Facts of the Case

Lecoanet Hemant India Pvt. Ltd. is the successor/transferee company pursuant to a duly sanctioned Scheme of Amalgamation, under which IP Support Services (India) Pvt. Ltd. stood amalgamated and dissolved by operation of law.

Despite the amalgamation having been approved by the competent authority and duly intimated to the Income Tax Department, the Revenue:

  • Issued notices of assessment and reassessment, and
  • Passed consequential orders

in the name of the amalgamating company, i.e., an entity which had ceased to exist on the relevant dates.

Aggrieved by the continuation of proceedings against a dissolved entity, the petitioner approached the Delhi High Court challenging the validity of such actions.

 

Issues Involved

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

Whether such a defect can be cured by invoking Section 292B of the Income Tax Act, 1961.

Whether participation of the amalgamated/successor company cures the jurisdictional defect.

Petitioner’s Arguments

The petitioner contended that:

Upon approval of the Scheme of Amalgamation, the amalgamating company stood dissolved by operation of law and ceased to exist.

Any notice or order issued in the name of such a non-existent entity is void ab initio.

The defect is a jurisdictional illegality, not a procedural irregularity.

Section 292B cannot be invoked to cure a defect that goes to the root of jurisdiction.

Reliance was placed on binding precedents including:

PCIT v. Maruti Suzuki India Ltd.

Spice Entertainment Ltd. v. CIT

 

Respondent’s Arguments

The Revenue argued that:

Issuance of notices in the name of the amalgamating company was a curable defect.

Section 292B saves proceedings from invalidation due to mistakes, defects or omissions.

Reliance was placed on PCIT v. Mahagun Realtors (P) Ltd. to contend that substance should prevail over form.

 

Court Order / Findings

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

An amalgamating company ceases to exist in the eyes of law once the scheme of amalgamation is sanctioned.

Issuance of a notice is a condition precedent to assumption of jurisdiction, and such notice must be issued to a legally existing entity.

Notices and assessment/reassessment orders issued in the name of a non-existent entity are a nullity.

Section 292B applies only to technical or clerical defects, and not to jurisdictional errors.

Participation of the successor company does not cure the illegality, as there can be no estoppel against law.

The decision in Mahagun Realtors does not dilute the binding ratio of Maruti Suzuki and turns on its own peculiar facts.

 

Important Clarification

The Court clarified that:

Jurisdiction under the Income Tax Act cannot be assumed against a dissolved or non-existent entity.

Sections 159 and 170 of the Act do not validate proceedings initiated in the name of an entity that had ceased to exist.

Administrative convenience or revenue considerations cannot override settled jurisdictional principles.

 

Final Outcome

Writ Petitions Allowed
 Assessment and reassessment proceedings quashed
 Notices and orders issued in the name of the non-existent amalgamating company declared void

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770193575_LECOANETHEMANTINDIAPVT.LTD.VsPRINCIPALCOMMISSIONEROFINCOMETAX4ANR..pdf

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