Facts of the Case

Rangoli Resorts Pvt. Ltd., as successor-in-interest of Polyflex Marketing Pvt. Ltd., challenged assessment and reassessment proceedings initiated by the Income Tax Department in the name of Polyflex Marketing Pvt. Ltd., which had ceased to exist pursuant to an approved scheme of amalgamation.

The scheme of amalgamation was duly sanctioned by the competent authority, and the factum of amalgamation was intimated to the Income Tax Department. Notwithstanding this, notices and consequential proceedings were continued in the name of the amalgamating company.

The petitioner contended that Polyflex Marketing Pvt. Ltd. stood dissolved by operation of law and had no legal existence on the date when the impugned notices and orders were issued.

 

Issues Involved

Whether assessment or reassessment proceedings initiated in the name of an amalgamating company are valid in law.

Whether issuance of notices to a non-existent entity constitutes a jurisdictional defect.

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

Whether participation of the successor entity cures the illegality.

 

Petitioner’s Arguments

The petitioner submitted that upon approval of the scheme of amalgamation, the amalgamating company stood dissolved and ceased to exist as a juristic person. Consequently, any notice or order issued in its name was a nullity.

It was argued that the issue stood conclusively settled by the Supreme Court in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd. and Spice Entertainment Ltd., wherein it was held that assessment proceedings against a non-existent entity are void ab initio and cannot be saved by Section 292B.

The petitioner further contended that participation in proceedings by the successor entity does not confer jurisdiction on the Assessing Officer.

 

Respondent’s Arguments

The Revenue argued that the defect, if any, was procedural in nature and curable under Section 292B of the Act. It was submitted that the intent of the Department was always to assess the correct taxable entity and that no prejudice was caused.

Reliance was also placed on Skylight Hospitality LLP to contend that wrong description of the assessee could, in certain circumstances, be treated as a curable defect.

 

Court Order / Findings

The Delhi High Court allowed the writ petition and quashed the impugned assessment and reassessment proceedings. The Court held that:

Upon amalgamation, the transferor company ceases to exist in the eyes of law.

Issuance of notices or passing of orders in the name of a non-existent entity is a substantive jurisdictional defect.

Such a defect is not procedural and cannot be cured by invoking Section 292B of the Act.

Participation of the successor entity does not validate proceedings initiated without jurisdiction.

The Court reaffirmed the binding ratio of Maruti Suzuki and Spice Entertainment and clarified that Skylight Hospitality LLP applies only to its peculiar facts.

 

Important Clarification

The judgment conclusively clarifies that:

Assessments or reassessments framed in the name of an amalgamating company are void ab initio.

Section 292B cannot be invoked to cure jurisdictional defects arising from absence of a legally existing assessee.

Revenue authorities must mandatorily substitute the successor entity once amalgamation is intimated.

Consistency and certainty in tax administration demand strict adherence to settled law on amalgamation.

This decision further consolidates taxpayer protection in cases involving corporate restructuring and amalgamation.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770202566_RANGOLIRESORTSPVTLTDASSUCCESSORININTERESTOFPOLYFLEXMARKETINGPVTLTDVsASSISTANTCOMMISSIONEROFINCOMETAXANR..pdf 

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