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Principal Commissioner of Income Tax (Central) 2 vs. M/S Mahagun Realtors (P) Ltd.

Civil Appeal · 2022 INSC 389Decided 5 Apr 2022
Civil Appeal No. 2716 of 2022
Uday Umesh Lalit · S. Ravindra Bhat

Background

Mahagun Realtors Pvt. Ltd. (MRPL), a real-estate developer, amalgamated into Mahagun India Pvt. Ltd. (MIPL) with effect from 1 April 2006 under a High Court-sanctioned scheme. Despite this, when the tax department later conducted search and survey operations uncovering undisclosed "on-money" receipts, MRPL continued to file returns and contest proceedings in its own name (represented by MIPL) without disclosing that it had ceased to exist. The Income Tax Appellate Tribunal, and then the Delhi High Court, quashed the resulting assessment order on the technical ground that an assessment cannot be framed against a company that is legally dead, relying on earlier rulings (Spice Infotainment, Maruti Suzuki).

Decision Breakdown

The Supreme Court distinguished those earlier rulings because in this case the assessee itself never disclosed the amalgamation to the tax department at the relevant time, actively participated in proceedings holding itself out as MRPL, and even swore an affidavit before the Supreme Court in MRPL's name. The Court held that the legal "death" of a company through amalgamation does not automatically nullify an assessment order in every case. It depends on the conduct of the parties and the specific facts. Because the assessee's own conduct created and sustained the impression that MRPL was still functioning, it could not now use the amalgamation as a technical shield. The High Court's order was set aside and the matter sent back to the Tribunal to be decided on merits.

Lesson Learnt

A company cannot conceal its own amalgamation, actively participate in tax proceedings under its old name, and then later use "we no longer legally exist" as a technical escape route. Courts will look at actual conduct, not just corporate-law formalities.

Official source (sci.gov.in)View Judgment (PDF)

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