Kalpataru Projects International Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai Quashes Reassessment: Income of Predecessor Company Cannot Be Clubbed with Successor Post-Amalgamation
The Mumbai Bench of the ITAT allowed the appeals of Kalpataru Projects International Ltd. for AYs 2018-19 to 2020-21 and dismissed the cross-appeals of the Revenue, holding that the reassessment framed under section 147 was jurisdictionally invalid insofar as it sought to tax the income of the predecessor company (JMC Projects (India) Ltd.) in the hands of the successor through a single composite assessment order.
The Tribunal noted that JMC continued to exist as an independent taxable entity during the relevant assessment years and the amalgamation with the assessee took effect only from 01.04.2022. On a conjoint reading of sections 170, 163 and 161 of the Act, the ITAT held that the statutory scheme clearly distinguishes between assessment of income and recovery of tax. While a successor may be liable to discharge the tax liability of the predecessor, the Act does not permit the income of the predecessor, relating to a period prior to amalgamation, to be assessed as the income of the successor in its own right. At best, such income could be assessed only through a separate and distinct representative assessment, which was not done in the present case.
The Tribunal rejected the Revenue’s reliance on the Supreme Court decision in Maruti Suzuki India Ltd., holding that the said judgment merely prohibits issuance of notices to non-existent entities and mandates proceedings in the name of the successor representing the predecessor. It does not authorise clubbing of the predecessor’s income with that of the successor in one assessment. Reliance was placed on coordinate bench decisions such as City Gold Education Research Ltd. and Manish Tyagi, which consistently hold that additions relating to a predecessor entity prior to amalgamation cannot be merged into the successor’s assessment.
Since the reassessment itself failed on legal grounds, the Tribunal held that the additions sustained by the CIT(A) on merits—such as restriction of alleged bogus purchases to 12.5%—did not survive for adjudication. Accordingly, the assessee’s appeals were allowed on jurisdictional grounds and the Revenue’s appeals were dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
A bunch of appeal was filed by both the assessee and cross appeal by revenue against the separate orders of the Learned Commissioner of Income-tax (Appeals)–51, Mumbai [hereinafter referred to as “Ld. CIT(A)”], orders passed under section 250 of the Income-tax Act, 1961 (“the Act”), date of orders 31.07.2025 related to assessment years 2018–19 to 2020–21. The impugned orders were emanated from the orders of the Ld. DCIT, Central Circle-3(3), Mumbai, all the orders were passed under section 147 of the Act date of order 30.03.2025.
