' This judgment will also dispose of Writ Petition No, 3169/83 as the same question of law seems to be involved in both.
2. The two companies, namely, (I) Messrs Ujalla Cotton Mills Limited, and (2) Messrs Crescent Jute Products Limited had jointly made a petition before this Court on 3rd June, 1982 under sections 153 and 153-A of the Companies Act, 1913, for merger/amalgamation of the former into the latter as from 30th June, 1981. The petition was accepted by my brother Abdul Shakoor Salam, J. Vide his judgment, dated 19th January, 1983 holding that the assets and liabilities, etc. Of the transferor concern shall vest in the transferee company as from 30th June, 1981.
3. This merger was claimed to have been accepted by the then Income-tax Officer, but subsequently due to some administrative change the petitioner was served with a notice, dated 4th July, 1983 issued by respondent No, 3 purporting to fall under section 56 of the Income-tax Ordinance, 1979, calling upon them to file a return for the assessthent year 1982-83. The writ petition impugns it to be illegal chiefly because it seems to override the order of the High Court in not accepting the merger from the retrospective date viz. 30th June, 1981. The contention was that the petitioner Company stood dissolved with effect from 1st July, 1981 and that it could not be asked to file any return for the income year 1981-82 or for that matter the assessment year 1982-83 when it no more existed. It was the petitioner's case that after the merger, the liabilities and benefits relatable to it had passed on to the transferee-Company which had filed the necessary returns and in fact those having been accepted by the then I.-T.
0. Could not be re-opened much less on any administrative change.
4. The petition was opposed inter alia on the ground that mere service of a notice did not justify resorting to the extraordinary remedy of writ in that the petitioner should have availed the opportunity of explaining their position before respondent No, 3 or else may have availed of an appeal or revision in that hierarchy. Besides, it was urged that the Income-tax Authorities being not a party to the petition under section 153 or 153-A of the Companies Act, 1913, was not bound by the merger allowed by the Court and lastly that it had to be prospective in any event taking effect from the date of the order of the High Court. The gist of the objection was that the tax liability could not be evaded by any merger/amalgamation taking place from a back date.
5. The preliminary objection that the petitioner should have exhausted other remedies was shown to be not effective because in virtue of Messrs Usmania Glass Sheet Factory v. Sales-tax Officer (1) writ was allowable to protect oneself against threats in fiscal matters. The impugned notice was claimed not only to convey such a threat but also a decision to proceed with the re-opening of the return with a view to burden the petitioner-defunct Company with the tax liability as had not been earlier imposed upon it. I think the plea is quite formidable. The impugned notice speaks for itself inasmuch as it relies upon certain authorities of foreign jurisdiction to re-open the assessment vis- a-vis the defunct Company which stood merged with its principal company as allowed by the High Court. Besides, it was not shown if the mere issuance of such a notice was at all appealable/revisable. An unreported judgment in Crescent Sugar Mills Ltd. v. C. I. T., etc. (W. P. No, 2320 of 1984) was cited for the ouster of jurisdiction but it was based basically upon the fact that right of appeal was not availed. Apparently there was no such remedy against the notice in this case and hence the writ.
6. There was considerable authority for the view that merger could take place with retrospective effect and not from the date of the sanction by the Court. Reghu bar Dayal v. The Bank of Upper India Ltd. (2), Badarganj Loan Office Limited v. Shahar Uddin Shah (3) and Commissioner of Income-tax, Zone-I v. Swastik Rubber Products Ltd. (4), were cited in support of the view. There can be no two opinions about it. The order {{FOOT NOTE}}
(1) PLD 1971 SC 205 (2) AIR 1919 P C 9
(3) I I.. R 1 Cal. 121 (4) (1983) 140 1 T R 304 {{FOOT NOTE}} of the High Court on the point was final. It held clearly that the merger shall be effective from 30th June, 1981. The necessary consequence was that the petitioner having lost its existence as from that date was obviously not under any liability as a non-existent person to file any return for the income year 1981-82 (assessm ent year 1982-83). The contention that the Income-tax Department was not a part to those proceedings cannot be heard. There is no such provision to implead them as a party and hence for all purposes any order in this behalf made by the High Court shall be binding on them. Otherwise no sanctity could be attached to it and for that purpose the whole exercise in obtaining it will be quite an otiose act. The order by its very nature determines the vesting of assets and incurring of liabilities. It goes without saying that payment of tax is a liability and the same passes on to the transferee-Company as from that date. The Income-tax Department seems to have no locus standi to insist that the Company existed even after it was declared to be non-existent by the High Court. The proposition if accepted is wrought with dangerous consequences. Section 56 of the Income-tax Ordinance, 1979, invoked here, does not override the provisions of section 153 or 153-A of the Companies Act, 1913. All that it authorises is the issuance of a notice to a "person" who may either be a human being or a juristic body. The petitioner-Company was of course a juristic person but it became nonexistent (dead) as from 30th July, 1981 under the orders of the High Court, and was no more capable of earning any income during 1981-82. The next poser may be as to whether the High Court was competent to declare it to be non-existent from that date. Section 153-A of the D Companies Act, 1913 does not place any embargo on the authority of the Court in making such a retrospective order. The authorities referred to above provide a complete answer to it and hence it is not open to the Income-tax Authorities to insist that the merger was effective from the date of sanction.
7. For the foregoing reasons I accept the writ and declare that the impugned notice in so far as it does not accept the merger from the date determined by the High Court and all subsequent proceedings taken thereunder are without lawful authority and of no legal effect. Respondent No, 3 is restrained from asking the petitioner-defunct Company to file any return for the assessment year 1982-83. No order as to costs.