Relying on catena of judicial precedents where it is settled that a notice against a non-existent entity is bad in law, the Uttarakhand High Court quashes reassessment proceedings initiated in the name of the merged company since it became a non-existent entity post-amalgamation.

A Single Judge Bench of Justice Ravindra Maithani observed that “Mere activation of PAN number may not give a right to the revenue to issue notice to a non-existent entity. Admittedly, in the instant case, the notice was given to the Transferor company, which is a non-existent entity, after the appointed date, i.e. 01.04.2018. Admittedly, the order under Section 148 A (d) of the Income Tax Act has been passed by the revenue against a non-existent entity”.

Advocate Piyush Kaushik appeared for the Assessee while the Revenue was represented by Advocate H.M. Bhatia.

The brief facts of the case were that Delta Power Solutions India Pvt. Ltd. (DPS) was subjected to reassessment proceedings for Assessment year 2019-20 which got merged into Delta Electronics India Pvt. Ltd (Assessee), with the approval of the NCLT amalgamation order. The Revenue was informed about the scheme of amalgamation and it even participated in the amalgamation proceedings before the NCLT. Later, the AO issued notice under Section 148 and order under Section 148A(d) against DPS specifying, therein, that the PAN of DPS was active. In response, Assessee brought the fact of amalgamation to the Revenue’s notice and submitted that with effect from the appointed date i.e. Apr 1, 2018 all the transactions entered and appeared with PAN of DPS were duly accounted for by the Assessee.

After considering the submission, the Bench noted that that the Revenue admitted that fact of amalgamation was informed to it, however, contended that though DPS became non-existent post-amalgamation, its PAN was lying a-float and was active due to the non-action/failure on the part of the Assessee in surrendering the PAN.

The Bench analyzed the provision of Section 170 and the order of the NCLT wherein it observed that the statutory dues, tax, etc, that are due and payable by DPS after amalgamation would stand transferred to the Assessee.

The Bench therefore held that from the appointed date, under the scheme of amalgamation, DPS stood merged into the Assessee, and thus, the notice was given to DPS after the appointed date and the order under Section 148A(d) was passed against a non-existent entity.

Accordingly, the High Court set aside the reassessment proceedings.

Cause Title: Delta Electronics India Pvt. Ltd. v. Principal CIT

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Uttarakhand High CourtJustice Ravindra Maithani

Pankaj Bajpai