Based on a series of established legal precedents, the Uttarakhand High Court has invalidated the reassessment proceedings initiated in the name of a company that ceased to exist following a merger.

In a ruling by Justice Ravindra Maithani, presiding over the Bench, it was observed that “mere activation of PAN number may not give a right to the revenue to issue notice to a non-existent entity. Admittedly, in the instant case, the notice was given to the Transferor company, which is a non-existent entity, after the appointed date, i.e. 01.04.2018. Admittedly, the order under Section 148 A (d) of the Income Tax Act has been passed by the revenue against a non-existent entity.”

In this case, Delta Power Solutions India Pvt. Ltd. (DPS) was initially subjected to reassessment proceedings for the Assessment year 2019-20. Subsequently, DPS merged into Delta Electronics India Pvt. Ltd. (the Assessee) with the approval of the National Company Law Tribunal (NCLT) through an amalgamation order. The Revenue authorities were informed about the amalgamation scheme, and they even participated in the NCLT proceedings related to the amalgamation.

However, despite being aware of the amalgamation, the Assessing Officer (AO) proceeded to issue a notice under Section 148 and an order under Section 148A(d) against DPS. These actions were taken by the AO on the basis that the PAN (Permanent Account Number) of DPS was still active. In response, the Assessee brought the fact of the amalgamation to the attention of the Revenue authorities. The Assessee argued that starting from the appointed date, which was April 1, 2018, all transactions conducted using the PAN of DPS had been duly accounted for by the Assessee.

Upon reviewing the submissions made, the Bench observed that the Revenue acknowledged being informed about the amalgamation. However, the Revenue's argument was that, despite the post-amalgamation non-existence of DPS, its PAN remained active due to the Assessee's failure to take action and surrender the PAN.

The Bench conducted an analysis of Section 170 of the relevant legal provisions and the order issued by the National Company Law Tribunal (NCLT). In its analysis, the Bench noted that the NCLT order explicitly stated that statutory dues, including taxes, owed by DPS after the amalgamation, would be transferred to and become the responsibility of the Assessee.

As a result of its analysis, the Bench reached the conclusion that, in accordance with the amalgamation scheme, Delta Power Solutions India Pvt. Ltd. (DPS) was effectively merged into the Assessee from the appointed date. Therefore, the notice issued to DPS occurred after the appointed date, and the order under Section 148A(d) was issued against an entity that no longer existed, rendering it invalid.

In accordance with its findings, the Uttarakhand High Court made the decision to nullify or set aside the reassessment proceedings.

Case: Delta Electronics India Pvt. Ltd. v. Principal Commissioner of Income Tax and Another, Writ Petition (M/S) No.1557 of 2023.