(2022) 443 ITR 194 (SC)
Assessment following amalgamation where the fact was not disclosed
No. The invalidity rule is not absolute. Where the amalgamation was concealed, returns were filed in the old name and the conduct of the assessee contributed to the error, the assessment is not void.
Does the rule invalidating assessments on amalgamated companies apply where the taxpayer did not disclose the amalgamation and continued to deal with the Revenue in the old name?
The amalgamation had taken effect some years before the assessment proceedings, but was not brought to the notice of the Assessing Officer. A search was conducted, and a return for the relevant year was filed in the name of the amalgamating company, signed on its behalf. The proceedings were conducted throughout on the footing that the company continued to exist, and the amalgamation was raised only later as a ground for challenging the assessment. The business of the amalgamating company had also continued to be carried on.
The Delhi High Court, applying Maruti Suzuki, held the assessment void. The Revenue appealed to the Supreme Court, which reversed and distinguished its earlier decision.
For the assessee
The amalgamating company had ceased to exist before the assessment, and on the authority of Maruti Suzuki an assessment framed in its name is a nullity regardless of the circumstances. The defect is jurisdictional and cannot be waived.
For the Revenue
Unlike Maruti Suzuki, the Revenue was never informed of the amalgamation. The return itself was filed in the amalgamating company's name, and the assessee conducted itself throughout as though the company subsisted. A party cannot rely on a defect that its own suppression produced.
The Court held that whether an assessment framed on an amalgamated entity is a nullity is not a question admitting of a single answer in every case; it depends on the facts, and in particular on the conduct of the assessee. It distinguished Maruti Suzuki on the footing that there the Revenue had been duly informed of the amalgamation and had proceeded in the old name with full knowledge. Here the amalgamation had been suppressed, the return for the year had been filed in the name of the amalgamating company, and the proceedings had been conducted on that basis throughout with the assessee's participation. In those circumstances the Court held that the assessee could not take advantage of a defect that its own non-disclosure had produced, and that the assessment was not void. It observed that the business had continued and that the conduct of the parties, the scheme of amalgamation and the surrounding facts must all be examined rather than a mechanical rule applied. The appeal of the Revenue was accordingly allowed.
The necessary counterweight to Maruti Suzuki. Together the two decisions establish that the outcome depends on disclosure: intimate the amalgamation and an assessment in the old name is void; suppress it and the objection is unlikely to succeed. Under the IT Act 2025 the assessment machinery is recast but the principle, resting on jurisdiction and conduct rather than on a specific numbered provision, continues to apply.