Facts of the Case

The batch of writ petitions, including those filed by M/s Nokia Solutions and Networks India Pvt. Ltd. (successor of Nokia Siemens Networks India Pvt. Ltd.), challenged assessment and reassessment proceedings initiated by the Income Tax Department in the names of entities that had ceased to exist due to court-approved schemes of amalgamation or arrangement.

In each case, the amalgamations were duly sanctioned by the National Company Law Tribunal or the jurisdictional High Courts. The petitioners had also intimated the Income Tax Department of the mergers. Despite this, statutory notices under Sections 143(2), 148, and reassessment proceedings pursuant to Section 148A were issued and continued in the names of the amalgamating entities, rather than the surviving or resultant companies.

 

Issues Involved

Whether assessment or reassessment proceedings initiated and continued in the name of an amalgamating company, which had ceased to exist pursuant to a sanctioned scheme of amalgamation, are legally sustainable, and whether such defects can be cured under Section 292B or saved by Section 170 of the Income Tax Act, 1961.

 

Petitioner’s Arguments

The petitioners contended that once a scheme of amalgamation is sanctioned, the amalgamating company stands dissolved by operation of law and ceases to exist as a juristic person. Any notice or assessment framed in its name is therefore a nullity.

It was argued that the issuance of a jurisdictional notice to a non-existent entity goes to the root of the matter and constitutes a substantive illegality, not a procedural irregularity. Reliance was placed on the Supreme Court’s decision in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd., as well as Spice Entertainment Ltd., to submit that such defects cannot be cured under Section 292B, nor can participation by the successor entity confer jurisdiction.

 

Respondent’s Arguments

The Revenue contended that the failure to issue notices in the name of the amalgamated entity was a curable defect covered by Section 292B of the Act. It was further argued that Section 170 of the Act, dealing with succession to business otherwise than on death, permitted continuation of proceedings against the successor entity.

Reliance was also placed on the Supreme Court’s decision in PCIT v. Mahagun Realtors (P) Ltd. to submit that proceedings should not be invalidated on mere technicalities, particularly where the successor entity was aware of and had participated in the proceedings.

 

Court Order / Findings

The Delhi High Court rejected the submissions of the Revenue and held that assessment and reassessment proceedings initiated in the name of a non-existent amalgamating company are void ab initio.

The Court reaffirmed that upon approval of a scheme of amalgamation, the amalgamating entity ceases to exist in law. Issuance of a jurisdictional notice in its name constitutes a substantive illegality that strikes at the root of jurisdiction and cannot be cured by invoking Section 292B.

The Court distinguished Mahagun Realtors, holding that the said decision turned on its own facts and did not dilute the binding ratio laid down in Maruti Suzuki India Ltd. and Spice Entertainment Ltd. The Court further held that Sections 159 or 170 of the Act do not validate notices issued to a non-existent entity.

Accordingly, all impugned assessment and reassessment proceedings initiated in the names of amalgamating entities were quashed.

 

Important Clarification

The Court clarified that certainty and consistency in tax administration are fundamental. Once an entity ceases to exist due to amalgamation, all statutory notices must be issued only in the name of the surviving or resultant entity. Jurisdictional defects arising from proceedings against non-existent persons or entities cannot be cured by participation, consent, or curative provisions such as Section 292B of the Income Tax Act.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770194160_MSNOKIASOLUTIONSANDNETWORKSINDIAPVTLTDSUCCESSOROFNOKIASIEMENSNETWORKSINDIAPRIVATELIMITEDVsDEPUTYCOMMISSIONEROFINCOMETAXCIRCLE161ANDANR..pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.