Facts of the Case

Madhu Viniyog Private Limited, the petitioner, was the resultant entity pursuant to a scheme of amalgamation, under which Marigold Nirman Private Limited merged into the petitioner company. The scheme was duly sanctioned by the competent authority, and upon its approval, the amalgamating company ceased to exist in law from the appointed date.

Despite the amalgamation having been duly intimated to the Income Tax Department, the Revenue initiated reassessment proceedings by issuing notices under Section 148 / Section 148A in the name of the amalgamating (non-existent) entity. Subsequent proceedings were also continued on the same basis.

Aggrieved by the reassessment action initiated without placing the amalgamated entity on notice, the petitioner approached the Delhi High Court by way of a writ petition.

 

Issues Involved

Whether reassessment proceedings initiated in the name of a non-existent (amalgamated) entity are legally sustainable.

Whether such a defect is curable under Section 292B of the Income-tax Act, 1961.

Whether participation by the amalgamated entity can validate jurisdiction assumed against a dissolved company.

 

Petitioner’s Arguments

The petitioner contended that:

Upon approval of the scheme of amalgamation, Marigold Nirman Pvt. Ltd. stood dissolved by operation of law.

Notices issued in the name of a non-existent entity are void ab initio and without jurisdiction.

Section 292B cannot cure a jurisdictional defect such as issuance of notice to a dissolved company.

The issue is squarely covered by binding precedents, particularly:

Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd.

Spice Entertainment Ltd. v. Commissioner of Income Tax

Participation in proceedings does not amount to waiver, as there is no estoppel against law.

 

Respondent’s Arguments

The Revenue argued that:

The defect was merely technical and procedural in nature.

The reassessment proceedings were substantially intended against the successor entity.

Section 292B should be applied to save the proceedings.

Reliance was placed on the decision in PCIT v. Mahagun Realtors (P) Ltd. to contend that reassessment against amalgamated entities could, in certain circumstances, be sustained.

 

Court Order / Findings

The Delhi High Court held that:

Once a scheme of amalgamation is sanctioned, the amalgamating company ceases to exist in the eyes of law.

Issuance of reassessment notices in the name of such a dissolved entity is a substantive illegality, not a procedural lapse.

Section 292B cannot be invoked to cure a jurisdictional defect.

The facts of the case are squarely governed by the ratio laid down by the Supreme Court in Maruti Suzuki India Ltd., which reaffirmed the earlier decision in Spice Entertainment Ltd.

The decision in Mahagun Realtors does not dilute the settled position where notices are issued in the name of a non-existent entity despite knowledge of amalgamation.

 

Important Clarification

The Court clarified that:

The decisive factor is the existence of the assessee on the date of issuance of notice.

Jurisdiction must be validly assumed at the inception; subsequent participation or correction cannot cure the defect.

Tax authorities are under a legal obligation to issue notices in the name of the correct, existing entity once amalgamation is brought to their notice.

 

Final Outcome

Writ Petition Allowed
 Reassessment Notices and Proceedings Quashed
 Proceedings Held Void Ab Initio for Want of Jurisdiction

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770193744_MADHUVINIYOGPRIVATELIMITEDMARIGOLDNIRMANPVT.LTD.MERGEDWITHPETITIONERVsDEPUTYCOMMISSIONEROFINCOMETAXCIRCLE161DELHIANR..pdf

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