Facts of the Case

Religare Enterprises Limited, the successor-in-interest of Religare Securities Ltd., challenged reassessment proceedings initiated by the Income Tax Department in the name of Religare Securities Ltd., which had ceased to exist pursuant to a composite Scheme of Arrangement approved by the National Company Law Tribunal.

Under the approved scheme, the broking business of Religare Securities Ltd. was demerged and vested in another entity, while the remaining undertakings stood amalgamated with Religare Enterprises Limited with effect from the appointed date. The factum of amalgamation was duly intimated to the Assessing Officer, and revised returns and merged financial statements were filed.

Despite this, notices under Section 148 and subsequent proceedings were initiated and continued in the name of the amalgamating company. The petitioner challenged such action as being without jurisdiction.

 

Issues Involved

Whether assessment or reassessment proceedings initiated in the name of an amalgamating (non-existent) company are valid in law.

Whether issuance of notices to a dissolved entity constitutes a jurisdictional defect.

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

Whether Sections 159 or 170 of the Act save proceedings initiated against a non-existent entity.

Applicability of the Supreme Court decision in Mahagun Realtors (P) Ltd. to such cases.

 

Petitioner’s Arguments

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

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., which held that assessment proceedings against a non-existent entity are void ab initio and cannot be cured under Section 292B.

The petitioner further submitted that participation by the successor entity does not confer jurisdiction and there can be no estoppel against law.

 

Respondent’s Arguments

The Revenue argued that issuance of notices in the name of the amalgamating company was a curable defect and could be saved under Section 292B of the Act. Reliance was placed on the Supreme Court decision in Mahagun Realtors (P) Ltd. to contend that proceedings could continue against the successor entity.

It was also contended that Sections 159 and 170 of the Act provided statutory support for sustaining the impugned proceedings.

 

Court Order / Findings

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

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

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

Such defect cannot be cured by invoking Section 292B of the Act.

Sections 159 and 170 do not validate proceedings initiated against an entity which had already ceased to exist.

The decision in Mahagun Realtors does not dilute the binding ratio of Maruti Suzuki and Spice Entertainment and is confined to its peculiar facts.

The Court emphasized the need for certainty and consistency in tax administration and followed the settled line of Supreme Court jurisprudence.

 

Important Clarification

The judgment authoritatively clarifies that:

Assessment or reassessment proceedings initiated in the name of an amalgamating company are void ab initio.

Jurisdictional defects arising from non-existence of the assessee cannot be cured under Section 292B.

Participation by the successor entity does not validate void proceedings.

Revenue authorities must mandatorily issue notices in the name of the amalgamated entity once amalgamation is duly intimated.

This decision further consolidates the law protecting taxpayers in cases involving corporate restructuring and amalgamation.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770202866_RELIGAREENTERPRISESLIMITEDASSUCCESSORININTERESTOFRELIGARESECURITIESLTDVsASSISTANTCOMMISSIONEROFINCOMETAXORS..pdf 

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