Telangana High Court sets aside Section 148 notice issued to non-existent amalgamating company

Background of the dispute

The Telangana High Court in Dr Reddy’s Laboratories Limited Vs ACIT dealt with the validity of a reassessment notice issued under Section 148 of the Income Tax Act 1961 to an entity that had already ceased to exist pursuant to an approved merger.

The writ petition, numbered W.P.No. 29532 of 2026, was decided on 08/09/2026 by the Telangana High Court. The assessee, Dr Reddy’s Laboratories Limited, challenged the reassessment proceedings initiated in the name of Dr. Reddy’s Holdings Limited, which had already amalgamated with the assessee under an order of the National Company Law Tribunal (NCLT).

Under the NCLT’s order dated 05.04.2022, the merger of Dr. Reddy’s Holdings Limited with the petitioner was sanctioned with effect from 01.04.2019. Post-merger, all business was carried on only by the petitioner company. Despite this, a reassessment notice dated 27.06.2026 for Assessment Year 2022-23 was issued under Section 148 in the name of Dr. Reddy’s Holdings Limited.

The High Court examined whether such a notice, issued in the name of an entity that had legally dissolved due to amalgamation, could stand in law.

Procedural posture

  • The matter came before the Telangana High Court by way of a writ petition under Article 226 of the Constitution of India.
  • Both sides consented to final disposal of the writ at the admission stage itself, avoiding prolonged proceedings.
  • The Court heard:
    • Counsel representing the petitioner, Dr Reddy’s Laboratories Limited, and
    • The Senior Standing Counsel for the Income Tax Department, appearing on behalf of the respondents.

The primary relief sought was quashing of the Section 148 notice issued to the non-existent amalgamating company.

Core facts regarding the merger

NCLT-approved amalgamation

  • The NCLT passed an order on 05.04.2022 approving the merger of Dr. Reddy’s Holdings Limited with Dr Reddy’s Laboratories Limited.
  • The order clearly recorded the effective date of merger as 01.04.2019.
  • From this effective date, Dr. Reddy’s Holdings Limited ceased to have an independent legal existence, and its business was taken over by the petitioner.

Intimation to the Income Tax Department

The assessee contended that:

  • The fact of amalgamation and the NCLT’s order had been duly communicated to the Income Tax Department.
  • Post-merger, only Dr Reddy’s Laboratories Limited was carrying on the business previously conducted by Dr. Reddy’s Holdings Limited.
  • Despite being repeatedly informed of the merger, departmental notices continued to be addressed to Dr. Reddy’s Holdings Limited, which no longer existed.

The Revenue did not dispute:

  • The authenticity of the NCLT order dated 05.04.2022.
  • The effective date of amalgamation, i.e., 01.04.2019.
  • The subsequent intimation of these facts by the petitioner to the departmental authorities.

Controversy around the Section 148 notice

Notice to a non-existent entity

A reassessment notice under Section 148 dated 27.06.2026 for AY 2022-23 was issued in the name of: