IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 13871 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India or any order made thereunder ? GAYATRI MICRONS LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX Appearance: JAIMIN GANDHI(8065) for Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for Respondent(s) No. 1 CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 24/12/2019 CAV JUDGMENT (PER : HONOURABLE MS. JUSTICE SANGEETA K. VISHEN) 1. By way of present petition, petitioner, that is, Gayatri Microns Limited has inter alia prayed for direction to issue writ of prohibition or any other writ, order or direction Page 1 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT for quashing and setting-aside notice dated 25th March, 2019, issued under section 148 of Income Tax Act, 1961 (hereinafter referred to as Act ). 2. brief facts are as under:- 2.1 petitioner is company registered under Companies Act, 1956 (hereinafter referred to as Companies Act ). Somewhere in year 2015, Company Petition No.89 of 2015 in Company Application No.24 of 2015 and other allied applications, were filed before this court by petitioner company as well as by three companies viz. Gayatri Mine-Chem Private Limited, Gayatri Integrated Services Private Limited and Gayatri Fillers Private Limited inter alia praying for sanction of composite scheme of arrangement in nature of amalgamation with petitioner company under provisions of Companies Act. During said proceedings before this court, Regional Director, North-Western Region, Ministry of Corporate Affairs, had filed his affidavit dated 13 th May, 2015. In response whereof, additional affidavit was filed inter alia providing explanation to issues raised by Regional Director, Ministry of Corporate Affairs. As per one of explanations, objection was invited from Income Tax Department; however, within statutory period of 15 days, no objection was raised by Income Tax Department and it was presumed that Income Tax Department, had no objection to proposed scheme of arrangement. 2.2 Thereafter, this court upon being satisfied that amalgamation under scheme was in interest of companies, sanctioned composite scheme of arrangement vide order dated 18th June, 2015. As result whereof, three Page 2 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT companies viz. Gayatri Mine-Chem Private Limited, Gayatri Integrated Services Private Limited and Gayatri Fillers Private Limited came to be amalgamated with petitioner. 2.3 petitioner had filed its return for assessment year 2015-16 furnishing all information including information regarding amalgamation of aforesaid three companies with petitioner. In return filed by petitioner under heading Holding Status , further details were provided below column Business Organisation that is, status of afore-stated three companies having been amalgamated with petitioner. 2.4 For assessment year 2015-16, Income Tax Officer Ward-2(1)(1), Ahmedabad had sought for certain information vide his letter dated 1st September, 2017. Apropos which, petitioner had submitted details wherein it had been categorically informed that by virtue of order passed by High Court of Gujarat, amalgamation has taken place amongst three companies, viz. petitioner - Gayatri Microns Limited, Gayatri Mine-Chem Limited Gayatri Fillers Private Limited and Gayatri Integrated Services Private Limited. Along with said information, order dated 18th June, 2015 passed by this court was also furnished to Income Tax Officer, Ward-2(1)(1), Ahmedabad. 2.5 respondent, on 25th March, 2019, issued notice under section 148 of Act for assessment year 2012-13 to Gayatri Integrated Services Private Limited, indicating that respondent has reason to believe that income chargeable to tax for assessment year 2012-13 has escaped assessment within meaning of section 147 of Act. By Page 3 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT said notice, Gayatri Integrated Services Private Limited was called upon to file its return in prescribed form for said assessment year 2012-13. 2.6 On 1st April, 2019, Gayatri Integrated Services Private Limited addressed letter to respondent inter alia informing that return of income filed under section 139 of Act be treated as return filed under section 148 of Act for assessment year 2012-13. In said letter Gayatri Integrated Services Private Limited also requested respondent to furnish reasons on basis of which, respondent had believed that income chargeable to tax for assessment year 2012-13 has escaped assessment within meaning of section 147 of Act. 2.7 On 6th August, 2019, respondent issued show-cause notice calling upon Gayatri Integrated Services Private Limited to show cause as to why assessment for year 2012-13 should not be finalised ex-parte under provisions of section 144 of Act on basis of material available on record. Gayatri Integrated Services Private Limited was also informed that as to why penalty proceedings under clause (b) of sub- section (1) of section 271 of Act should not be initiated separately for failure on its part. 2.8 It appears that Gayatri Integrated Services Private Limited requested for some time so as to enable it to respond to show-cause notice. It is case of petitioner that on 7 th August, 2019 itself, respondent issued notice under section 274 read with section 271F of Act calling upon Gayatri Integrated Services Private Limited, to show cause as to why order imposing penalty should not be made under Page 4 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT provisions of section 271F of Act, since it had failed to furnish return of income as required under provisions of sub-section (1) of section 139 of Act . 3. Being aggrieved, petitioner has filed present petition with aforementioned prayer. 4. respondent has filed affidavit indicating events which took place during proceedings of reopening of assessment. It has been stated that respondent has scrupulously followed procedure for issuance of notice under section 148 of Act and that there is no procedural irregularity as alleged by petitioner. It has been urged that in absence of any illegality in proceedings, notice issued under section 148 of Act is valid and legal. 5. Mr. Jaimin Gandhi, learned advocate for petitioner, vehemently submitted that action of respondent, in issuing notice under section 148 of Act is illegal. It is further submitted that respondent has proposed to reopen proceedings against non-existing entity, that is, Gayatri Integrated Services Private Limited inasmuch as, it has got amalgamated with petitioner and thus, it has ceased to exist. It is thus submitted that reopening of assessment by issuing impugned notice dated 25th March, 2019 under section 148 of Act, is bad in law and without jurisdiction. 5.1 Mr. Gandhi, then submitted that immediately after passing of order dated 18th June, 2015 under provisions of Companies Act, respondent was informed about amalgamation. Thereafter, during assessment proceedings for year 2015-16, all details were provided to Page 5 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT Income Tax Officer, Ward-2(1)(1); further followed by communication dated 9th June, 2017, bringing to his notice that amalgamation has taken place during year 2015-16 between petitioner, that is, Gayatri Microns Limited and three other companies including Gayatri Integrated Services Private Limited. It is submitted that along with said letter dated 9th September, 2017, order of High Court sanctioning scheme of amalgamation was supplied to him for his consideration. It is submitted that it is not that respondent was not aware about amalgamation, inasmuch as, said factum was duly brought to notice of respondent and thus, respondent ought not to have issued notice dated 25th March, 2019, reopening assessment of Gayatri Integrated Services Private Limited for assessment year 2012-13, when said company is no longer in existence. It is also submitted that there can be no quarrel with proposition that once company ceases to exist, it is not amenable to assessment proceedings under provisions of Act. 5.2 It is further submitted that respondent though was requested to provide copy of reasons recorded, he had not provided same. respondent without providing copy of reasons recorded, proceeded further with assessment proceedings by issuing notice under section 142 of Act. It is further submitted that respondent ought to have provided copy of reasons recorded so as to enable petitioner to file its objection. It is only after offering opportunity to petitioner to file its objection and rendering his decision thereon, that it was open to respondent to proceed further with assessment proceedings. 5.3 It is further submitted that respondent ought not to Page 6 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT have issued notice dated 7th August, 2019 under provisions of section 271 of Act inasmuch as, Gayatri Integrated Services Private Limited had filed its return for assessment year 2012-13 under provisions of section 139 of Act and thus, respondent had no jurisdiction or authority to issue notice under section 271 read with section 274 of Act. 5.4 Mr. Gandhi while placing reliance on judgment of Supreme Court in case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Ltd. reported in (2019)107 taxmann.com 375, submitted that Apex Court, in said case has observed and held that if Assessing Officer was informed about factum of amalgamation of transferor company with transferee company and transferor company having ceased to exist as result of approved scheme of amalgamation; jurisdictional notice issued would be illegal and bad. Mr Gandhi further submitted that Apex Court has categorically observed that basis on which jurisdiction was invoked was fundamentally at odds with legal principle and participation in proceedings by party concerned cannot operate as estoppel against law. 5.5 Mr. Gandhi further placed reliance on judgment of this court in case of Dharmnath Shares & Services (P) Ltd. vs. Assistant Commissioner of Income Tax Cen. Cir. 1(2) of this court reported in (2018)94 taxmann.com 458 (Gujarat) and submitted that it is well settled proposition of law that if assessee company has amalgamated with transferee company, its independent existence does not survive and therefore, it would no longer be amenable to assessment proceedings. It is submitted that in similar circumstances, this Page 7 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT court had quashed notice issued under section 148 of Act to company which had already merged in another company. 5.6 Further reliance has been placed on judgment of this court in case of Khurana Engineering Ltd. vs. Deputy Commissioner of Income Tax (OSD)-1 reported in (2013) 34 taxmann.com 261 (Gujarat) to contend that this court, has held that transferor company would no longer be amenable to assessment proceedings for concerned assessment year if subsequently said company, has amalgamated in another company. notice under provisions of Act, for reassessment, would therefore be invalid. 5.7 In support of aforesaid proposition, further reliance has been placed on judgments in case of (i) Rustagi Engineering Udyog (P) Ltd. vs. Deputy Commissioner of Income- Tax reported in (2016)67 taxmann.com 284 (Delhi), and (ii) Assistant Commissioner of Income-tax vs. DLF Cyber City Developers Ltd. reported in (2015)53 taxmann.com 81 (Delhi Tribunal). 6. As against this, Ms. Mauna Bhatt, learned Senior Standing Counsel for respondent submitted that procedure for issuance of notice under provisions of section 148 of Act has been duly complied with and that there is no procedural irregularity. In absence of any illegality, notice issued under section 148 of Act is valid and legal notice. 7. Having heard learned counsel for respective parties, it emerges from record that this court, under provisions of Companies Act, has vide order dated 18 th June, Page 8 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT 2015, sanctioned composite scheme of arrangement in nature of amalgamation of three transferor companies viz. Gayatri Mine-Chem Private Limited, Gayatri Integrated Services Private Limited and Gayatri Fillers Private with petitioner that is, Gayatri Microns Limited, transferee company. Pertinently, amalgamation took place, much prior to issuance of notice dated 25th March, 2019 for reopening assessment. Thereafter petitioner informed respondent about said amalgamation of all three companies with petitioner. record reveals that factum of amalgamation of Gayatri Integrated Services Private Limited with petitioner, was communicated to respondent with sufficient details viz. (i) Passing of order dated 18 th June, 2015 by this court; (ii) communication dated 9th September, 2017 addressed by petitioner to Income Tax Officer, Ward-2(1)(1) during assessment proceedings for assessment year 2015-16 containing information of amalgamation and (iii) details of amalgamation in return for assessment year 2015-16 . 8. Concededly, in present case notice under section 148 of Act has been issued to Gayatri Integrated Services Private Limited which, as aforesaid, had long back got amalgamated with petitioner vide order dated 18th June, 2015 passed by this court and thus, it had ceased to have its own existence so as to render it amenable for reassessment proceedings under provisions of section 147 of Act. Moreover, respondent and department were duly informed by petitioner about amalgamation and despite said factum having been brought to notice of respondent, statutory notice under section 148 came to be Page 9 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT issued to Gayatri Integrated Services Private Limited for reopening assessment on ground that respondent has reason to believe that income chargeable to tax for assessment year 2012-13 has escaped assessment within meaning of section 147 of Act. 9. controversy in present petition, is no longer res integra. Apex Court in case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited (supra), in paragraph 33, has categorically held that if company has ceased to exist as result of approved scheme of amalgamation then in that case, jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. It is also held that upon amalgamating entity ceasing to exist, it cannot be regarded as person under sub- section (31) of section 2 of Act; against whom assessment proceedings can be initiated. Apex Court has further held that participation by amalgamated company in proceedings would be of no effect as there is no estoppel against law. 10. Similarly, this court, in judgment in case of Dharamnath Shares and Services (P) Ltd. (supra) while referring to its earlier decision in case of Khurana Engineering Limited (supra) held that once assessee company gets amalgamated with transferee company, its independent existence does not survive and therefore it would no longer be amenable to assessment proceedings. Thus, it is well settled proposition of law that upon its amalgamation transferor company ceases to exist and becomes extinct, and it would no longer be amenable to assessment proceedings considering fact that extinct entity would not be Page 10 of 11 Downloaded on : Thu Dec 26 10:13:30 IST 2019 C/SCA/13871/2019 CAV JUDGMENT covered within ambit of provisions of Act. 11. Accordingly, in view of aforesaid concluded proposition of law; which applies on all fours to facts of present case, notice dated 25th March, 2019 issued by respondent under provisions of section 148 of Act for assessment year 2012-13, being without jurisdiction, is not sustainable. 12. For foregoing reasons, petition succeeds and is accordingly so allowed. impugned notice dated 25th March, 2019 issued by respondent under section 148 of Act, and all proceedings taken pursuant thereto, are hereby quashed and set aside. Rule is made absolute accordingly. No order as to costs. (HARSHA DEVANI, J) (SANGEETA K. VISHEN,J) BINOY B PILLAI Page 11 of 11 Gayatri Microns Ltd. v. Assistant Commissioner of Income-tax