Virtusa Consulting Services Private Limited V. Union of India, through the Ministry of Finance, Department of Revenue and Assistant Commissioner of Income Tax, Circle 8(1)

WP/22597/2021

AI Insights

The case involves M/s. Virtusa Consulting Services Private Limited challenging a notice issued under Section 148 of the Income Tax Act, 1961, by the Assistant Commissioner of Income Tax, Circle 8(1). The notice was directed to Polaris Consulting and Services Limited, which had merged with Virtusa Consulting Services following an order by the National Company Law Tribunal (NCLT). The petitioner argued that the notice was issued to a non-existent entity, making it null and void. The respondents contended that the notice could be treated as issued to the petitioner and that there was an adequate remedy against the notice. The court's decision was influenced by the Supreme Court's ruling in a similar case, emphasizing that notices issued to non-existent entities post-merger are without jurisdiction.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 821112 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 28-02-2023
• Assessment Year: misc
• Other Referred Cases: Union of India vs. Ashish Agarwal, Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited, SKG Light Hospitality vs. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: GADI KUMAR; A KRISHNA
• Assessee Lawyers: KAMAL SAWHNEY; G CHETTY
• Keywords: Income Tax; Notice Quashing; Re-assessment; Unconstitutional Notification; Writ petition
• Section: 148; 148A

Judgement Text

".Y ! t [3311 I HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (SPecial Original Jurisdiction) TUESDAY, THE TWENTY EIGHTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY THREE PRESENT M/s.Virtusa Consulting Services Private Limited, (P_o[ari9 Consulting.and Services i_ia.,';;rg\"d *iih-M7;: virtusi-Coniulting Services' Private Limited vide the Hon'ble f.f'Clf OiO-ei dated Cjg.i22019L SV ft6 115lPart, Plo_t_ No. 1-0, Nanakram.guda Vilf\"g\", Seriiingampaf fV ntanOal,'Hyderabad. Telangana, 500008 Represented by its Director, Mr. Vasu PendYala. ...PETITIONER THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRt JUSTICE N.TUKARAMJI WRIT PETITION NO:22597 OF 2021 Between: AND 1, 'Union of lndia, through the Ministry of Finance, Department of Revenue, North Block, New Delh-l, Delhi-110 001. 2. Assistant Commissioner of lncome Tax, Circle 8(1), Signature Towers, Sy. - N;. oipt ot fonOipur, Sv. 37(P) of Kothaguda, Opp' - Botanical Gardens, Sertingainpally, R.R. District, Hyderabad, Telangana 500084 ...RESPONDENTS petition under.Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed theiewith, the High Court rnay be pleased to. (a)lssue an appropriate writ, order or direction more particularly in the nature of CERTIORARI quashing- the impugned notice dated 30.06.2021 bearing No. ITBA/AST/S/1 48/ 2021 -221 103391 q459(1 ) for AY 201 6-1 7, issued by Respondent No.2 under section 148 of the lncome Tax Act, 1961, (b) Declare the Explanation to clause (AXa) of Notification No. 2012021 dated 31.03.2021 and Explanation to clause (A)(b) of Notification No. 38 of 2021 dated 27.04.2021 as unconstitutional and ultra-vires the parent act. lA NO: 1 OF 2021 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to dispense with the filing of the certified copy of the impugned assessment/re- assessment notice . dated 30.06.2021 bearing no. ITBA/AST/5t14812021- 22t1033918459(1) for AY 2016-17 issued under Section 148 ot the'lncome Tax Act, 1961 by the Respondent No. 2, as the same was sent to the Petitioner by e- mail only and the Petitioner has filed e-mail copy of the same. lA NO: 2 OF 2021 petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to grant stay of operation of the lmpugned Notibe dated 30.06.2021 bearing no. ITBA/AST/5t14812O21-2211033918459 (1) for AY 2016-17, issued by Respondent No.2 under section 148 of the lncome Tax Act, 1961, lA NO: 1 OF 2022 petition under Section 151 CPC praying that in the circumstances stated in thb affidavit filed in support of the petition, the High Court may be pleased to de-tag the above Wiit petition No. 22597 of 2021 from the batch matters and hear it separately to decide the validity of impugned notice vis-a-vis the second ground, i.e. the invalidity of the notice being issued on a non-existent entity' : lA NO: 2 OF 2022 Petition under Section 151 cPC prayingthat in the circumstances stated in the affidavit fired in support of the petition, the High court may be preased to rant ad-interim and interim stay of operation of rmpugned Notice dated 30'06'2021 bearing no' lrBA/Asrtst148t2I21-22t1033918459(1) read with tetter dated 18'05-2022 bearing no. rrBA/c o,tFr17t2o22-23r1043056663(1) for Ay 2016-17, issued by Respondent No. 2 under section 14gA(b) of the rncome Tax Act 1961 Counset for the petitioner: SRt KAMAL SAWHNE' FOR SRI G. NARENDRA CHETT' COUNSEI fOr thE RESPONdENT NO.1: SRI GADI PRAVEEN KUMAR, DEPUTY SOLICITON CETICNAL OF INDIA Counsel for the Respondent No.2: SRI-A: RADHA KRISHNA, S.C. FOR INCOME TAi The Court made the following: ORDER i i I ri rl :j i I I ,I THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRI JUSTICE N.TUI(ARAMJI Writ Petition 22597 of 2O2t ORDER: (Per the Hon'ble the Chief Justic.e Itjjat Bhugan) Heard Mr.Kamal Sawhney, learned counsel on behalf of Mr.G.Narendra Chetty, learned counsel for the petitioner; Mr.Gadi Praveen Kumar, learned Deputy Solicitor General of India for the first respondent; and Mr.A.Radha Krishna, learned Standing Counsel, Income Tax Department for the second respondent. 2. By fiting this petition under Article 226 of the Constitution of India, petitioner has assailed legality and validity of the notice dated 30.06..2021 issued by the second respondent under Section 148 of the Income Tax Act, 1961 (brieflythe Act' hereinafter). 3. The challenge has been made on two grounds:- (i) After Ol.O4.2O2l, the procedure for re-assessment has undergone a change by insertion of Section 148A of the Act. Instead of following the procedure laid down under 2 Section 148A of the Act, second respondent had issued the notice under Section 148 of the Act; and (ii) Impugned notice was issued to Polaris consulting and Services Limited, Chennai as the assessee. Polaris consulting and services Limited has merged with the petitioner i.e., M/s.virtusa consulting services Private Limited following order dated 09.12.2019 passed by the National Company Law Tribunal, Chennai (NCLT)' Therefore, the impugned notice was issued to a non- existent assessee. Such a notice is null and void. 4. ln the proceedings held on 15.06.2022, this Court held as follows: \"Th.e impugned nottce dated 30.06.2021 issued bg tlue assessing olficer under Section 148 of tlrc Income Tax Act, 7961 Pneflg referred to hereinafier as th.e 'Act') for the assessment Aear 2014-15 hrlrs been qssailed on tle ground thnt post 01.04.2021 Section 14BA of the Act ha\"s been introduced which lags down ct completelg new procedure to be followed uthich Lws not been amplied with rendering the notice null and uoid. On this ground, tle Court had granted stag. Subsequently, Supreme Court in a -) Union of India as. Ashish Agarutal reported in 2O22 SCC Online SC 543 has disposed of a bunch of ciuil appeals on the same fssue bg hotding that s;uch a notice would. be construed to be a notice under the amended prouision as q one time measure and\" thereafter issued a series of directions. To that extent, th.e challenge is couered bg Ashish Agarwal (suPra). Today learned counsel for the petttioner submits that in addition to tLrc aboue ground, there ls a more fundamental ground to the challenge to the impugned notice and that is non-existence of the noticee itself. It is contended that the noticee is no longer in existence hauing merged with the petitioner fotlowing order passed bg the National Compang Lqw Tribunal, Clrcnnai. In this connection, learned counsel for the petitioner hlcis placed before us a\" letter dated 12.07.2021 issued bg the Principal Commissioner of Income Tax (DR), 'D' Bench, ITAT, Chennai addressed to the President of ITAT, Mumbai, which sags that M/ s. Polaris Consulting Seruices Put' Ltd' (noticee) stood. merged with M/ s' Virtusa Consulting Seruices Put. Ltd. (petitioner) pursuant to order of National Compang Law Tribunal dated 09. 1 2.20 1 9. 4 Supreme Court in PrinciPal Commissioner of Income Tax us' Manfii Suzuki India Limited [416 ITR 6731 Lws held that issuq.nce of notice to a company which has und.ergone anmlgamation and thus hc.s cea'sed to exist would be without jurisdiction. That being the position, ute are of the uiew that respondents should file counter alfidauit on this aspect. Interim stag granted bg this Court on 27.09.2021 shall be continued until further orders.' 5. Thereafter respondents have filed counter affidavit. After referring to the facts, an endeavour is made to distinguish the judgment of the Supreme Court in Mantti Sttzuki (supra). It is stated that similar contention raised in M/s.Skg Light Hospitalitg' LW t). Assistant pommissioner of Income Taxrt was rejected by Delhi High Court and the decision of the Delhi High Court was affirmed by the Supreme Court. That apart, it is contended that petitioner has got adequate remedy against the impugned notice. It is submitted that the impugned notice be treated as a notice issued to the petitioner. On the I I I I t I j ' JZOtAl 90 taxmann.com 413 (Delhi) t- 5 above contentions respondents seek dismissal of the writ petition. 6. Subject matter of challenge has already been summed up in our order dated 15.06.2022 which we have extracted above. 7. In the hearing today learned counsel for the petitioner submits that the fact that Polaris Consulting and Services Limited has merged with M/s.Virtusa Consulting Services Private Limited was known to the revenue which would be evident from the letter dated 12.07.2021 issued by the Principal Commissioner of Income Tax (DR), D - Bench, ITAT, Chennai addressed to the President of ITAT, Mumbai. However, Mr.Radha Krishna, learned Standing Counsel submits that the aforesaid communication is post the notice dated 30.06.2021 B. Without entering into the above controversy, what is evident is that by an order dated 09.12.2019 passed by the NCLT, Polaris Consulting Services Limited stood merged with M/s.Virtusa Consulting Services Private 6 - t _., Limited. As a matter of fact, Principal Commissioner of Income Tax [V, Chennai had issued notification No.3/2O2O 2O2I dated L3.O4.2O2L transferring the assessment jurisdiction from Assessing Officer in Chennai to Assessing Officer in Hyderabad, following the merger. This notification is prior to the issuance of the impugned notice. 9. Be that as it rnay, in Mqnfii Suzuki (supra), Supreme court held that issuance of notice on the basis of which jurisdiction was invoked by the Assessing officer would be fundamentally at odds with the legal principle that the amalgamating entity (assessee) ceases to exist upon the approved scheme of amalgamation. Even participation by the assessee in re-assessment proceedings would not operate as an estoppel against such a regal principle. 1O. In the course of the aforesaid judgment, Supreme court noted a divergent view taken by the Delhi court in skg Light Hospitalitg (supra) which was affirmed by the Supreme court but in the peculiar facts of that case. The : 1 peculiar facts have been highlighted in paragraph 2z of Mqntti Suzuki (supra). 1 1. That being the position and following the decision of the Supreme Court in Mantti Suzuki (supra), we have no hesitation in holding that the impugned notice issued. by the Assessing Officer under Section 148 of the Act to a non-existent assessee would be legally untenable. Consequently, the same is set aside and quashed. 12. Writ petition is accordingly allowed. Miscellaneous applications pending, if arLy, shall stand closed. However, there shall be no order as to costs. ,ffRUE COPY'I SECTION OFFICER I To, 1. 2. 3. 4. 5. b. MP BS bqr L:?.'B',s:-:t [$;tJl}|ibtilrti-? lfltsiY or Finance' Department or Revenue' TheAssistantCommissioneroflncomeTax,Circle€(1),SionatureTowers, ifiils:sEifi i[\"{'s[!r;lh;itfj:.[eirru:r,3iri'?u\"caGardens One CC to SRI G. NARENDRA CHETTY' Advocate [OPUC] one cc to sRr cADr PRAVEEN KUMAR, Deputy Soricitor General of India IoPUCI one cc to sRl A. RADHA KRISHNA, S.C. for lncome Tax [oPUC] Two CD CoPies. HIGH COURT DATED i2810212023 ORDER WP.No.22597 ot 2021 1 0 IIi liiS ti-lF- S14 o t r) ALLOWING THE WRIT PETITION WITHOUT COSTS I E5H-= "