Karnataka High Court
COFFEE DAY RESORTS (MSM) PVT. LTD. V. THE DEPUTY COMMISSIONER OF INCOME-TAX
WRIT PETITION NO. 9594 OF 2023 (T-IT)
Bench- HON’BLE MR JUSTICE S SUNIL DUTT YADAV
Decided On 01-06-2023
Facts of the case-
Coffee Day Resorts (MSM) Pvt. Ltd. (hereinafter referred to as the petitioner) has raised concerns regarding the validity of the reassessment proceedings initiated against them. The petitioner, formerly known as Shankar Resources Pvt. Ltd., was a non-banking financial company (NBFC) that underwent a merger with the petitioner company pursuant to an order of amalgamation by the National Company Law Tribunal (NCLT).
Subsequently, the respondent, referring to the provisions of Section 148A (b) of the Income Tax Act, 1961, issued a notice to Shankar Resources Private Limited, seeking an explanation as to why a notice under Section 148 of the said Act should not be issued.
In response, the petitioner submitted a reply stating that the company to which the notice under Section 148A (b) was directed, namely M/s. Shankar Resources (P) Ltd., had been amalgamated with M/s. Coffee Day Resorts (MSM) Pvt. Ltd. Consequently, as of April 1, 2018, M/s. Shankar Resources (P) Ltd. ceased to exist, and there was no longer any assessable entity under the name of M/s. Shankar Resources (P) Ltd. for the assessment year 2019-20.
It is imperative to analyze the legal implications of the aforementioned facts. The merger of Shankar Resources Pvt. Ltd. with Coffee Day Resorts (MSM) Pvt. Ltd. has been carried out in accordance with the order of amalgamation issued by the NCLT. Such an amalgamation signifies the consolidation of both entities, resulting in the cessation of the existence of Shankar Resources Pvt. Ltd. from the effective date of the amalgamation, i.e., April 1, 2018.
Therefore, the petitioner contends that the notice issued under Section 148A (b) is misplaced, as it is directed towards an entity, M/s. Shankar Resources (P) Ltd., that no longer exists. The petitioner, now known as Coffee Day Resorts (MSM) Pvt. Ltd., is the only surviving and accessible entity following the merger.
In light of these facts, the petitioner asserts that there is no valid basis for the reassessment proceedings for the assessment year 2019-20 to be conducted against them. The amalgamation has effectively dissolved the identity and legal existence of Shankar Resources Pvt. Ltd., leaving Coffee Day Resorts (MSM) Pvt. Ltd. as the only relevant entity subject to assessment.
Consequently, the petitioner seeks legal redress and challenges the validity of the reassessment proceedings, arguing that the notice issued under Section 148A (b) is untenable given the amalgamation and the subsequent cessation of Shankar Resources Pvt. Ltd.
Judgement
The Court has ruled that a notice and assessment order issued in the name of a non-existent company is fundamentally illegal and lacks jurisdiction. The Court specifically noted that M/s. Shankar Resources (P) Ltd., which had merged with the petitioner company, no longer existed at the time the notice was issued. As a result, the notice issued under Section 148A(b) is declared null and void.
The Court emphasized that the tax department is entitled to initiate appropriate proceedings, as permissible by law, against the petitioner company based on the contents of the notice under Section 148A(b). However, such proceedings must be in accordance with the relevant legal provisions. The Court clarified that the petitioner company is still subject to assessment and can be subjected to lawful actions by the tax department.
Therefore, the Court sets aside the notice issued under Section 148A(b) in relation to M/s. Shankar Resources (P) Ltd., while affirming that the tax department retains the authority to commence appropriate proceedings against the petitioner company, Coffee Day Resorts (MSM) Pvt. Ltd., in compliance with the applicable laws.
JUDGEMENT REVIEWED BY ABHAY SHUKLA
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