Assessment of Firm After Conversion Into Company Quashed: ITAT Dehradun

JCIT Vs Bharat Construction (ITAT Dehradun)

Summary: The Revenue appealed against the CIT(A)’s order dated 17.04.2026 for assessment year 2020-21. Its grounds challenged relief concerning a liability provision of Rs.49,34,74,227/-, a write-off of Rs.4,70,14,821/-, and the treatment of additional evidence under Rule 46A. Bharat Construction filed a connected cross-objection challenging the validity of the assessment itself.

The assessee had filed its return on 27.12.2020 declaring income of Rs.20,78,35,600/-. The Assessing Officer’s order dated 29.09.2022 determined income at Rs.74,83,24,648/- after additions under section 41(1) and disallowance of expenditure. The assessee submitted that the partnership firm had converted into a private limited company with effect from 19.01.2020. It said it had informed the Assessing Officer of that fact by letter dated 27.09.2022, in response to a show-cause notice dated 23.09.2022. The CIT(A) had granted relief on the merits but had not adjudicated the legal ground concerning the firm’s existence.

The Tribunal considered the cross-objection first. It recorded that the change had been unequivocally conveyed to both the Assessing Officer and the CIT(A), and that the Revenue’s representative could not rebut the facts presented. Referring to Maruti Suzuki India Ltd., *Spice Infotainment Ltd.* and J. M. Mahatre Infra Pvt. Ltd., it held that the assessment dated 29.09.2022 had been made in the name of an entity that had ceased to exist. It set aside and quashed that assessment and allowed the assessee’s cross-objection. Consequently, the Revenue’s appeal became infructuous and was dismissed. The Tribunal did not decide the Revenue’s grounds concerning the additions and disallowance on their merits.