Mr. Dharan v. Abhay Ahuja, Jj Dated : 10[Th] August 2021

Digitallysigned byGAURIGAURI AMITGAEKWADAMITDate:GAEKWAD2021.08.1711:13:57+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.2742 OF 2019Alok Knit Exports Limited)(M/s. Niraj Realtors & Shares Pvt. Ltd.)(PAN : ) now merged with)M/s. Alok Knit Exports Limited), a company)incorporated under the Comanies Act, 1956)and having its office at 3[rd] Floor, Tower B,)Peninsula Business Park, G.K. Road, Lower)Parel, Mumbai – 400 013)PAN : ) ….Petitioner V/s.1. The Deputy Commissioner of Income Tax)Circle 6 (1) (1), Room No.563B, 5[th] Floor,)Aayakar Bhavan, M.K. Road, Mumbai – 400)0202. The Principal Commissioner of Income)Tax – 6, Aayakar Bhavan, M.K. Road,)Mumbai – 400 020)3. The Union of India )Through the Secretary, Ministry of Finance,)Government of India, North Block, New)Delhi – 110 001) ….Respondents ---- Mr. Dharan V. Gandhi for petitioner. Mr. Nirmal C. Mohanty for respondents. ---- CORAM : K.R.SHRIRAM, & ABHAY AHUJA, JJ DATED : 10[th] AUGUST 2021 ORAL JUDGMENT : (PER K.R. SHRIRAM, J.)1Petitioner is impugning a notice no.ITBA/AST/S/148/2018-19/1015547197(1) dated 30[th] March 2019 issued by respondent no.1 underSection 148 of the Income Tax Act, 1961 (the Act) for the Assessment Year 2012-2013 and the subsequent order [Letter No.ITBA/AST/F/17/2019-20/1017795202(1)] passed on 5[th] September 2019 rejecting the objectionsraised by petitioner. 2By a notice dated 30[th] March 2019 issued under Section 148 ofthe Act, respondent no.1 informed Niraj Realtors and Shares Pvt. Ltd. (NirajRealtors) that he has reasons to believe that Niraj Realtors’ incomechargeable to tax for the Assessment Year 2012-2013 has escapedassessment within the meaning of Section 147 of the Act. Niraj Realtors wascalled upon to deliver a return in the prescribed form for the saidAssessment Year. The reasons required to be given for re-opening underSection 148 of the Act was provided by respondent no.1 to Niraj Realtorsalmost six weeks later by a communication dated 17[th] May 2019. Thereasons, opens with admission of the fact that Niraj Realtors had merged inand was known as Alok Knit Exports Pvt. Ltd. and had e-filed its return ofincome tax for the Assessment Year 2012-2013 on 30[th] September 2012. 3On receipt of these reasons, petitioner, by its objection dated16[th] June 2019 brought to the notice of respondent no.1 that the noticeissued under Section 148 of the Act was bad in law as the same was issuedin the name of a non-existent person. In the objection, copy whereof is atExhibit “H” to the petition, petitioner had also listed various judicialpronouncements on which they were relying upon to make their submissionthat the notice issued was bad in law. Apart from that, petitioner had also 3On receipt of these reasons, petitioner, by its objection dated16[th] June 2019 brought to the notice of respondent no.1 that the noticeissued under Section 148 of the Act was bad in law as the same was issuedin the name of a non-existent person. In the objection, copy whereof is atExhibit “H” to the petition, petitioner had also listed various judicialpronouncements on which they were relying upon to make their submissionthat the notice issued was bad in law. Apart from that, petitioner had also raised various other objections with which we do not propose to go into atthis stage because the Court felt, if the Court comes to a conclusion that thenotice, that was issued under Section 148 of the Act, was bad in law, thesame having been issued in the name of non-existent person, the otherobjections would only be academic. We should note that this objectiondated 16[th] June 2019 has been signed and submitted by Alok Knit ExportsPvt. Ltd. (successors of Niraj Realtors). In their objections, petitioner onceagain brought to the notice of respondent no.1, though respondent no.1was aware, that Niraj Realtors had merged with petitioner and for theAssessment Year 2011-2012 for re-opening of assessment of Niraj Realtors,the Assessing Officer had infact issued notice in the name of Alok KnitExports Pvt. Ltd. A copy of the notice issued under Section 148 of the Actfor the Assessment Year 2011-2012 in the name of petitioner as successorsof Niraj Realtors alongwith reasons for issuing the notice under Section 148of the Act is also annexed to the petition. Respondent no.1, however,rejected the objections raised by petitioner that the notice issued underSection 148 of the Act in the name of a non-existent person was bad in law.The reasons for rejection, for ease of reference and better understanding,are reproduced hereinbelow : “……………. 3. The above objections are being dealt hereunder : 3.1. With regard to the notice u/s. 148 to be bad in law asthe same is issued in the name of non-existent person, the year in consideration is A.Y. 2012-13 and during the saidyear, the name of the assessee was Niraj Realtors and SharesPvt. Ltd. under PAN and the informationreceived is with regard to obtaining of accommodationentries by the assessee viz. M/s. Niraj Realtors and SharesPvt. Ltd. and not M/s. Alok Knit Exports Pvt. Ltd. Theassessee company had merged recently and the informationis prior to the date of merger and hence the notice has beenissued in the name of M/s. Niraj Realtors and Shares Pvt. Ltd.Now that the assessee company has got merged with M/s.Alok Knit Exports Pvt. Ltd., it is pertinent to mention herethat with the acquisition and the corresponding duediligence, i.e., making realization of a merger or acquisition,after having identified and evaluating, all aspects withrespect to opting of an asset or a liability transaction, a fulltakeover viz a phased merger takes place which is bylaw theaccounting principle followed under merger or acquisitionand that all assets and liabilities are taken care of by the newcompany and any liability including Income Tax Liabilityarising out of any previous year is undoubtedly the liability tobe taken care of by the new company. 3.2. Further, the PAN Query Data base shows that the PANAAACN3983A as active and not inactive, which also signifiesthe notice issued in the name of the earlier company does notbecome bad in law. …………..” 3.2. Further, the PAN Query Data base shows that the PANAAACN3983A as active and not inactive, which also signifiesthe notice issued in the name of the earlier company does notbecome bad in law. …………..” 4One of the ground for rejecting the objection is that the PANQuery Data base showed that PAN of Niraj Realtors wasactive and not inactive which according to Assessing Officer signifies thatthe notice issued in the name of Niraj Realtors does not become bad in law.Annexed to the petition at Exhibit “A” is a copy of the letter dated 17[th] July2013 addressed to the Deputy Commissioner of Income Tax, Circle – 7 (1)from Niraj Realtors where Niraj Realtors has informed DeputyCommissioner of Income Tax that this Court, vide its order dated 10[th] May2013, has sanctioned the scheme of amalgamation of Niraj Realtors withpetitioner with appointed date of 1[st] April 2012. A copy of the said order was also forwarded alongwith the original PAN card with request to cancelthe same. Therefore, for respondent no.1 to say that even the PAN numberwas active and that signifies the notice issued in the name of Niraj Realtorsdoes not become bad in law is incorrect. In his conclusions, respondent no.1has stated that the assessee company, i.e., Niraj Realtors, had mergedrecently with petitioner and when merger takes place, all assets andliabilities are taken care of by the new company and any liability includingincome tax liability arising out of any previous year is undoubtedly theliability to be taken care of by the new company. Notwithstanding thisconclusion and being aware that Niraj Realtors had merged into petitionerand for the Assessment Year 2011-2012 respondent no.1 having issuednotice under Section 148 of the Act to petitioner for the dues of NirajRealtors, still respondent no.1 persisted with issuing the notice for theAssessment Year 2012-2013 under Section 148 of the Act to Niraj Realtors,a non-existent company. 5Mr. Mohanty appearing for respondents submitted that it was ahuman error which could be corrected under Section 292B of the Act.According to Mr. Mohanty human errors and mistakes cannot and shouldnot nullify proceedings which were otherwise valid and no prejudice hasbeen caused. Mr. Mohanty, relying upon the judgment of the Delhi HighCourt in Sky Light Hospitality LLP V/s. Assistant Commissioner of Income Tax1, submitted that that was the effect and mandate of Section 292B of theAct. Mr. Mohanty also relied upon the order passed by the Apex Court whenSky Light Hospitality (supra) was escalated to the Apex Court (Sky LightHospitality LLP V/s. Assistant Commissioner of Income Tax[2]). These do nothelp Mr. Mohanty’s case. This cannot be a general preposition as the ApexCourt has expressly stated“In the peculiar facts of this case, we areconvinced that wrong name given in the notice was merely a clerical errorwhich could be corrected under Section 292B of the IT Act (emphasissupplied)”. 6The Apex Court in its recent judgment on this subject inPrincipal Commissioner of Income Tax V/s. Maruti Suzuki India Ltd.3considered the judgment of Sky Ligh Hospitality (supra) of the Apex Courtand said that the Apex Court has expressly mentioned that in the peculiarfacts of that case wrong name given in the notice was merely a clericalerror. The Apex Court in Maruti Suzuki India Ltd. (supra) has also observedthat what weighed in the dismissal of the Special Leave Petition were thepeculiar facts of that case. The Apex Court has reiterated the settledposition that the basis on which jurisdiction is invoked is under Section 148of the Act and when such jurisdiction was invoked on the basis ofsomething which was fundamentally at odds with the legal principle thatthe amalgamating entity ceases to exist upon the approved scheme of 1. (2018) 405 ITR 296 (Delhi)2. (2018) 92 taxmann.com 93 (SC)3. (2019) 416 ITR 613 (SC)2. (2018) 92 taxmann.com 93 (SC)3. (2019) 416 ITR 613 (SC) amalgamation, the notice is bad in law. The Apex Court has held as under : 1. (2018) 405 ITR 296 (Delhi)2. (2018) 92 taxmann.com 93 (SC)3. (2019) 416 ITR 613 (SC)2. (2018) 92 taxmann.com 93 (SC)3. (2019) 416 ITR 613 (SC) amalgamation, the notice is bad in law. The Apex Court has held as under : In the present case, despite the fact that the assessing officerwas informed of the amalgamating company having ceasedto exist as a result of the approved scheme of amalgamation,the jurisdictional notice was issued only in its name. Thebasis on which jurisdiction was invoked was fundamentally atodds with the legal principle that the amalgamating entityceases to exist upon the approved scheme of amalgamation.Participation in the proceedings by the appellant in thecircumstances cannot operate as an estoppel against law. Thisposition now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed theappeal of the Revenue in Spice Enfotainment on 2 November2017. The decision in Spice Enfotainment has been followedin the case of the respondent while dismissing the SpecialLeave Petition for AY 2011-2012. In doing so, this Court hasrelied on the decision in Spice Enfotainment. 7This quotation squarely applies to this case at hand. In the caseat hand as well, the indisputable fact is respondent no.1 has invokedjurisdiction by issuing notice under Section 148 of the Act to an entity thathad ceased to exist. This is notwithstanding the fact that respondent no.1was aware that Niraj Realtors had ceased to exist. Respondent no.1, asnoted earlier, we say was aware because the notice under Section 148 of theAct was issued for the Assessment Year 2011-2012 in the name of petitionerfor re-opening the assessment of Niraj Realtors. Infact even the reasoningdated 6[th] July 2018 for re-opening of the Assessment Year 2011-2012 startswith the following : “The M/s. Niraj Realtors & Shares Pvt. Ltd. (PAN : ) now merged with M/s. Alok Knit ExportsPrivate Limited (PAN : ) is an Assessee of thischarge.” 8The stand now taken in the affidavit in reply and submissionsof Mr. Mohanty is nothing but an afterthought by respondent after havingcommitted a fundamental error. We would have expected respondent no.1to have atleast applied his mind and looked for documents which werealready on file to see whether Niraj Realtors existed before issuing noticeunder Section 148 of the Act. Respondents’ records would have indicatedthat Niraj Realtors ceased to exist and his predecessor/colleague has issuednotice for the Assessment Year 2011-2012 alongwith the reasoning in thename of petitioner. 9Therefore, the stand of respondent today that it was an errorwhich could be corrected under Section 292B of the Act is not acceptable tothis Court. Mr. Mohanty submitted that when respondent filled up the formfor recording the reasons and initiating proceedings under Section 148 ofthe Act and for obtaining the approval on 29[th] March 2019, he hasmentioned in the form in the column name and address of the assessee asM/s. Niraj Realtors and Shares Pvt. Ltd. now merged in and known asM/s. Alok Knit Exports Pvt. Ltd. In our view, that itself should have maderespondent no.1 realise that when a company is merging into anothercompany that merging company ceases to exist. Infact the PrincipalCommissioner of Income Tax, who is supposed to have approved theinitiating of proceedings under Section 148 of the Act, also should havebrought to the notice of or guided respondent no.1 that the notice ought toGauri Gaekwad be issued in the name of petitioner and not Niraj Realtors which ceased to exist. 10In the circumstances, we allow the petition in terms of prayer clause – (a), which reads as under : (a) that this Hon’ble Court may be pleased to issuea Writ of Certiorari or a Writ in the nature ofCertiorari or any other appropriate Writ, Order ordirection, calling for the records of the petitioner’scase and after going into the legality and proprietythereof, to quash and set aside the said notice dated30[th] March 2019 (Exhibit “D”) and the subsequentOrder dated 05[th] September 2019 (Exhibit “I”). be issued in the name of petitioner and not Niraj Realtors which ceased to exist. 10In the circumstances, we allow the petition in terms of prayer clause – (a), which reads as under : (a) that this Hon’ble Court may be pleased to issuea Writ of Certiorari or a Writ in the nature ofCertiorari or any other appropriate Writ, Order ordirection, calling for the records of the petitioner’scase and after going into the legality and proprietythereof, to quash and set aside the said notice dated30[th] March 2019 (Exhibit “D”) and the subsequentOrder dated 05[th] September 2019 (Exhibit “I”). Petition disposed. 11All to act on authenticated copy of this order. (ABHAY AHUJA, J.) (K.R. SHRIRAM, J.)