EDELWEISS BROKING LTD. ( ON BEHALF OF AMALGAMATING COMPANY EDELWEISS FINANCIAL ADVISORS LTD.),AHMEDABAD vs. ACIT, CIRCLE-1(3), , AHMEDABAD

The brief facts leading to the case is this the M/s. Edelweiss Financial Advisors Ltd. having PAN No. AABCA2916K in short ‘EFAL’ has been amalgamated with Edelweiss Broking Limited having PAN No. AABCE9421H in short ‘EBL’ by and under the order passed by the Hon’ble High Court at Gujarat dated 17.10.2014 with effect from 01.10.2013. The said fact of amalgamation was brought to the notice of the revenue on 16.03.2015 by the appellant without consideration of which the Ld. AO passed the order of penalty under Section 271(1)(c) 27.03.2017 imposing penalty of Rs. 17,86,440/- which was, in turn, confirmed by the Ld. CIT(A).

The crux of the case made out by the appellant and the submission made by the Ld. AR on the preliminary issue of maintainability is this that one the company is amalgamated with another it loses its original identity and proceeding cannot be continued in the earlier name rather it is the settled principle of law that the proceeding has to continue in the name of the amalgamated company and order can only be passed in the new name as Edelweiss Broking Limited, the appellant company before us. In support of the contention made by the Ld. AR, he has relied upon the judgment passed by the Coordinate Bench in the matter of Intas Lifesciences vs. ACIT in ITA Nos. 677 & 678/Ahd/2019 for A.Ys. 2013- 14 & 2014-15. He has further relied upon the judgment passed by the Edelweiss Broking Ltd. vs. ACIT Asst.Year –2011-12 Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Limited reported in 416 ITR 613. 5. We have heard the respective parties and we have also perused the relevant materials available on record.

It appears that the fact of amalgamation of the earlier company namely Edelweiss Financial Advisors Limited (EFAL) with the new company namely Edelweiss Broking Limited (EBL) by and under the order dated 17.10.2014 passed by the Hon’ble Gujarat High Court with effect from 01.10.2013, the amalgamating company i.e. EFAL stood dissolved from the date on which that amalgamation/transfer took effect and, thus, ceased to exist in the eyes of law, fact of which has been made known to the revenue as the said fact is reflecting at paragraph 2.2 at Page of the appellate order impugned before us. The appellant, as it further appears from the order impugned, vehemently made objection in regard to the penalty proceeding initiated and continued by the revenue in the name of the erstwhile company. The AO has no juri iction to levy penalty and/or to pass order in the hands of EFAL as it has become a non-existent entity. As submitted by the Ld. AR that the issuance of notice under Section 148 of the Act admittedly issued upon the dissolved company which is neither permissible in the eyes of law.

In fact, the Ld. DR has failed to draw our attention to any provision under the Income Tax Act, supporting such issuance or orders on the non-existent entity. In fact, the assessment proceedings for the Edelweiss Broking Ltd. vs. ACIT Asst.Year –2011-12 Assessment Year 2010-11 to 2013-14 have also been conducted by the concerned AO in the hands of the then amalgamated company i.e. EFAL after considering income and expenses of amalgamating company Edelweiss Stock Broking Ltd. (ESBL) in view of merger of Edelweiss Stock Broking Ltd. (ESBL) into Edelweiss Financial Advisors Ltd. (EFAL). Similarly in view of merger EFAL into EBL with effect from 01.10.2013 i.e. the pointed date of effect of merger, the penalty proceeding under Section 271(1)(c) must have been continued only in the hands of the amalgamated company i.e. Edelweiss Broking Limited as Edelweiss Financial Advisors Limited became a non-existent company from the date as envisaged under the scheme of amalgamation approved by the Hon’ble High Court of Gujarat on 01.10.2013. 8. In this regard, we have also considered the judgment passed by the Coordinate Bench in the matter of Intas Lifesciences vs. ACIT being ITA No. 677&678/Ahd/2019 for A.Y. 2013-14 & 2014-15. It further appears that the judicial pronouncement relied upon by the Ld. AR passed by the Hon’ble Apex Court in the case of PCIT vs. Maruti Suzuki India Limited has also been taken into consideration while deciding the issue in favour of the assessee. In the said case of Maruti Suzuki India Limited, on 29.01.2013 a scheme for amalgamation of SPIL and MSIL was approved by the Hon’ble High Court with effect from 01.04.2012 in terms of which all liabilities and duties of the transferor company stood transferred to the transferee company and the transferor company stood dissolved without winding up. The scheme stipulated that the order of amalgamation would not be construed as an order granted exemption Asst.Year –2011-12 from the payment of stamp duty or taxes or any other charges, if any, payable in accordance with law. The MSIL participated in the assessment proceeding of erstwhile amalgamating entity i.e. SPIL through its authorized representative. But the final assessment order passed on 31.10.2016 was in the name of the erstwhile entity i.e. SPIL which already amalgamated with MSIL. The objection of the assessee that assessment order passed in the name of the non-existent company is void ab initio has been accepted by the Ld. Tribunal which was upheld by the Hon’ble High Court and finally by the Hon’ble Apex Court. While holding the said assessment order a nullity as the same was in the name of non-existent company per se the Hon’ble Apex Court has been pleased to observe as follows:-

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 juri ictional notice was issued only in its name. The basis on which juri iction 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 (supra) 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 (supra).

We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011- 12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable."” Asst.Year –2011-12 We have further carefully considered the judgment passed by the Coordinate Bench wherein it appears that the judgment passed by the Hon’ble Apex Court in the case of PCIT vs. Maruti Suzuki India Limited and the judgment of Delhi High Court in the case of CIT vs. Dimension Apparels P. Ltd. on the identical issue were taken into consideration. The relevant portion whereof is as follows:-

In the result, assessee’s appeal is partly allowed. This Order pronounced in Open Court on 02/03/2021 (WASEEM AHMED) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 02/03/2021TANMAY, Sr. PS आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant

""यथ" / The Respondent. 3. संबं"धत आयकर आयु"त / Concerned CIT 4. आयकर आयु"त(अपील) / The CIT(A)-

"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड" फाईल / Guard file.