Nunhems India Pvt. Ltd vs. The Deputy Commissioner of Income Tax Circle -5(1)

[ 337e ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE FOURTH DAY OF JANUARY TWO THOUSAND AND TWENry FOUR PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE N.TUKARAMJI WRIT PETITION NO: 37863 OF 2021 Between: AND 1 trlu.nhgmg lndia Pvt. Ltd, (Successor to Nunhems Vegetable Seeds pvt. Ltd.),S-196, Kenalakoya Village, Medchal to t\riyapur BypZss Road, Medchal, !-l Vdera f-r_ad, Telangana -501403, Through its AJthbrized Signatory, 'Mr. Sushii Kumar Kaushik, Director. ...PETITIONER Tte^Depy.ty Commisjioter of lncome Tax Circle -5(1), Hyderabad, Room No.344, 3'' Floor, l.T. Towers, A.C. Guards, Masa6 fank, Hyderabad-SoOOO4 The Union of lndia, through the Secretary, Ministry of Finance, Government of lndia, North Block, New Delhi 110 101 ...RESPONDENTS 2 Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ of Certiorari, or a writ in the nature of Certiorari, or any other appropriate writ, order or direction under Article 226 of the constitution of lndia, calling for the records of the Petitioner's case so far as they relate to the issue of the lmpugned Notice dated 17 June 2021 issued by the First Respondent (Exhibit "P'1") and Notices dated 24 November 2O21 and 25 November 2021 (Exhibit "P20" and "P21") re{ating to the A.Y. 2016-17, after going through and examining the question of the validity, propriety and legality thereof, be pleased to quash the same.(b)declaring the provisions of section 3 of the Taxation and Other Laws Act, 2020 (Exhibit "P4") as suffering from the vice of excessive delegation of legislative functions as also being arbitrary and discriminatory, thus violative of

unconstitutional. (c)declaring Notification No.2Ol2O21 dated 31 March 2021 (Exhibit. "P2") and Notification No.38/2021 dated 27 April 2021 (Exhibit "P3") as having been issued in exercise of powers which suffer from the vice of excessive delegation of legislative functions as also arbitrary and discriminatory, thus violative of Article 245 and 14 of the Constitution of lndia and consequently unconstitutional.(d )Passing such other order or orders as may be deemed fit and proper in the circumstances of the case and in the interests of justice. lA NO: 2 OF 2021 Petition under Order 39, Rules 1 & 2 of praying that in the circumstances stated in the affidavit filed in supporl of the petition, the High Court may be pleased to restrain the respondents, their subordinates, servants and agents from acting upon or taking any further proceedings in pursuance of and/or in implementation and/or inn furtherance of the impugned Notice dated 17rh June, 2021 issued by the First Respondent under Section 148 of the lncome Tax Act, '1961 (Exhibit "Pl") and Notices dated 24th November 2021 and 25 November, 2021 (Exhibit "P20" and "P21") relating to the A.Y.2016-17 pending disposal of the above Writ Petition. Counsel for the Petitioner: SRI NISHANT THAKKAR AND SRI HITEN THAKKAR REPRESENTING FOR SRI G NARENDRA CHETTY Counsel for the Respondent No.1: MS. SApNA REDDY, SC FOR INCOME TAX Counsel forthe Respondent No.2: SRI B. MUKERJEE, SC REPRESENTING FOR GADI PRAVEEN KUMAR, DEPUW SOLICITOR GENERAL OF INDIA The Court made the following: ORDER

THE HON'BLE SRI JUSTICE P.SAM KOSI{Y AND THE HON'BLE SRI JUSTICE N.TUKARAMJI W.P.No.37863 of 2O2l ORDER:6-re' rro n'bte Sn Justice P.SAM l<Or;fiy) Heard Mr. Nishant Thakkar and Mr. Hiten Thakkar, learned counsel appearing on behalf of Mr. G. Narendra Chetty, learned counsel for the petitioner; Ms. Sapna Reddy, learned Standing Counsel for lncome Tax appearing for respondent No. I and Mr. B. Mukerjee, learned Senior Counsel appearing on behalf of Mr. Gadi Praveen Kumar, learned Deputy Solicitor General of India appearing for respondent No.2. 2. The instant writ petition has been filed assailing the Notice dated 17.06.2O2 1 issued by respondent No.1 under Section 148 of the Income tax Act, 1961 for the A.Y.2O16-17. 3. The challenge to the said Notice dated 17.O6.2021 and tlre consequential proceedings drawn by the respondent authorities is primarily on the ground that the addressee to the said Notice viz., M/s.Nunhems Vegetable Seeds private Limited is a non-existing entity. 4. It has been contended by the learned counsel for the petitioner that in terms of the order passed by this Court in Company Petition No.7O of 2OL6 connected with Company

2 Application No.S of 2O16 decided on O1.06.2016, the scheme for amalgamation was approved and the relevant portion of the said order is for convenience sake reproduced hereinunder: "Having regard to the above material/ reports, this Court is of the opinion that the proposed scheme of amalga;rration is in conformity with the provisions of the Act. The scheme does not alTect the interest of stakeholders and ttre public or public interest ald is intended to further t]le business interests of transferor and tralsferee companies for more proht and maximum utilization of available resources. Therefore, the scheme of amalgamation approved in the meeting of Board of Directors of transferor compzrny on 07. 12.2015 is sanctioned with effect from the date appointed i.e. 0I.04.2015. The transferor compzrny viz., M/s.Nunhems Vegetable Seeds Private Limited is ordered to be dissolved without going through the process of winding up. The transferor and the transferee companies ale directed to communicate certified copy of this order to the Registrar of Companies for the State of Telangana and the State of Andhra Pradesh, Hyderabad within 30 days from the date of receipt of a copy of this order. They are further directed to take all consequential artd statutory steps required in pursu:rnce of the approved scheme of amalgamation ald the Act." From the above referred paragraph, it is clear that the effective date of amalgarnation has been accepted to be 01.04.2O15. The said amalgamation has attained its finality and thereafter, it is the petitioner-company which now exists and operates in the name of Nunhems India Private Limited. 5. karned counsel for the petitioner referring to the decision of this Court in W.P.No.11247 of 2023, decided oo 2O.O9.2O23 contended that the impugned Notice dated 17.06.2021 is not sustainable against the non-existing company. In support of this

3 contention, learned counsel has relied upon the decision of the Hon'ble Supreme Court in the case of PCIT Vs. Maruti Srtzuki India Limitedl, whereby, the Hon'ble Supreme Court has held that initiating of proceedings and framing of assessment against a non existing company which stands amalgamated is impermissible under law. 6. On the previous date of hearing, we had directed the learned counsel for the Department to seek instructions as regards the amalgamation of two companies. 7 . Today, when the matter is taken up for hearing, learned counsel for the petitioner submits that the facts of this case is similar to the one which stands decided by this Court in the case of trll/s. Virchoto Drugs Limited. Vs. Income Ta-x. OfJicer and. Ors., in W.P.No. 11247 of 2023, dated 2O.O9.2023. However, the learned counsel for the Department prays that the right of the Department may be protected so fa_r as initiating appropriate proceedings against the merged company i.e., the petitioner,s establishment in accordance with law. '20t9 416 ITR 613

4 8. To which, the learned counsel for the petitioner did not oppose subject to the authorities initiating steps in accordance with law. 9. It would be relevant at this juncture to take note of the relevant portion of the order passed by this Court in W.P.No.11247 of 2023, which is reproduced herein under: "20. The Hon'ble Supreme Court frnally endorsing the earlier view of the High Court of Delhi in the case of Spice Infotainment, supra, in paragraph Nos.33 to 35 held as under: "ln the present case, despite the fact that the AO was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, t1le jurisdictional notice -was issued only in its narne. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the arnalgamating entity ceases to exist upon the approved scheme of arrralgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppels against law- This position now holds t]'e filed in view of the judgment of a co ordinate Bench of two learned judges which dismissed t}.e appea,l of the Revenue in Spice Enfotainment on 2nd Nov-, 2017. T?re decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for asst. yr. 2Oll-12. In doing so, this Court has relied on the decision in Spice Enfotainment. We find no reason to take a different view. There is a value which tl.e Court must abide by in promoting the interest of certainty in ta-x litigation. The view which has been taken by this Court in relation to the respondent for asst. yr. 2OlI-72 must, in our view be adopted in respect of the present appeal which relates to asst. )'r. 2Ol2-I3- Not doing so will only result in uncertainty a-rrd displacement of settled expectations. There is a significant value which mqqt_ attach to observing the requirement of consistency and Certainty. lndividual allairs are conducted and business decisions are made in the expectation of consistency, uniforrnity and certainty. To detract from those principles is neittrer expedient nor desirable. For the reasons, we find no merit in the appea-l.

5 The appeal is accordingly dismissed. There shall be no order as to costs. " 21. It is also relevant at this juncture to ta-ke note of yet another recent decision of the High Court of Bombay in the case of SISz{ INDIA (4 LTD. yS. DEPUTY COIIIUISSIO IER OF INCOME ?A,lP, wherein the Bombay High Court reiterating the view of the High Court of Delhi in the case of Spice Infotainment, supra, and also following the dictum of the Hon'ble Supreme Court in the case of Maruti Suzuki (lndial Limited, supra, in paragraph Nos.7 and 8 has held as under: "The stand of the Revenue that the reassessment was justifred in view of the fact that the PAN in the name of the non-eistent entity had remained active does not create an excepLion in the favour of t]re Revenue to dilute in any manner the principles enunciated hereinabove. Be that as it may the writ petrtion is allowed. The impugned notice dt.3 I st March, 2O2l the order of assessment dt.31stMarch, 2022 as also the consequential demand notice artd penalty nolice dt.3 I st March,2O22 are set aside." 22. Glen the aforesaid facts and circumstances of the case and also the admitted factual matrix, as has been, revealed in the preceding paragraphs, we ale of the considered view that the present is a-lso the case which squarely stands covered by the decision of the Hon'ltrle Supreme Court in the case of Maruti Suzuki (India) Limited (supra), and the recent decision of the High Court of Bombay in the case of SISA INDIA (Pl LTD.' (supra), and t.lle earlier judgment of the High Court of Delhi in the case of Spice Infotainment (supra). 23. T!;.e present Writ Petition deserves to be arrd is accordingly allowed, holding that the notice dated 24.03.2023 issued Section 14aA(d) of the Act and ttre consequential notice of the same date i.e. 24.03.2023 under Section 148 of the Act, both being bad in law, are set aside, as the entire proceedings itself is against a non-existing company." 10. Keeping in view the aforesaid judicial precedents and the decision rendered by the Hontrle Supreme Court in the case of '1zoz:1 z uvecta 174 (Bom) \ )

6 Manuti Suzuki (Supra), \ re are of the considered opinion that the present is a {it case which deserves to be allowed and is accordingly allowed. The irnpugned Notice dated 17 .06.2021 ald the consequential proceedings drawn by the respondent authorities stands set aside/quashed. However, the right of the Depa-rtment stands reserved to initiate appropriate proceedings, if they so want, against the merged company. No order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed. SD/. T.JAYASREE ASSISTANT REGISTRAR ,/TRUE COPY// SECT N OFFICER To, TJ PSK 1 . The Deputy Commissioner of lncome Tax Circle -5(1) Hyderabad'.199I^"^, No.3a4, 3rt Floor, l.T. Towers, A.C. Guards, Masab Tank, Hyderabad-5uuuu4 2. The Secretary, The Union of lndia, Ministry of Finance, Government ot Inora, North Block, New Delhi 110 101 3. One CC to Sri G. Narendra Chetty, Advocate [OPUC] 4. on; CC io sri Gidi Praveen Kumli, Deputy Solicitor General of lndia IOPUC] s. bne Ci to Ms. Sapna Reddy, SC for lncome Tax[oPUCl 6. Two CD Copies s \

HIGH COURT DATED:0410112024 ORDER WP.No.37863 of 2021 ALLOWING THE WRIT PETITION 1Y\iST 4r€ g o7FIB2o2r { {. * * Df WITHOUT COSTS. @o+J e >0. > ',a- |