C.I.T,NEW DELHI v. M/S MARUTI UDYOG LTD. INSC 1682

  NAME OF THE CASE 

C.I.T, NEW DELHI v. M/s MARUTI UDYOG Ltd

  FACTS

The aforementioned case arose from a tax dispute involving the amalgamation of two corporate entities. Maruti Suzuki India Limited(MSIL), formerly known as Maruti Udyog Limited, had merged with Suzuki Powertrain India Limited(SPIL) following a scheme of amalgamation sanctioned by the Delhi High Court, effective April 1, 2012. As a result, SPIL ceased to exist as a separate legal entity from that date. The Income Tax Department, however, initiated assessment proceedings and issued notices for the assessment year 2011-2012 in the name of SPIL, which had already merged into MSIL. Despite being informed of SPIL’s non-existence due to the amalgamation, the department proceeded to pass assessment orders under the Income Tax Act in the name of SPIL. The Revenue contended that the assessment proceedings were valid and any error in addressing the non-existent SPIL was merely procedural, curable under Section 292B of the Income Tax Act. MSIL challenged the legality of these proceedings, asserting that assessments against non-existent entities are void. The case escalated through the appellate process, ultimately reaching the Supreme Court of India for resolution.

  ISSUES

1. Whether the assessment proceedings initiated and completed in the name of a non-existent entity(SPIL) due to amalgamation are valid in law. 2. Can the provisions of Section 292B of the Income Tax Act cure the defect of issuing notices and orders in the name of a dissolved entity? 3. Did the Income Tax Department fail to exercise due diligence in ensuring that the proceedings were initiated against the correct legal entity post-amalgamation? 4. What are the legal implications of conducting assessments on entities that have ceased to exist following a merger or amalgamation?

  HOLDINGS

1. The Supreme Court held that the assessment proceedings initiated and completed in the name of a non-existent entity(SPIL) due to its amalgamation are invalid. Once an entity ceases to exist, it cannot be the subject of assessment proceedings. 2. The Court held that Section 292B, which cures procedural defects in Tax proceedings, does not apply to the issuance of notices or assessment orders in the name of a non-existent entity. Such errors are not procedural but jurisdictional, and therefore, the proceedings are fundamentally flawed and cannot be rectified under Section 292B. 3. The Court observed that the Income Tax Department had failed to exercise due diligence. Despite being informed of the amalgamation and the cessation of SPIL’s existence, the Department continued the proceedings in its name. This lapse rendered the assessments invalid. 4. The Supreme Court reinforced the principle that conducting assessments on entities that have ceased to exist following a merger or amalgamation is a substantive illegality. Any orders or notices issued in such cases lack jurisdiction and are liable to be quashed. This decision underscores the importance of tax authorities verifying the legal status of entities before initiating proceedings.

  RATIONALE

In the given case the Supreme Court held that assessment proceedings initiated and completed in the name of a non-existent entity due to amalgamation are invalid in law. Once a company ceases to exist following a merger, it cannot be the subject of any assessment or notice. The court rejected the Revenue’s argument that such defects are merely procedural and curable under Section 292B of the Income Tax Act, clarifying that issuing notices to a dissolved entity constitutes a substantive jurisdictional error. Consequently, the court invalidated the assessment proceedings against Suzuki Powertrain India Limited(SPIL), emphasizing the importance of due diligence by tax authorities in cases involving corporate restructuring.

  CITATIONS

• Casemine: Casemine. "Legal Database for Cases and Judgments." Accessed 8 Jan. 2025, https://www.casemine.com.