The Madras High Court set aside an assessment order under section 148 of the Income Tax Act, 1961 passed without Considering the Merging of Transferor Company. M/s.Shapoorji Pallonji Samalpatti Operator Services Private Limited, the petitioner challenged the impugned assessment order passed by the second respondent under Section 147 r/w Section 144 of the Income Tax Act, 1961. Ms Gayatri T, counsel appearing on behalf of the petitioner [Transferor Company], would submitted that the impugned assessment order came to be passed mainly on the ground that the petitioner company had failed to disclose its investment in the Mutual Funds to the extent of Rs.3.10 Crores.  In the impugned Assessment Order, it has been stated that a series of show cause notices were sent to the assessee and since no response was received on behalf of the assessee, the impugned Assessment Order dated has been passed under Section 144 r/w Section 147 r/w Section 144B of the Income Tax Act, 1961.

The main contention of the petitioner is that the petitioner Company/Transferor Company viz., M/s.Shapoorji Pallonji Samalpatti  Operator Services Private Limited merged with the Transferee Company viz., Shapoorji Pallonji Infrastructure Capital Company Private Limited by an order passed by the Bombay High Court in Company Scheme Petition No.511 of 2011. While so, the show cause notice was issued, the petitioner Company/Transferor Company had already been merged with the Transferee Company and the Transferor Company was dissolved even on the date of the order passed by the Bombay High Court.

Therefore, the petitioner Company/Transferor Company was not in existence on the date of issuance of the show cause notice. Hence, the counsel for the petitioner prays for setting aside the impugned Assessment Order. On the other hand, Ms. S. Premalatha, Junior Standing Counsel representing on behalf of Mr. R.S. Balaji, Senior Standing Counsel for the respondent department submitted that though the petitioner Company/Transferor Company got merged the PAN of the petitioner Company was in existence and therefore, after issuance of show cause notices as mandated under the provisions of the Income Tax Act, 1961 the impugned Assessment Order came to be passed by best judgement assessment.

It was evident that the merger of the petitioner Company/Transferor Company was communicated to the Deputy Commissioner of Income Tax and the same was also acknowledged by the respondent. After making such acknowledgement, without verifying the Book of Accounts of the Transferee Company, due to non-application of mind, the notice under Section 148  of the Income Tax Act, 1961 was issued to the petitioner Company alleging that a sum of Rs.3.10 Crores invested in the Mutual Fund had not been disclosed. Justice Krishnan Ramasamy observed that “There was no material evidence to show that the petitioner Company had concealed any investment because once the petitioner Company/Transferor Company is merged with the Transferee Company, the entire investment will stand transferred in the name of the Transferee Company and same also got reflected in the Book of Accounts of the Transferee Company.” While allowing the petition, the court set aside the assessment order.