Tax assessment orders issued to companies defunct after merger are void: Bombay High Court

The Bombay High Court on Friday held that tax assessment orders issued to non-existent companies post-merger are 'void ab initio' [Reliance Industries v UOI]..Therefore, the Court quashed assessment orders issued by the Income Tax department for the assessment years 1993-94 to 1995-96 in the names of Reliance Polypropylene Limited (RPPL) and Reliance Polyethylene Limited (RPEL), which had merged with Reliance Industries Limited (RIL) in 1995The Bench comprising Justices MS Sonak and Jitendra Jain ruled that the assessment orders were issued to companies that no longer existed after their merger with another entity and hence, the notices were invalid."In our view, the facts of the present appellant-assessee before us are similar to the significant facts in the case of Maruti Suzuki India Ltd. (2019)....In our view, in the present case also, although RIL—the amalgamated company—participated in the proceedings, the respondent-revenue, having knowledge of the amalgamation, still passed an order in the name of the amalgamating companies, which would make the assessment order dated March 27, 1997, void ab initio,” the Court ordered..The central issue was whether assessments should have been made in the name of the amalgamated company RIL instead of RPPL and RPEL. Representing Reliance, Senior Advocate JD Mistri argued that the assessments were invalid because they were issued after the merger. He highlighted that the Assessing Officer had knowledge of the merger, as evidenced by the fact that RIL’s refund had been adjusted against the outstanding demands of RPPL and RPEL. Despite this, the assessment orders were passed in the names of thde defunct companies.On the other hand, the Income Tax Department argued that RIL was raising the issue too late which had prejudiced the department's ability to take proper action. They referred to the Supreme Court’s decision in Mahagun Realtors (P) Ltd from 2022 and said that RIL, having assumed the liabilities of RPPL and RPEL, should not be allowed to avoid its obligations by making a belated plea. The department also objected to the introduction of additional documents by RIL, arguing that the fresh evidence could undermine the revenue’s position.Despite these objections, the Court allowed RIL’s request to submit additional documents. It explained that new evidence was necessary to determine whether the Assessing Officer had knowledge of the merger before issuing the assessment orders. The Court observed that for the assessment year 1994-95, the intimation to RIL, which adjusted its refund against RPPL and RPEL’s demands, clearly demonstrated that the Assessing Officer was aware of the merger before passing the orders.Subsequently, the Court drawing on the Supreme Court’s ruling in Maruti Suzuki (2019),emphasized that passing assessment orders in the names of non-existent companies rendered those orders void Hence, it quashed the assessment orders from 1994-1995.Similarly, relying on the same rationale, assessment orders for the year 1993-94 and 1995-96 were quashed as well..Senior Advocate JD Mistri along with advocates Madhur Agrawal, FenilBhatt, P C Tripathi, Ashwin Dave, Ketan Dave, Amit Bhatt, P C Tripathi, Ashwin Dave, Ketan Dave, Amit Mathur and Gaurav Gangal instructed by A S Dayal & Associates appeared for Reliance Industries Ltd.Advocate Vipul Bajpayee appeared for the Commissioner of Income Tax.Advocate Suresh Kumar for appeared for the Deputy Commissioner of Income Tax..[Read Judgment]