A bench comprising Justices S Muralidhar and Prathiba M Singh of Delhi High Court, last week held that the assessment in the name of Company dissolved by amalgamation not procedural defect but void under the provisions of the Income tax act, 1961.
Assessee, Maruti Suzuki India Ltd was amalgamated with Suzuki Powertrain India Ltd in the year 2011. As per the scheme of amalgamation, all the liabilities and duties on the entire undertaking of the Petitioner/Amalgamating Company be transferred without further act or deed to the Petitioner/ Amalgamated Company and accordingly the same shall pursuant to Section 394 (2) of the Companies Act, 1956 be transferred to and become the liabilities of the Petitioner/Amalgamated Company.
Later, the department passed an assessment order in the name and address of the amalgamating company, Suzuki Powertrain India Ltd.
Before the appellate authorities, the assesse contended that the assessment order was without jurisdiction inasmuch as it had been passed in the name of an entity that ceased to exist on the date of the assessment order.
The ITAT accepted the above plea of the MSIL and set aside the assessment order.
On departmental appeal, the bench noticed the decision in CIT v. Dimensions Apparels (P) Ltd, wherein it was held that for the purposes of Section 170 (2) of the Act, the defect of passing the assessment order in the name of an non-existent entity is not a mere irregularity . in that case, the Court observed that “The revenue seems to argue that the assessment is justified because the liabilities of the amalgamating company accrue to the amalgamated (transferee) company. While that is true, the question here is which entity must the assessment be made on. The text of Section 170(2) makes it clear that the assessment must be made on the successor (i.e., the amalgamated company).”
In view of the above decision, the division bench dismissed the appeal and held in favour of the assesse.
Read the full text of the Order below.
