Notice Issued To Non-Existing Entity Post-Merger Is Substantive Illegality, Dept Cannot Cite Technical Glitch: Bombay High Court
Mehak Dhiman
6 Feb 2025 8:20 PM IST
The Bombay High Court stated that notice issued to a non-existing entity post-merger is a substantive illegality and not some procedural violation. “we cannot condone the fundamental error in issuing the impugned notices against a non-existing company despite full knowledge of the merger. The impugned notices, which are non-est cannot be treated as “good” as urged on behalf...
The Bombay High Court stated that notice issued to a non-existing entity post-merger is a substantive illegality and not some procedural violation.
“we cannot condone the fundamental error in issuing the impugned notices against a non-existing company despite full knowledge of the merger. The impugned notices, which are non-est cannot be treated as “good” as urged on behalf of the department” stated the Division Bench of Justices M.S. Sonak and Jitendra Jain.
In this case, the assessee/petitioner (City Corporation Limited) is engaged in constructing and developing infrastructure facilities. The assessee/CCL got merged with its wholly owned subsidiary “Amanora Future Tower Pvt. Ltd.” (AFTPL).
The assessee informed the Income Tax Authority of the merger. The Assistant Commissioner of Income Tax/respondent issued a notice under Section 148 of the Income Tax Act, 1961 to AFTPL seeking to reopen the case.
The assessee has challenged the notice on the ground that, post-merger, AFTPL was a non- existing entity. Therefore, no notice under Section 148 of the Income Tax Act, 1961 could have been issued to AFTPL.
The department submitted that the material on record shows that the notice was meant to be served upon the assessee. However, due to certain technical glitches, the utility system generated a notice in the name of AFTPL.
The bench observed that as of the date of the issue of the impugned notices, the noticee 'Amanora Future Towers Private Limited' could not have been regarded as a 'person' under Section 2(31) of the IT Act. In fact, that was a non-existent entity.
The bench referred to the case of Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki India Ltd. where the Supreme Court held that the merged company had no independent existence after the merger. Even though the Assessing Officer was informed of the merged company having ceased to exist due to the approved merger scheme, the jurisdictional notice was issued only in its name.
In view of the above, the bench allowed the petition but with a clarification that the department can issue a fresh notice to CCL for reassessment.
The bench further clarified that the impugned notices have been quashed only because they were issued to a non-existing company or entity despite the department's knowledge of its non-existence.
Case Title: City Corporation Limited v. Assistant Commissioner of Income Tax Circle (Writ Petition No. 6076 Of 2023)
Citation: 2025 LiveLaw (Bom) 49
Counsel for Petitioner/ Assessee: Sham Walve
Counsel for Respondent/ Department: Suresh Kumar