Notice sent to a dissolved entity is essentially unlawful and does not have any legal standing
Fact and issue of the case
Since, the issue involved in this matter involves the short question of law, learned Advocates for the parties jointly requested that this matter be taken-up for final hearing, at the admission stage.
By way of this petition, filed under Article 226 of the Constitution of India, the petitioner has sought the following reliefs;
A. quash and e set aside the impugned notice dated 27.03.2021 issued by the Respondent under section 148 of the Income Tax Act, 1961 for the Assessment Year 2016-17 at Annexure ‘A’; B. Pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure A to this petition and stay further procedure for assessment and recovery for A.Y. 201617; C. any other and further relief deemed just and proper be granted in the interest of justice; D. to provide for the costs of this petition;
Heard, learned Advocate, Mr. Soparkar, appearing for the petitioner and learned Advocate, Mr. Sangani, appearing with learned Advocate, Ms. Raval, for the Respondent.
Learned Advocate, Mr. Soparkar, appearing for the petitioner submitted that the petitioner is a private limited company and its majority of the ultimate shareholders are the individuals, who are the citizens of India.
It was submitted that this Court vide order dated 28.01.2016, approved the scheme of amalgamation of one Panchdhara Agro Farms Pvt. Ltd. with the petitioner-Company, i.e. Shantigram Estate Management Pvt. Ltd. with effect from 01.04.2015, i.e. the appointed date.
It was pointed out from the record that the petitioner informed the concerned Assessing Officer about the same vide communication dated 31.03.2016. 4.3 It was averred that in spite of the above, the Respondent issued a notice, under Section 133 (6) of the Income Tax Act, 1961 (in brief, ‘the Act’), on 24.01.2020.
The petitioner replied to the same vide communication dated 17.02.2020, wherein, the details, with regard to the fact of merger having taken place, were given. Though, this was pointed out to the concerned assessing officer, the notice, under Section 148 of the Act, came to be issued to the petitioner on 27.03.2021 and the reasons for reopening were supplied vide communication dated 29.12.2021.
The petitioner filed its objections to the same vide letter dated 13.01.2022.
It is the case of the petitioner that the notice dated 27.03.2021 issued to it, under Section 148 of the Act, is bad and illegal and the same deserves to be quashed. Hence, the present petition is filed.
Learned Advocate, Mr. Soparkar, submitted that, though, the aspect of merger was brought to the notice of the concerned assessing officer, the notice, under Section 148 of the Act, came to be issued to the petitioner on 27.03.2021, which is unjust and illegal.
In support of his submission, learned Advocate, Mr. Soparkar, placed reliance on the decision of the Hon’ble Apex Court, rendered in the case of ‘PRINCIPAL COMMISSIONER OF INCOME TAX VS. MARUTI SUZUKI LTD.’, reported in 416 ITR 613(SC).
Learned Advocate, Mr. Soparkar, also placed reliance on the decision of this Court in the case of ‘ADANI WILMAR LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX’, reported in 150 taxmann.com 178 (Gujarat).
By referred to the aforesaid decisions, it was submitted that the issue involved in this matter is squarely covered by the same.
On the other hand, learned Advocate, Mr. Sangani, appearing with learned Advocate, Ms. Raval, for the Respondent, though, opposed this petition, he is not in a position to dispute the fact that the issue involved in this matter is covered by the aforesaid two decisions.
Having heard the learned Advocates for the parties and having perused the material on record, it emerges that one Panchdhara Agro Farms Pvt. Ltd. came to be merged with Shantigram Estate Management Pvt. Ltd., i.e. the petitioner-Company, with effect from 01.04.2015 and the same was approved by this Court vide order dated 28.01.2016.
From the record, it also emerges that pursuant to the above, the petitioner had also intimated the concerned assessing officer of the respondent about the same vide communication dated 31.03.2016. A copy of the same is produced at Page-13 to the compilation. In spite of the same, a notice, under Section 148 of the Act, came to be issued to the erstwhile Panchdhara Agro Farms Pvt. Ltd.
Observation of the court
The court, undoubtedly noticed Saraswati Syndicate Further, the judgment in Spice (supra) and other line of decisions, culminating in this court’s order, approving those judgments, was also noticed. Yet, the legislative change, by way of introduction of Section 2(1A), defining “amalgamation” was not taken into account. Further, the tax treatment in the various provisions of the Act were not brought to the notice of this court, in the previous decisions.
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.
It is to be noticed that the Court specifically had held that the MRPL amalgamated with MIPL and ceased to exist thereafter. The contention of the respondent that the notice issued in the name of amalgamating company being void and illegal relying on the Spice and Maruti Suzuki (supra) was not sustained only on the robot facts which had been presented before this Court holding that can be distinguished from the facts existed in those matters.
According to this Court, the facts applicable to the present case are those which existed in case of Maruti Suzuki and not as were before the Apex Court in case of Mahagun Realtors (P.) Ltd. (Supra). Here of-course, the intimation was given in reply to the notice under Section142 in the month of March, 2018 by specifically intimating to the concerned officer of the factum of amalgamation by the petitioner and of its having acquired both the companies viz.Kaizen Stocktrade Pvt. Ltd. and Kaizen Finstock Pvt. Ltd. Again, it is the very officer who after three years of such amalgamation has issued notice which is impugned in the name of that company, which no longer existed on 30.03.2021 for the A.Y. 2016-17 and therefore, the grievance on the part of the petitioner requires to be sustained and the action of the respondent authority warrants interference.
We are conscious of the fact that the Income-tax Department had already been issued the notice by this Court at the time of considering the request for approving the scheme of amalgamation, however, that would in no manner absolve any party of its obligation to intimate the final order of amalgamation, as is otherwise expected under the law. The statute since has not provided any format nor has any specified format otherwise prescribed this intimation in response to the notice under Section-142 of the Income Tax Act should be construed as a sufficient compliance and hence, all the petitions deserve to be allowed, quashing and setting aside the show-cause notices with consequential reliefs. This of-course in no manner preclude the respondent to initiate the action against the present petitioner in accordance with law. The petition stands disposed of in above terms.
The Court has already decided issue involved in this petition, in similar facts in Special Civil Application No.935 of 2022 and allied matters. Thus, the petition here also is allowed. The actions of the respondent – authority regarding issuance of notice under Section-148 deserves to be interfered with. The show-cause notices issued by the respondents are quashed and set aside with consequential reliefs. This could not in any manner preclude the respondents to initiate the action against the present petitioners in accordance with law.
Keeping in view the observations made in the decisions of the Hon’ble Apex Court as well as of this Court, this petition deserves to be allowed. 8. In the result, this petition is ALLOWED and the impugned notice, Dated: 27.03.2016, issued under Section 148 of the Act to the erstwhile Panchdhara Agro Farms Pvt. Ltd. is quashed and set aside. Rule is made absolute to the aforesaid extent.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from hereAdani-Estate-Management-Private-Limited-Vs-ITO-Gujarat-High-Court-.3