TaxTMI 
TaxTMI 
2026 (1) TMI 1116
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....e and are being decided by way of this consolidated order. With the consent of the parties, the cross-appeals for the assessment year 2018- 19 are treated as a lead case, and the decision rendered therein shall apply mutatis mutandis to other appeals before us. 3. The assessee has taken the following grounds related to ITA No.5961/Mum/2025, AY 2018-19. "1 The Learned Commissioner of Income-tax Appeals 51, Mumbai (hereinafter referred as 'CIT(A)'] has erred in not holding that the assessment order passed by the A.O under section 147 of the Act is bad in law. 2 The CIT(A) has erred in not holding that the addition made by the A.O in respect of transactions of JMC Projects (India) Ltd. (which company got merged into Appellant with effect from 01 April 2022) is without jurisdiction and bad in law. 3 The CIT(A) has erred in confirming the disallowance of INR 3,82,32,499 being 12.50% of total alleged non-genuine purchase of INR 30,58,59,992 made by JMC Projects (India) Ltd. 4 The CIT(A) has erred in upholding the disallowance of employee contributions to ESIC made by JMC amounting to INR 84,95,010 5 The CIT(A) has erred in not grant....
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....tice under section 148 was issued on 31.03.2024 in response the assessee filed the return. After the details scrutiny the Ld. AO disallowance of 100% of expenses amounting to Rs.2,47,49,600/- under section 37(1) of the Act in respect of transaction of erstwhile M/s JMC Projects (India) Ltd. (JMC) which is merged with the assessee w.e.f. 01.04.2022. The Ld. AO during assessment proceeding had made the details factual discussion which is reproduced as below: "3. It is also to be noted that M/s, JMC Projects India Limited (JMC) has merged into M/s. Kalpataru Projects International Limited (KPIL) (earlier known as M/s. Kalpataru Power Transmission Limited) which is effective from 01.04.2022. Thus, KPIL is the successor entity of JMC. In this regard, it is pertinent to mention that on perusal of the merger order dated 21.12.2022 passed by National Company Law Tribunal, Ahmedabad, it is seen that as per order all the assets, liabilities, rights, claims, duties and obligations etc. of JMC shall stand transferred to and vested in KPIL on a going concern basis, so as to become the assets, liabilities (including tax liabilities), rights, claims, duties and obligations etc. of KPIL. ....
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.... order, both the assessee as well as the revenue has filed appeals before us. 5. The Ld. AR argued and filed paper book which is containing pages 1 to 146 which is kept in record. The Ld. AR filed a written note related to his argument which is annexed in Legal Paper Book page 229 to 230. The said written note is reproduced as below:- "Note on assessment of JMC Projects 1. Section 60 to 65 (Chapter V) of the Income-tax Act provides for clubbing of income of one assessee with income of another assessee. As against that, Sections 159, 160, 161, 162, 163 etc. (including S. 170) provides mechanism for assessment of income of the predecessor in the name of successor in a representative capacity. These provisions are different from the provisions of clubbing inasmuch as it merely provides for i) giving an opportunity of hearing to the successor and ii) recovery of tax liability from the successor. The income of the successor and tax liability thereon is not affected by virtue of these provisions. 2. In the present case, the assessment has been reopened u/s. 147 of the Act pursuant to search action in the case of assessee. Reopening of assessment of searched ....
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....of predecessor to tax the income of the predecessor. It was held that the notice could not be issued in the name of the predecessor. The notice ought to have been issued in the name of successor representing the predecessor. In that case the assessment under consideration was only of income of the predecessor. (The total income of the successor/computation of income of the successor was not disturbed). It was not a case where the assessment of successor was taken up in which the income of predecessor was to be clubbed. Even in a case where the correct notice i.e. in the name of successor entity as a representative has been issued, what can be taxed is only the income of predecessor. It was not a case of assessment of an income of the predecessor while carrying out the assessment of successor." 6. The Ld. AR advanced his arguments by submitting that the statute itself does not permit the Ld. AO to make an addition of the income of the predecessor in the hands of the successor for a period prior to the amalgamation. It was submitted that the amalgamation took effect from 01.04.2022 and that the assessee is the successor of JMC. On a plain reading, the provisions of section 170 of ....
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....r (d) who is the trustee of the non-resident; and includes also any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India : Provided that a broker in India who, in respect of any transactions, does not deal directly with or on behalf of a non-resident principal but deals with or through a non-resident broker shall not be deemed to be an agent under this section in respect of such transactions, if the following conditions are fulfilled, namely:- (i) the transactions are carried on in the ordinary course of business through the first-mentioned broker; and (ii) the non-resident broker is carrying on such transactions in the ordinary course of his business and not as a principal. [Explanation.-For the purposes of this sub-section, the expression "business connection" shall have the meaning assigned to it in Explanation 2 to clause (i) of sub-section (1) of sec-tion 9 of this Act.] (2) No person shall be treated as the agent of a non-resident unless he has had an opportunity of being heard by the [Assessing] Officer as to his liability to be treated as such." 8. In the ....
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....cipated in the assessment proceedings of the erstwhile amalgamating entity, SPIL, through its authorized representatives and officers. This is evident from the copies of the order sheets of the assessment proceedings before the assessing officer for AY 2012-13. Post amalgamation, on 30 September 2013, the Chartered Accountants addressed a communication to the Commissioner of Income Tax, Circle 9(1), pursuant to the notice under Section 143(2) for an adjournment of the assessment proceedings for AY 2012-13 until the assessment proceedings for AY 2010-11 and AY 2011-12 were completed. On 27 October 2014, the Deputy Commissioner of Income Tax Circle 9 (1) addressed a communication to the Principal Officer, SPIL seeking a response to a detailed questionnaire. Thereafter, on 4 September 2015, the Deputy Commissioner of Income Tax Circle 16(1) called for disclosure of information in the course of the assessment for AY 2012-13. The communication was addressed to: "The Principal Officer M/s Suzuki Power Train India Limited (Now known as M/s Maruti Suzuki India Limited)." 9. The Ld. AR respectfully relied on the order of Coordinate Bench of ITAT Mumbai 'C' Bench in the case of City....
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.... 153A r.w.s.143(3) that the disallowance is done based on statement recorded from Shri. Sandeep N Gharat. Therefore the submission that the addition is made not based on any seized material but based on statement recorded has merits. Accordingly on this count also, we are of the view that the additions made by the Assessing Officer by way of disallowance under section 37(1) are not sustainable. In view of this, we delete the addition made by the Assessing Officer." 10. The Ld. AR respectfully relied on the order of Coordinate Bench of ITAT Delhi 'I' Bench in case of Manish Tyagi vs. ITO ITA No.5548/Del/2015 date of pronouncement 25.03.2021. The relevant is reproduced as below: "14. We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee has contested ground No. 3 to 7 of the appeal which deals with the addition on account of sale of property of Shri Ashok Tyagi a non-resident in the hands of the assessee as representative assessee u/s 160 of the Act. The claim of the Id AR is that the assessee cannot be treated as agent of non-resident Mr. Ashok Tyagi without passing a specific order u/s 163 of the Act. Other grou....
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....esented by him. Therefore, the assessing officer should have passed a separate assessment order from the income of the assessee with respect to the income of the non-resident holding the assessee as a representative of a non-resident. In the present case, the assessing officer has passed an order in the name of the assessee without specifying that the above income is chargeable to tax in the hands of the assessee as a representative assessee of a non-resident l.e. not passing a separate order but adding the income of the non-resident in the hands of the assessee is not in accordance with the provisions of Section 161 of the act. The learned AO has also charged the tax in the hands of the assessee in the residential status of resident and not non-resident. On this score, the addition made by the learned assessing officer of the income of the non-resident Under the head capital gain of Rs.5,655,874/- is required to be deleted. Thus, ground number 7 of the appeal of the assessee is allowed." 11. The Ld. AR further respectfully relied on the order of Hon'ble Madras High Court in case of CIT vs. Indian Overseas Bank and Another reported in 182 ITR 434 (Mad). The relevant paragrap....
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....on, as per the scheme sanctioned under the Companies Act, was 01.04.2022. In terms of the NCLT order, all assets, liabilities (including tax liabilities), rights, duties, claims and obligations of JMC were transferred to and vested in KPIL on a going concern basis. It is further provided in the scheme that any legal proceedings initiated by or against JMC shall henceforth be continued by or against KPIL. Accordingly, with effect from the appointed date, JMC ceased to exist as a separate legal entity, and KPIL became its successor for all legal and tax purposes. This legal position is undisputed. On this basis, the reassessment proceedings for A.Y. 2018-19 were initiated by issuance of a notice under section 148 of the Income-tax Act, 1961, in the name of KPIL, being the surviving entity. 5.4 The appellant has contended that the additions relate to transactions undertaken by JMC in the year under consideration, and therefore, the notice issued solely in the name of KPIL is invalid in light of the Supreme Court's decision in Maruti Suzuki India Ltd. v. CIT [(2020) 116 taxmann.com 375 (SC)]. However, in my considered view, the ratio of Maruti Suzuki does not render the pr....
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.... ground raised by the appellant is hereby dismissed." 13. We have carefully considered the rival submissions, perused the material placed on record, the written submissions filed by the Ld. AR, and the judicial precedents relied upon by both the parties. The core issue for adjudication before us is whether the income and disallowances pertaining to the predecessor entity, namely JMC Projects (India) Ltd., for a period prior to its amalgamation w.e.f. 01.04.2022, could legally be assessed and added in the hands of the successor company, i.e., the assessee, by way of a single assessment order framed under section 147 of the Act. On a conjoint reading of sections 170 to 163 and 161 of the Act, it is evident that the scheme of the Act draws a clear distinction between (i) assessment of income of a predecessor and (ii) recovery of tax liability from a successor or representative assessee. The statutory provisions do not contemplate a situation where the income of the predecessor, relating to a period prior to succession, is clubbed with and assessed as the income of the successor in its own right. At best, the successor can be assessed only in a representative ca....