable' in amalgamation section. Though the
respondent contended that they had intimated the authorities by letter dated 22-7-2010, it was for Ays 2007-08
and not for AY 2006-07. For the AY 2007-08 to 2008-09, separate proceedings under section 153A were
initiated against MIPL and the proceedings against MRPL for these two assessment years were quashed by
the Additional CIT by order dated 30-11-2010 as the amalgamation was disclosed. In addition thereto, the
Apex Court observed that in the present case the assessment order dated 11-8-2011 mentions the name of both
the amalgamating (MRPL) and amalgamated (MIPL) companies. The Apex court also observed at para-37
that in the cases relied upon, the amalgamated companies had participated in the proceedings before the
department and the courts held that the participation by the amalgamated Company will not be regarded as
estoppel. However, in the instant case, the participation in proceedings was by MRPL which held out itself as
MIPL.
11. However, in the facts of the present case it is not in dispute that the jurisdictional notices were issued upon
the respondent assessee for the assessment year 2011-12 under section 133(6) of the Income-tax Act, 1961.
Based upon the same, notices under section 148 were issued on 29th March, 2018. Having received the notice,
the assessee Company sought for "reasons to believe" for reopening of the concluded assessment on 7-5-2018.
The reasons were provided as against which the company filed its objection which was also disposed of on
11-7-2018. In the meantime, the respondent assessee Company was amalgamated with M/s. Vishesh
Marketing Private Limited on 9-8-2018 after due sanction from the Regional Director, Ministry of Corporate
Affairs, Kolkata. This was duly informed to the Income-tax Officer vide letter dated 14-11-2018 received by
the Assessing Officer on 19-11-2018.The Scheme of Amalgamation had been duly submitted before the
Assessing Officer. A perusal of the scheme shows that clause 1.1 of the said scheme dealt with transfer of
asset; clause 1.2 dealt with transfer of liabilities and clause 7 dealt with treatment of taxes. However, the
Assessing Officer proceeded to assess the respondent Company in question, which had lost its existence, as on
the date of passing of the assessment order dated 20-12-2018 though the same was within the knowledge of
the AO.As it is evident that at no point of time the respondent assessee had represented during assessment
proceedings as representing on behalf of the amalgamating/transferee company. In fact the amalgamation took
place during the assessment proceedings on 9th August, 2018. Learned counsel for the respondent assessee
has shown from the supplementary affidavit that since the assessment order was passed against the present
respondent company even after it had lost its existence, the appeal was preferred by it on behalf of the
amalgamating/transferee company. Though the CIT appeals set aside the assessment order on other grounds,
but ITAT rejected the appeal of the revenue by recording the finding that the assessee company had already
merged with the transferee company during the assessment proceedings and this fact was duly brought to the
notice of the assessing officer. Therefore, the decision of the Apex Court in the case of Maruti Suzuki (supra)
applies to the present case.
12. Recently, this Court in W.P.(T) No. 2972 of 2022(Sandeep Chopra v. Pr. CIT [2023] 149 taxmann.com
225/292 Taxman 269 (Jhar.) vide its judgment dated 9-2-2023 taking into consideration the judgment of the
Hon'ble Supreme Court Maruti Suzuki (India) Ltd. (supra) has declared that the Assessment order against a
deceased Assessee as null and void and quashed the order and notice itself.
13. By going through the aforesaid judgment, it is crystal clear that the learned Tribunal has not committed
any error in rejecting the appeal filed by the Revenue, in as much as, admittedly; the respondent company was
not in existence as on the date of passing of the assessment order and this fact was duly informed and was in
the knowledge of the A.O. Hence, we hold that the assessment order passed on a non-existent Company is bad
in law, inasmuch as, on the date of passing of the assessment order, the respondent company was not in
existence, and as such no any liability can be fastened on a non-existent entity. The Tribunal has rightly held
that assessment order passed on a non-existent Company is bad in law.
14. Before parting it is necessary to indicate that this appeal was admitted ex-parte and the respondent
company appeared at hearing stage after formulation of questions of law and filed its counter affidavit raising
several preliminary objections.
Since we have already held that assessment order passed on a Non-existent Company is bad void-ab-intio
relying upon the judicial pronouncements referred to hereinabove; we are not deliberating on the other
questions, which consequently goes against the Revenue.
15. Consequently, the instant appeal is dismissed being devoid of merit.
JASPREET

*In favour of assessee.

†Arising out of ITA No. 290/Ran/2017, dated 16-9-2020.