Amalgamation does not take away right of income tax to proceed against transferee company

Amalgamation order does not take away right of income tax department to proceed against the transferee company,

In a recent judgment, Hon’ble Calcutta High Court has held that simply because the amalgamation order has been passed, the same does not take away right of the income tax department to proceed against the transferee company.

ABCAUS Case Law Citation:
4803 (2025) (10) abcaus.in HC

In the instant case, the Petitioner (the transferee company) had challenged the notice issued under Section 148 of the Income Tax Act, 1961 (the Act) in respect of the assessment year 2017-2018 against the transferor company which had since amalgamated with the petitioner.

It was submitted by the assessee that a scheme of amalgamation which had since been sanctioned by the National Company Law Tribunal (NCLT) several companies including the noticee company stood amalgamated with the petitioner.

It was further submitted that in terms of the order passed by the NCLT, the appointed date had been fixed as 1st April, 2023.  Having regard thereto, the notice under Section 148 of the Act, which was issued after the appointed date was a nonstarter and should be set aside.

On the other hand the Department submitted that though a notice was served on the petitioner intimating initiation of amalgamation proceedings in 2019 nothing further was informed to the petitioner.  Further, a notice under Section 148A(b) of the Act was issued to the noticee company on 8th March, 2024.  Although, the amalgamation order was passed on 11th March, 2024, after that the noticee company did appear pursuant to the above notice and had sought for time by the communication in writing.

It was further submitted by the Department that subsequently, the order under Section 148A(d) was passed and the notice under Section 148 was issued. 

The Hon’ble High Court observed that prima facie, the noticee company had duly notified the Income Tax authorities with regard to initiation of amalgamation proceedings in 2019. Still latter before the amalgamation proceedings was disposed of by order a notice under Section 148A(b) was issued in respect of the assessment year 2017-2018. 

The Hon’ble High Court opined that it was true that the effective date for the scheme has been determined as 1st April, 2023, however, as on 8th April, 2024, the department had no option but to issue the notice in respect of the noticee company as on such date the noticee company was very much in existence, as the order of amalgamation was yet to be passed.

The Hon’ble High Court further noted that the factum from the notice under Section 148A(b) of the Act was not brought to the notice of the NCLAT. It was apparent from the order that the petitioner or the said noticee company did not bring to the notice of the NCLAT that a notice under Section 148A(b) had already been served on the noticee company. 

The Hon’ble High Court observed that in any event, simply because the amalgamation order has been passed, the same does not take away right of the income tax department to proceed against the transferee company since the assets and liabilities of the transferor company including but not limited to the liabilities, duties and obligations had been taken over and stands transferred to the petitioner.

The Hon’ble High Court held that though the order dated u/s 148A(d) and the notice issued under Section 148 of the Act for the relevant assessment year cannot be sustained  against the noticee company which had since amalgamated with the petitioner, however, the right of the department to proceed against the petitioner remains intact. 

Accordingly, the Hon’ble High Court while setting aside the order under Section 148A(d) and the notice issued under Section 148 of the Act issued against the noticee company granted liberty to the Income Tax Department to proceed against the petitioner.

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