The reassessment proceedings executed against the non-existent/amalgamated entity under Section 148 A of the Income Tax Act have been cancelled by the Madhya Pradesh High Court stating that despite being available the other remedy has no bearing on the same cases when the entity has stopped to exist under the amalgamation.
There is no independent existence for a transferor company which is the taxpayer when the same has already integrated with the transferee company dated 01.04.2017 the division bench of Justices Sushrut Arvind Dharmadikari and Pranay Verma noted.
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“in the present case, it is clear that the reassessment proceedings have been initiated against Jhansi Baran Pathways Pvt. Ltd (JBPPL) for the assessment year 2018-19, which had indeed ceased to exist with effect from 01.04.2017 based upon the scheme of amalgamation having been approved on 17.04.2018”, the bench sitting at Indore remarked.
The state contended after the scheme of amalgamation could enter into effect, various transactions were taken via the PAN of the taxpayer (JBPPL) rather than Prakash Asphaltings and Toll Highways (India) Ltd (PATH), i.e., the integrated entity.
The assessment was reopened as the assessing officer has causes to believe that the income levied to the taxation for the fiscal year has fled from the assessment under Section 147 of the IT Act. The counsel for the respondent state indeed argued that despite when the taxpayer has any issues the same could contend to the appellate authority under section 246 of the IT act.
For this Discussion Asked via The State Authorities, the Court Cited Below:
“it is well settled that when the order is without jurisdiction and appears to be passed in blatant exercise of powers and the same is against the principles of natural justice, then the question of availability of alternative remedy does not come in the way for exercising jurisdiction under Article 226 of the Constitution of India” the court also stated that the income tax authority could not provide the orders or notices against the non-existent entity and opt for the shield of the availability of another remedy.
Stating the existing position of law that is no more res integra, the court regards the Supreme Court decision in the Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki (2020) 18 SCC 331.
Section 2(31) of the Update Income Tax Act does not consider a corporation that has ceased to exist after a merger to be a person, therefore assessment actions cannot be started against those non-existent organizations.
This ruling was made by a two-judge bench of the highest court. The highest court’s definitive ruling, the court said, would directly relate to the circumstances of this case because Jhansi Baran Pathways Pvt. Ltd. (JBPPL) suspended operations on April 1, 2017, and a reassessment was started for the 2017–2018 fiscal year.
“If the company has ceased to exist as a result of the approved scheme of amalgamation, then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction.
It is also held that upon amalgamating entity ceasing to exist, it cannot be regarded as a person under sub-section (31) of Section 2 of the Act against whom assessment proceedings can be initiated.
The participation by the amalgamated company in the proceedings would be of no effect as there is not estoppel against law.”
The court also ruled that all the notices orders along with the next proceedings executed against the transferor company/taxpayer are invalid and void during permitting the filed petitions.
| Case Title | Jhansi Baran Pathways Pvt. Ltd. |
| Citation | Writ Petition No. 11190/ 2022 & Others |
| Date | 03.11.2023 |
| Counsel For Appellant | (Shri Sumit Nema, Learned Senior Advocate Assisted by Ms.Preena Salgia, Counsel For The Petitioner) |
| Counsel For Respondent | Ms. Veena Mandlik |
| MP HC | Read Order |
