Mere activation of PAN number may not give a right to I-T Dept. to issue notice to a non-existent entity

The Uttarakhand High Court quashed reassessment proceedings initiated in the name of the merged company since it became a non-existent entity post-amalgamation.

A Single Judge Bench of Justice Ravindra Maithani observed that “mere activation of PAN number may not give a right to the revenue to issue notice to a nonexistent entity”.

Advocate Piyush Kaushik appeared for the petitioner whereas Advocate H.M. Bhatia appeared for the Respondent. 

The brief facts of the case were that Delta Power Solutions India Pvt. Ltd. (DPS) was subjected to reassessment proceedings for AY 2019-20 which got merged into Delta Electronics India Pvt. Ltd (Assessee). NCLT approved the amalgamation by order dt. Jan 31, 2019, with Apr 1, 2018, as the appointed date. The Revenue was informed about the scheme of amalgamation on August 8, 2018, and the Revenue even participated in the amalgamation proceedings before the NCLT. The Revenue was informed about the amalgamation even after the approval by NCLT. The Assessee challenged the notice under Section 148 dated Mar 20, 2023, and order under Section 148A(d) as Revenue issued notice under Section 148A against DPS specifying, therein, that the PAN of DPS was active.

In response, the Assessee brought the fact of amalgamation to the Revenue’s notice and submitted that with effect from the appointed date i.e., Apr 1, 2018, all the transactions entered and appeared with PAN of DPS were duly accounted for by the Assessee.

After considering the submission, the Bench noted that the Revenue admitted that the fact of amalgamation was informed to it.

“However, contended that though DPS became non-existent post-amalgamation, its PAN was lying a-float and was active due to the non-action/failure on the part of the Assessee in surrendering the PAN”, added the Bench.

The Bench stated by the analyses of the provision of Section 170 and the order of the NCLT, that the statutory dues, tax, etc., that are due and payable by DPS subsequent to amalgamation would stand transferred to the Assessee.

The Bench further stated that from the appointed date, under the scheme of amalgamation, DPS stood merged into the Assessee. 

Hence, on finding that the notice was given to DPS after the appointed date and the order under Section 148A(d) was passed against a non-existent entity, the Bench quashed the impugned order passed under Section 148(A)(d) of the Income Tax Act

Cause Title: Delta Electronics India Pvt. Ltd. Vs. Principal Commissioner of Income Tax and Anr. [Writ Petition (M/S) No.1557 of 2023 / 2023-Enterslice-25-HC-Ukd-IT]

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Delta-Electronics-India-Pvt.-Ltd-Vs-Principal-Commissioner-of-Income-Tax-and-Another