Supreme Court Issues Notice In Appeal Against Order Quashing IT Assessments On Entities Merged Into Reliance Industries

The Supreme Court on Tuesday issued notice on an appeal filed by the Revenue challenging a Bombay High Court ruling that had quashed income tax assessments against Reliance Polyethylene Ltd. and Reliance Polypropylene Ltd. following their merger with Reliance Industries Ltd.

A Bench of Justice Pamidighantam Sri Narasimha and Justice Vijay Bishnoi called for a response from Reliance Industries Ltd. and directed that the matter be listed for further hearing after completion of pleadings.

The appeal arises from a judgment delivered by the Bombay High Court on February 14, 2025, in a batch of income tax appeals relating to Assessment Years 1993–94 to 1995–96. The High Court held that Reliance Polyethylene Ltd. and Reliance Polypropylene Ltd. ceased to exist as separate legal entities upon their amalgamation with Reliance Industries Ltd. with effect from January 1, 1995, prior to the assessment orders in challenge.

The High Court found that despite being aware of the amalgamation, the Assessing Officer passed assessment orders in the names of the amalgamating companies. It held that a non-existent entity cannot be treated as a “person” under the Income Tax Act and that such assessments suffered from a jurisdictional defect.

Holding the defect to be substantive and not procedural, the High Court ruled that the assessment orders were void ab initio and that participation by the amalgamated company in the proceedings could not cure the illegality.

The High Court relied on the Supreme Court's decision in Maruti Suzuki India Ltd. and distinguished Mahagun Realtors Pvt. Ltd. on facts, noting that in the present case the revenue had prior knowledge of the amalgamation.

The Income Tax Department has now challenged the High Court's judgment