Bombay High Court Quashes Reassessment Proceedings Against Non-Existent Post-Amalgamation Entity: Vertiv Energy Pvt. Ltd. vs ACIT

Overview of the Dispute

The Bombay High Court recently ruled on two writ petitions filed by Vertiv Energy Pvt. Ltd. (formerly known as Emerson Network Power (India) Pvt. Ltd.) challenging reassessment proceedings initiated by the Revenue for Assessment Years 2013-14 and 2014-15. The central issue before the Court was whether income-tax reassessment proceedings can be validly sustained against a company that had already ceased to exist as a separate legal entity on account of its amalgamation into another company.

The Division Bench, comprising Justice K. R. Shriram and Justice Dr. Neela Gokhale, ultimately quashed the reassessment notices, reassessment orders, and the consequential penalty notices — all dated 27 March 2021 and 27 March 2022 respectively — after finding that the very foundation on which the Revenue had initiated the proceedings had collapsed due to the Revenue's own admissions.

Background: The Amalgamation and Its Communication to the Revenue

The petitioner, Vertiv Energy Pvt. Ltd., had a wholly owned subsidiary named Leroy Somer India Private Limited (LSIPL). Pursuant to a scheme of amalgamation duly approved by the Delhi High Court vide an order dated 19 November 2013, LSIPL stood amalgamated with the petitioner with effect from 1 April 2012 — the appointed date under the scheme.

The petitioner had proactively brought this amalgamation to the attention of the Assessing Officer through a formal communication dated 28 November 2013, shortly after the Delhi High Court approved the scheme. Furthermore, the amalgamation and the appointed date of 1 April 2012 were explicitly disclosed in the notes to the financial statements for the year ended 31 March 2013.

Despite these communications and disclosures being placed on record, the Revenue proceeded to:

  • Issue reassessment notices dated 27 March 2021 under Section 148 of the Income Tax Act, 1961 in the name of LSIPL for AY 2013-14 and AY 2014-15
  • Pass reassessment orders dated 27 March 2022 against the same non-existent entity
  • Issue penalty notices dated 27 March 2022 as a consequence of the said reassessment orders

The petitioner challenged the proceedings primarily on jurisdictional grounds, arguing that all notices and orders issued in the name of LSIPL were legally non est, since LSIPL had ceased to exist as an independent entity from the appointed date of amalgamation, i.e., 1 April 2012.

The petitioner's counsel, Mr. Mistri, placed strong reliance on the Supreme Court's authoritative ruling in:

Principal Commissioner of Income Tax v. Maruti Suzuki India Limited, (2019) 107 taxmann.com 375 (Supreme Court) / (2019) 416 ITR 613 (SC)