Gujarat High Court
The Mehsana Urban Co-Op Bank Ltd vs Assistant Commissioner Of Income Tax ... on 7 January, 2023
Author: Sonia Gokani
Bench: Sonia Gokani
C/SCA/15621/2019 ORDER DATED: 07/01/2023
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 15621 of 2019
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THE MEHSANA URBAN CO-OP BANK LTD.
Versus
ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(3), SURAT
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Appearance:
MR B S SOPARKAR(6851) for the Petitioner(s) No. 1
MRS KALPANA K RAVAL with MR KARAN SANGHANI for the
Respondent(s) No. 1
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CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MR. JUSTICE SANDEEP N. BHATT
Date : 07/01/2023
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1 The petitioner, Mehsana Urban Co-Op Bank Ltd., has preferred this petition under Article 226 of the Constitution of India challenging the notice dated 30.03.2019 issued by respondent under section 148 of the Income Tax Act, 1961 ("the Act" for short) to reassess the income of Surat Nagrik Sahkari Bank Ltd., which is now merged with the petitioner for the Assessment Year 2012-13, which according to the petitioner, is an act contrary to law.
2 Brief facts leading to the present petition are as Page 1 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023 C/SCA/15621/2019 ORDER DATED: 07/01/2023 follows:
2.1 Petitioner is a Multi-State Scheduled Cooperative Bank, whose members are individuals and citizens.
One Surat Nagrik Sahkari Bank Limited had amalgamated with the petitioner on 01.07.2013. The respondent had been intimated of the said amalgamation with Surat Nagrik Sahkari Bank Limited vide its communications dated 23.08.2013 and 05.11.2014. Thereafter, the orders passed by the Registrar of Co-operative Societies, Gujarat State and Reserve Bank were submitted to the respondent on 24.12.2013.
2.2 The return of income was filed by the petitioner as on 12.11.2012 at nil. The case was selected for scrutiny under section 143 of the Act and the order under section 143(3) of the Act was passed on 30.03.2015.
2.3 However, the notice received on 30.03.2015 under section 148 of the Act seeking to reopen the assessment for the Assessment Year 2012-13 is sought to be challenged raising preliminary objection Page 2 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023 C/SCA/15621/2019 ORDER DATED: 07/01/2023 that the notice has been issued at an entity, which no longer exists and it is merged.
2.4 According to the petitioner, the ground of reopening is in relation to the amount of Rs.2.68 crores, which is transferred to Hong Kong and UAE by 12 entities managed by one Afroze Hassan Fatta in the guise of bogus import payment. The ground recorded is based on the information received from DDIT (Investigation), Surat unit and there is no application of mind. Therefore, the petition is preferred seeking following reliefs:
"7. The Petitioner, therefore, prays that this Honourable Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to:
a. quash and set aside the impugned notice at Annexure-'A' to this Petition;
b. pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure-'A' to this petition and stay further proceedings for the A.Y.2012-13;
c. any other and further relief deemed just and proper be granted in the interest of justice;
d. to provide for the cost of this petition."
3 Affidavit-in-reply is filed denying all allegations.
According to the respondent, the information for Page 3 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023 C/SCA/15621/2019 ORDER DATED: 07/01/2023 escapement of income by Surat Nagrik Sahkari Bank Limited for the Financial Year 2012-13 is already with the respondent. The jurisdictional issue that the name of non-existing company i.e amalgamating company ceased to exist is bad in law. It is submitted that all future proceedings shall be conducted in the name of existing entity, namely, the Mehsana Urban Cooperative Bank Ltd. Therefore, the proceedings are in continuation and cannot be termed to be bad in law.
4 The rejoinder affidavit also has been filed, which may not be necessary to be further dilated, except emphasising that outward remittances are not the income of the petitioner and, therefore, the petitioner cannot be made a scapegoat of any unscrupulous transactions alleged to have been undertaken at the behest of any party.
5 We have heard Mr.B.S.Soparkar, learned advocate for the petitioner, who has relied on the decisions of this Court in the case of Neo Structo Construction (P.) ltd.
vs Assistant Commissioner of Income-tax, [2022] 144 Page 4 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023 C/SCA/15621/2019 ORDER DATED: 07/01/2023 taxmann.com 41 (Gujarat) and in the case of Dharmnath Shares & Services (P.) Ltd. vs. Assistant Commissioner of Income-tax, Cen.Cir.1(2), [2018] 94 taxmann.com 458 (Gujarat), to urge that the petitioner, on the ground of issuance of notice on the entity, which is not in existence in 2013-14 and the one which has been merged with the present petitioner, cannot be issued the notice and the petition should be entertained.
6 We have also heard Mrs. Kalpana Raval, learned advocate for the respondent assisted Mr. Karan Sanghani, learned advocate for the respondent, who does not dispute the settled position of law. However, according to Mr. Karan Sanghani, learned advocate for the respondent, the information, which have been received from the Investigative Wing of DDIT, Surat is speaking of foreign remittances.
7 Noticing the decision of the Apex Court in the case of CIT vs. Maruti Suzuki India Ltd, [2019]107 taxmann.com 375, where it has been held that the Page 5 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023 C/SCA/15621/2019 ORDER DATED: 07/01/2023 amalgamating entity would cease to exist against the approved scheme of amalgamation. In Gayatri Microns ltd. vs. Asstt. CIT, [2020] 114 taxmann.com 318, this Court had followed the Apex Court's decision of Maruti Suzuki India Ltd (supra) to hold that the jurisdictional notice issued in the name of the company, which has been amalgamated is illegal and without jurisdiction, since the amalgamating entity ceases to exist and cannot be regarded as person under sub-section (31) of section 2 of the Act against whom the assessment proceedings can be initiated. Relevant paragraphs are reproduced as under:
"7. Learned advocate Mr. Shah relied upon the judgement of Hon'ble Supreme Court in case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Ltd (107 Taxmann. Com. 375) in which the Supreme Court has held as under:
"33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment."Page 6 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023
C/SCA/15621/2019 ORDER DATED: 07/01/2023
8. He further placed reliance on the decision of this Court in case of Gayatri Microns Ltd vs. Assistant Commissioner of Income Tax reported in [2020] 114 Taxmann.com 318 in which this Court has held as under:
"9. The controversy in the present petition, is no longer res integra. The Apex Court in the case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited (supra), in paragraph 33, has categorically held that if the company has ceased to exist as a result of the approved scheme of amalgamation then in that case, the jurisdictional notice issued in its name would be fundamentally illegal and without jurisdiction. It is also held that upon the amalgamating entity ceasing to exist, it cannot be regarded as a person under subsection (31) of section 2 of the Act; against whom assessment proceedings can be initiated. The Apex Court has further held that participation by the amalgamated company in the proceedings would be of no effect as there is no estoppel against law.
10. Similarly, this court, in the judgment in the case of Dharamnath Shares and Services (P) Ltd. (supra) while referring to its earlier decision in the case of Khurana Engineering Limited (supra) held that once the assessee company gets amalgamated with the transferee company, its independent existence does not survive and therefore it would no longer be amenable to the assessment proceedings. Thus, it is well settled proposition of law that upon its amalgamation the transferor company ceases to exist and becomes extinct, and it would no longer be amenable to the assessment proceedings considering the fact that the extinct entity would not be covered within the ambit of the provisions of the Act.
11. Accordingly, in view of the aforesaid concluded proposition of law; which applies on all fours to the facts of the present case, the notice dated 25th March, 2019 issued by the respondent under the provisions of section 148 of the Act for the assessment year 2012-13, being without jurisdiction, is not sustainable."
9. On the other hand, learned advocate Mr.Manish Bhatt has opposed this petition.
10.We have heard learned advocates appearing for the respective parties. It is an undisputed fact that the Billfinger Neo Structo Pvt Ltd. was merged with Neo Structo Construction Pvt. Ltd by the order of the High Court of Bombay in Company Petition No. 21 of 2015 connected with Company Summons for Direction No. 875 of 2014. The petitioner has specifically raised his objection in the reply however, notice has been issued to the company viz. Billfinger Bilfinger Plant Equipment Pvt. Ltd which is already merged with the present petitioner.
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11.We are in agreement with the submissions made by learned advocate for the petitioner. The ratio laid down by the Hon'ble Apex Court in case of Principal Commissioner of Income Tax vs. Maruti Suzuki India Ltd (supra) and in case of Gayatri Microns Ltd vs. Assistant Commissioner of Income Tax (supra) is applicable in the facts and circumstances of the present case in view of the fact that now the notice has already been issued to the present petitioner-company under section 148 of the Income Tax Act for the assessment years involved in the present group of petitions.
12.Accordingly, we hereby allow the petitions and quash and set aside Notice dated 30.03.2021 in Special Civil Application No. 5803 of 2022, Notice dated 25.03.2021 in Special Civil Application No. 5805 of 2022 and Notice dated 25.03.2021 in Special Civil Application No. 5804 of 2022. Rule is made absolute to the aforesaid extent in each petition."
8 In the case of Dharmnath Shares & Services (P.) Ltd.
vs. Assistant Commissioner of Income-tax, Cen.Cir.1(2), [2018] 94 taxmann.com 458 (Gujarat), this has held thus:
"4. It is not indispute that the petitioner-company amalgamated with Dharmanath by virtue of the judgment of this Court dated 4th May 2012. In fact, copy of the order of this Court is produced on record. Though this order was passed on 4th May 2012, the effective date of amalgamation was 1st April 2010. Division Bench of this Court in case of Khurana Engineering Limited v. Deputy Commissioner of Income Tax, reported in [2014] 364 ITR 600 [Guj.] had held that once the assessee company had amalgamated with the transferee company, its independent existence did not survive, and therefore, would no longer be amenable to assessment proceedings. For such purpose, the Court had quashed the notice on the company which had already merged, for producing documents for assessment. Under the circumstances, the notices in the present case would also be invalid. Learned counsel for the Revenue, however, made faint attempt to argue that the impugned notices have been issued not to the transferor company, but to Dharmanath Share & Services Private Limited itself. Such contention has to Page 8 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023 C/SCA/15621/2019 ORDER DATED: 07/01/2023 be rejected out of hand. The notice itself is addressed to the Principal Officer/ Director of M/s. Rajendrasuri Financial Services [Gujarat] Private Limited [the present assessee]. By reference, it also records that the company has now merged with Dharmanath Share & Services Private Limited, nevertheless, the notice is to M/s. Rajendrasuri Financial Services [Gujarat] Private Limited. Had the Revenue desired to issue notice of re-assessment to Dharmanath Share & Services Private Limited, there would have been six different notices for the same assessment year, as in the present case. We also noticed that the very same income has also been taxed in the hands of Dharmanath Share & Services Private Limited."
9 In view of the above, notice itself is not sustainable under the law. Petition stands allowed quashing and setting aside the notice issued under section 148 of the Act dated 30.03.2019 with all consequential reliefs. 10 Petition stands disposed of accordingly.
(MS. SONIA GOKANI, J. ) (SANDEEP N. BHATT,J) SUDHIR Page 9 of 9 Downloaded on : Tue Jan 10 20:44:14 IST 2023