JUDGMENT : K.S. Jhaveri, J. 1. Since the common issue involved in this group of petitions, they are being heard and decided by this common oral judgment. 1.1 By way of this writ petitions, the petitioners have challenged the notice dated 09/03/2005 issued under Section 10 of the Interest Act, 1974 issued by the respondent. 2. The short facts of the case are that the petitioner filed its return upto assessment year 1993-94 under the Interest Tax Act. Thereafter, the petitioner on being advised that it was not a credit institution to which only Section 5 of the said Act applies, for the assessment year 1995-96, petitioner filed a letter dated 28/11/1995 with the office of the AO to the effect that since it is not a credit institution, it has not filed the return. It is the case of the petitioner that for the subsequent years also, for the same reasons, it has not filed the returns under the said Act and upto 2004 the department did not do anything in the direction of asking it to file return under the said Act. However, in the month of March, 2005, after a period of 10 years, petitioner was given a notice dated 09/03/2005 under Section 10 of the Interest Act for the assessment year 1995-96. 2.1 It is the case of the petitioner that in response to the said notice, petitioner vide letter dated 25/04/2005 requested the respondent to supply the reasons, if any, recorded by respondent. Reasons were supplied to the petitioner inter alia stating that the interest income of the petitioner from various financial activities and from those financial activities, three types of income viz., (01) finance charges of Rs. 70,02,169/- (02) bill discounting income of Rs. 6,47,67,934/- and (03) interest on deposits/loans Rs. 2,82,26,110/- making a total of Rs. 9,99,96,213/- as income liable to the interest tax. 2.2 Thereafter, the petitioner had filed Special Civil Application No. 19006 of 2005 challenging the validity of the notice. 2.3 It is the case of the petitioner that the respondent rejected the petitioner's objections contained in the letter dated 22/10/2005 by his order by reproducing the reasons and hence the present petition is filed. 3. 2.2 Thereafter, the petitioner had filed Special Civil Application No. 19006 of 2005 challenging the validity of the notice. 2.3 It is the case of the petitioner that the respondent rejected the petitioner's objections contained in the letter dated 22/10/2005 by his order by reproducing the reasons and hence the present petition is filed. 3. Learned Counsel for the petitioner has submitted that the notice issued under Section 10of the Interest Tax Act is patently bad in law as also on the fact since the very basis of the reasons to believe omission or failure on the part of the petitioner itself patently faulty and therefore no jurisdiction under Section 10 of the Interest Tax Act was required to be invoked. 3.1 Learned Counsel for the petitioner also contended that impugned notice pertaining to assessment year 1995-96 has been issued after a period of nearly 10 years and it was therefore time barred and therefore the said notice deserves to be quashed and set aside. 3.2 Learned Counsel for the petitioner has also contended that the requirement of the provisions of Section 2(5A) read with Section 2(5B) of the Act are not fulfilled and therefore also the impugned notice may be quashed set aside. 3.3 Learned Counsel for the petitioner has also contended that the petitioner had already filed letter dated 28/11/1995 to the respondent pointing out that the petitioner was not liable under the Act, however the same was not considered and therefore also the impugned notice may be quashed and set aside. 3.4 In support of his submissions, learned Counsel for the petitioner has relied upon a decision of this Court in case of Khurana Engineering Ltd. v. Deputy Commissioner of Income-Tax (OSD) [2014] 364 ITR 600 (Guj) and relied upon paragraphs No. 6 to 8 which reads thus: "6. Having heard the learned counsel for the parties, it emerges from the record that the transferor company had merged in transferee company with effect from 1.4.09. The High Court did not provide for any modification in the appointed date as envisaged in the merger scheme itself. In that view of the matter, as held by the Supreme Court in the case of Marshall Sons and Co. (India) Ltd. v. I.T.O., 223 ITR 809, the effective date for amalgamation would be the date as envisaged under the scheme. The Supreme Court in the said decision observed as under: 14. In that view of the matter, as held by the Supreme Court in the case of Marshall Sons and Co. (India) Ltd. v. I.T.O., 223 ITR 809, the effective date for amalgamation would be the date as envisaged under the scheme. The Supreme Court in the said decision observed as under: 14. Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide viz. January 1, 1982. It is true that while sanctioning the scheme it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in this facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the Court does not prescribe any specific date but merely sanctions the scheme presented to it - as has happened in this case - it should follow that the date of amalgamation/date of transfer is the date specified in the scheme as "the transfer date". It cannot be otherwise. It must be remembered that before applying to the Court under Section 391(1) a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take sometime; indeed, they are bound to take some time because several steps provided by Sections 391 to 394-A and the relevant Rules have to be followed and complied with. During the period the proceedings are pending before the Court, both the amalgamating units, i.e., the Transferor Company and the Transferee Company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the Transferor Company (Subsidiary Company) shall be deemed to have carried on the business for and on behalf of the Transferee Company (Holding Company) with all attendant consequences. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore, of the opinion that the notices issued by the Income-tax Officer (impugned in the writ petition) were not warranted in law. The business carried on by the Transferor Company (Subsidiary Company) should be deemed to have been carried on for and on behalf of the Transferee Company. This is the necessary and the logical consequence of the Court sanctioning the scheme of amalgamation as presented to it. The order of the Court, sanctioning the scheme, the filing of the certified copies of the orders of the Court before the Registrar of Companies, the allotment of shares etc. may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be January 1, 1982. This is also the ratio of the decision of the Privy Council in Raghubar Dayal, v. Bank of Upper India Ltd., AIR 1919 PC 9 . Counsel for the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basis for this apprehension. Firstly, an assessment can always be made and is supposed to be made on the Transferee Company taking into account the income of both the Transferor and Transferee Company. Secondly, and probably the more advisable course from the point of view of the Revenue would be to make one assessment on the Transferee Company taking into account the income of both of Transferor or Transferee Companies and also to make separate protective assessments on both the Transferor and Transferee Companies separately. There may be a certain practical difficulty in adopting this course inasmuch as separate balance-sheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balance-sheet. In certain cases, best-judgment assessment may also be resorted to. There may be a certain practical difficulty in adopting this course inasmuch as separate balance-sheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balance-sheet. In certain cases, best-judgment assessment may also be resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for consideration in these cases directly. 7. In view of the above concluded position of law, we have no hesitation in holding that the transferor company would no longer be amenable to assessment proceedings for the assessment year 2010-11. The notice for producing documents for such assessment would, therefore, be invalid. Reference of the Revenue to clause 6 of the scheme is wholly misplaced. Clause 6 refers to two dates, namely, appointed date and the effective date. It only clarifies that the scheme shall be operative from the appointed date, but shall become effective from the effective date. This, in our opinion, does not alter the position of law. The term appointed date as defined in clause 1(ii) itself envisages 1st April 2009 as the appointed date unless, of course, any other date as may be approved by the High Court. In the present case, the High Court made no change in this respect. The appointed date for the said scheme, therefore, must be held to be 1.4.2009. 8. In the result, the petition is allowed. The impugned notice Annexure A is quashed. Rule is made absolute accordingly." 3.5 Reliance is also placed upon a decision in case of Rustagi Engineering Udyog (P.) Ltd. v. Deputy Commissioner of Income-tax [2016] 67 taxmann.com 284 (Delhi) and placed reliance upon paragraph Nos. 16 to 25 which reads thus: "16. We have heard the learned counsel for the parties. 17. It is well settled that the in a case of amalgamation, the amalgamating company would stand dissolved from the date on which the amalgamation/transfer takes effect. 18. In Marshall Sons & Co. (India) Ltd. v. Income-tax Officer [1997] 223 ITR 809 (SC), the Supreme Court held that every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The court further observed that it is W.P. (C) Nos. 18. In Marshall Sons & Co. (India) Ltd. v. Income-tax Officer [1997] 223 ITR 809 (SC), the Supreme Court held that every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The court further observed that it is W.P. (C) Nos. 1289/1999, 1290/1999, 1291/1999, 1292/1999 & 1293/1999 Page 9 of 13 also open for a court to modify the appointed date as it thinks appropriate in the facts and circumstances of the case but in a case where the court does not do so, the date as specified in the scheme would be the date on which the amalgamation would take effect. In that case, the Supreme Court was considering a challenge to the notices issued by the Income Tax Officer to the amalgamating company for the period after the appointed date of amalgamation. After examining the provisions of the Companies Act, 1956, the Supreme Court held that the notices issued by the Income Tax Officer were not warranted in law. 19. In a recent decision dated 3rd August, 2015 in ITA No. 475/2011 (SPICE Infotainment Ltd. v. Commissioner of Income Tax), this Court set aside the order passed by the Tribunal upholding the action of the assessing officer in framing an assessment in the name of an amalgamating company after the entity stood dissolved; this court held that the order of the Tribunal was unsustainable and framing an assessment on a dissolved company was not a procedural irregularity but a jurisdictional defect. Similarly, by an order dated 19th August, 2015, ITA 582 of 2015 (PCIT v. Images Credit and Portfolio Pvt. Ltd.), this Court held that the proceedings under Section 153C of the Act could not be initiated against an entity that had ceased to exist. 20. In view of the aforesaid, the contention that the impugned notices issued under Section 148 of the Act were invalid as having been issued to an Assessee that had ceased to exist, must be accepted. The impugned notices are, therefore, liable to be set aside on this ground alone. W.P. (C) Nos. 1289/1999, 1290/1999, 1291/1999, 1292/1999 & 1293/1999 Page 10 of 13 21. The impugned notices are, therefore, liable to be set aside on this ground alone. W.P. (C) Nos. 1289/1999, 1290/1999, 1291/1999, 1292/1999 & 1293/1999 Page 10 of 13 21. Having stated the above, we must also add that in our view, the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee's income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe - not reason to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act. In Income Tax Officer, Calcutta & Ors. v. Lakhmani Mewal Das: [1976] 103 ITR 437 (SC) the Supreme Court held that there must be a "live link" or a "close nexus" between the material available with the AO and his reason to believe that income of an assessee had escaped assessment. The court further observed as under: "The powers of the Income-tax Officer to reopen assessment though wide are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such W.P. (C) Nos. 1289/1999, 1290/1999, 1291/1999, 1292/1999 & 1293/1999 Page 11 of 13 action is taken the requirements of the law should be satisfied." 22. It is, therefore, essential that before such W.P. (C) Nos. 1289/1999, 1290/1999, 1291/1999, 1292/1999 & 1293/1999 Page 11 of 13 action is taken the requirements of the law should be satisfied." 22. It is also relevant to mention that the assessment order dated 27th March, 1997 for the Assessment Year 1994-95, which formed the basis for initiation of re-assessment proceedings and issuance of impugned notices, was set aside by Commissioner of Income Tax (Appeal). The Petitioner had contested the AO’s finding that the transaction of purchase and lease of moulds in the year 1993-94 relevant to assessment year 1994-95 was a sham transaction. The Assessee had also relied on the proceedings filed by the lessee (M/s. Prestige HM Polycontainers Ltd. and Others) in Suit No. 1318/1997 wherein the lessee had affirmed that the equipment in question was installed at the lessee's plant in NOIDA which had been taken over by Pradeshiya Industrial Corporation of Uttar Pradesh under Section 29 of the State Financial Corporation Act. 23. In any view of the matter, the AO’s conclusion that a particular transaction is a sham transaction cannot be a reason to believe that other transactions - including which were accepted by the AO after due scrutiny in AY 1990-91 and 1991-92 - in respect of which the AO has no material are also sham transactions. Thus, the impugned notices under Section 148 are also liable to be set aside for the foresaid reason. 24. In view of our aforesaid conclusion, it is not necessary to examine whether the impugned notices were approved by the competent authority as required under the Act. W.P. (C) Nos. 1289/1999, 1290/1999, 1291/1999, 1292/1999 & 1293/1999 Page 12 of 13 25. Accordingly, the Petitions are allowed and the impugned notices are set aside. The interim order passed on 10th March, 2000 is made absolute. In the circumstances, the parties are left to bear their own costs." 3.6 The attention of the Court was also drawn to the meaning of "Credit Institution" which reads thus: "6. Incidentally, we may also invite your kind attention to the definition of the words "financial company" as given in Section 3(5B) of the Act which reads as under: "Financial Company" means a company, other than a company referred to in sub clause (1), (ii) or (iii) of clause (5A), being- i.*** ii.*** iv.*** v.*** (va). Incidentally, we may also invite your kind attention to the definition of the words "financial company" as given in Section 3(5B) of the Act which reads as under: "Financial Company" means a company, other than a company referred to in sub clause (1), (ii) or (iii) of clause (5A), being- i.*** ii.*** iv.*** v.*** (va). A residuary non banking company other than a financial company referred to in sub clause (i), (ii), (iii), (iv) or (v) that is to say, a company which receives any deposit under any scheme of arrangement, by whatever name called, in one lump sum or in installments by way of contributions of subscriptions or by sale of units or certificates or other instruments or any other manner; or (vb). A miscellaneous finance company, that is to say, a company which carries on exclusively, or almost exclusively, two or more classes of business referred to in the proceeding sub clauses." 3.7 By placing reliance upon the aforesaid decisions and relying upon the aforesaid clause, learned Counsel for the petitioner has submitted that the impugned notice is time barred and against the settled proposition of law and therefore the same may be quashed and set aside. 4. On the other hand learned Counsel Mr. Sudhir Mehta for the department has contended that there is no infirmity in the impugned notice and he has taken us to the reply as well as the notice and contended that the notice issue was within the time limit and this Court may not interfere with the same. 5. Having heard the learned Counsel for the respective parties and having gone through the impugned notice as well as the reply of the petitioner, this Court is of the opinion that the notice issued upon the petitioner is bad in law; inasmuch as, the petitioner had also addressed a letter dated 28/11/1995 to the respondent informing that since the petitioner is not a credit institution, it is not liable to interest tax. Reliance placed upon a decision in case of Khurana Engineering Ltd. (supra) is also relevant for this purpose because as held therein after the date of amalgamation of the company, the transferor-company is no more in existence on the date of issuance of notice and therefore the said notice issued upon the said company held to be invalid. 6. Reliance placed upon a decision in case of Khurana Engineering Ltd. (supra) is also relevant for this purpose because as held therein after the date of amalgamation of the company, the transferor-company is no more in existence on the date of issuance of notice and therefore the said notice issued upon the said company held to be invalid. 6. Now, so far as the argument of the petitioner with regard to the period of limitation of issuance of notice is concerned, the said notice was issued after a period of ten years preceding the letter dated 28/11/1995 issued by the petitioner informing the respondent that it is not a credit institution whereupon only Section 5 of the said Act applies and therefore petitioner did not file the return. Thus, for the period of ten years nothing was turned up and suddenly the notice was issued, which in the opinion of this Court is bad in law. The act of reopening of notice is not within the period of limitation. 7. In view of the aforesaid discussions and in light of the submissions made by the learned Counsel for the petitioner, the petitions deserve to be allowed and the same are allowed. The impugned notice dated 09/03/2005 (Exhibit-B to the petition) issued under Section 10of the Interest Act, 1974 by the respondent is hereby quashed and set aside. Rule is made absolute.