Facts of the Case

Elite Wealth Limited, the petitioner, was a part of a batch of writ petitions where reassessment proceedings were initiated by the Income Tax Department in the names of companies that had ceased to exist pursuant to approved schemes of amalgamation.

In the case of Elite Wealth Limited, the amalgamating entity stood dissolved by operation of law following sanction of a scheme of arrangement by the competent authority. The factum of amalgamation was duly intimated to the Income Tax Department.

Despite having knowledge of the amalgamation, the Assessing Officer issued notices under Section 148 / 148A and continued reassessment proceedings in the name of the amalgamating (non-existent) company.

Aggrieved by the continuation of proceedings against a dissolved entity, the petitioner approached the Delhi High Court seeking quashing of the reassessment action.

 

Issues Involved

Whether reassessment proceedings initiated in the name of a non-existent amalgamating company are valid in law.

Whether such proceedings suffer from a jurisdictional defect or merely a procedural irregularity.

Whether Section 292B of the Income-tax Act can cure reassessment notices issued to a dissolved entity.

 

Petitioner’s Arguments

The petitioner argued that:

Upon amalgamation, the transferor company ceases to exist as a juridical person.

Issuance of reassessment notices to a non-existent entity is a nullity in law.

The defect goes to the root of jurisdiction and cannot be cured under Section 292B.

The issue is squarely covered by binding precedents including PCIT v. Maruti Suzuki India Ltd. and Spice Entertainment Ltd.

 

Respondent’s Arguments

The Revenue contended that:

The error in issuing notice in the name of the amalgamating entity was curable under Section 292B.

Reliance was placed on PCIT v. Mahagun Realtors (P) Ltd. to argue that proceedings need not fail merely due to incorrect description of the assessee.

Participation by the assessee indicated absence of prejudice.

 

Court Order / Findings

The Delhi High Court rejected the Revenue’s contentions and held that:

An amalgamating company stands dissolved by operation of law upon approval of a scheme of amalgamation.

Any notice or reassessment proceedings initiated in the name of such a non-existent entity are void ab initio.

Section 292B applies only to technical or clerical defects and cannot cure a jurisdictional defect.

The decision in Mahagun Realtors does not dilute the binding ratio of Maruti Suzuki, which governs cases where the Revenue was aware of amalgamation yet proceeded against a dissolved entity.

Participation by the assessee does not create estoppel against law.

 

Important Clarification

The Court clarified that:

There is no inconsistency between Spice Entertainment, Skylight Hospitality, Maruti Suzuki and Mahagun Realtors; each operates in its own factual context.

Where the Revenue has knowledge of amalgamation and still issues notices to a non-existent entity, the defect is fatal and incurable.

Jurisdiction must exist on the date of issuance of notice.

 Final Outcome

Writ Petition Allowed
 Reassessment Notices and Proceedings Quashed
Proceedings Held Void for Want of Jurisdiction
 Revenue Directed to Drop Proceedings Against the Amalgamating Entity

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770193266_ELITEWEALTHLIMITEDVsINCOMETAXOFFICERWARD81DELHIANR..pdf

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