Madhya Pradesh Industrial Development Corporation (Erstwhile Mp Audyogik Kendra Vikas Nigam Bhopal vs. Central Board Of Director Taxes

1 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI AND HON'BLE SMT. JUSTICE ANURADHA SHUKLA [ WRIT PETITION NO. 13145 OF 2024 [ MADHYA PRADESH INDUSTRIAL DEVELOPMENT CORPORATION (ERSTWHILE M.P.AUDYOGIK KENDRA VIKAS NIGAM BHOPAL) Versus CENTRAL BOARD OF DIRECT TAXES & OTHERS ----------------------------------------------------------------------------------------- Appearance : Shri Siddharth Shrivastava – Advocate for the petitioner. Shri Harpreet Singh Gupta – Advocate for the respondent. ------------------------------------------------------------------------------------------ Reserved on : 28.08.2024 Pronounced on : 20.11.2024 ------------------------------------------------------------------------------------------ The instant petition is coming on for admission, heard finally this day, Justice Sushrut Arvind Dharmadhikari passed the following: Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 2 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

O R D E R In the instant petition under Article 226/227 of the Constitution of India, the petitioner is challenging the order dated 21.03.2022 passed under Section 148A(d) of the Income Tax Act, 1961 ('the Act') by respondent No. 3 in case No. ITBA/AST/S/148_1/2023-24 /1063125561(1) for the Assessment Year 2020-21 inter alia on the ground that the same were passed against an entity which has been amalgamated with another entity with effect from 01.04.2018 and by virtue of which has ceased to remain in existence. Therefore, order having been issued against a non-existent entity are without jurisdiction, bad in law, contrary to settled principles in law. 2. The petitioner's case is that, the petitioner Madhya Pradesh ''Audyogik Kendra Vikas Nigam Bhopal'' (hereinafter referred to as the “MPAKVN”) was incorporated under the Companies Act, 1956. It was incorporated with the primary object to assist with the industrial growth and development within the state of Madhya Pradesh and to provide aholistic atmosphere in order to cater to the industrial development of the state by providing lands and various other facilities that are essential for running of industries in the. The MPAKVN were established in major cities namely Bhopal, Indore, Ujjain, Rewa, Sagar, Bhopal, whereafter the Respondent authority was pleased to issue the PAN number bearing AACCM6048F to the petitioner i.e. MPAKVN, Bhopal. 3. That vide order dt. 22.07.17 a decision was taken by the State Government to amalgamate these MPAKVN’s of Bhopal, Indore, Jabalpur, Ujjain, Rewa, Sagar, and Industrial Infrastructure Development Corporation, Gwalior (IIDC) with Madhya Pradesh Trade and Investment Facilitation Corporation Limited (MPTRIFAC) into a single entity. Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 3 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

for the income chargeable to tax which has escaped assessment to the tune of Rs. 66,14,59,826. 6. Petitioner submitted his reply to the aforesaid notice stating therin that the erstwhile MPAKVNs situated at Bhopal, Indore, Jabalpur, Ujjain, Rewa, Sagar and IIDC, Gwalior, stood amalgamated into the MPTRIFAC (subsequently renamed as MPIDC) with effect from 01.04.2018 the individual pan number of various MPAKVN’s were duly surrendered and deactivated and merged with the PAN number of MPIDC too. Therefore, the PAN number issued to MPAKVN, Bhopal i.e. PAN no. AACCM6048F stood merged with the PAN number issued MPTRIFAC (MPIDC) i.e. PAN no. AACCM6080D with effect from 1 April 2018. That it was further stated the petitioner are duly filing the income tax returns in a timely manner, and that the amount as shown in the notice has already been accounted in the consolidated books of the account of MPIDC. That the Respondent no.3 once again issued a show cause notice u/s 148A notice dated 07.03.2024 to the petitioner wherein the next date of hearing was fixed for 11.03.2024. According to petitioner, the said notice was delivered via e-mail at around 7 PM on the same day i.e 07.03.2022. The petitioner duly filed his response to the said notice wherein the petitioner categorically sought around 10 days’ |time in order to reply to the said notice on account of the fact that holiday had been declared from 08.03.2024 to 10.03.2024 owing to festival of Maha Shivaratri and therefore, it was not possible for the petitioner to submit his reply alongwith documents. Thereafter, the Respondent no.3 without considering the reasonable request of the petitioner issued another notice dated 09.03.2024 wherein once again it was reiterated that the hearing would take place on 11.03.2024 at 3 PM. The Petitioner once again submitted his reply to the aforesaid notice on 19.03.2024 wherein once again they had Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 5 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

categorically stated about the amalgamation of entity into the MPIDC with effect from 01.04.2018. The petitioner had duly submitted his reply via email but Respondent no.3 had refused to accept the same. Thereafter, the respondent no.3 vide impugned order dated 21.03.2022 without considering the reply filed by the petitioner has held that income to the tune of Rs. 66,14,59,826 has escaped assessment and thereby has initiated proceedings u/s 148A(d) of the Act. 7. Learned counsel for the petitioner submitted that the respondent no.3 has failed to appreciate the fact that MPAKVN’s situated at Bhopal, Indore, Jabalpur, Ujjain, Rewa, Sagar and IIDC Gwalior stood amalgamated with the MPIDC with effect from 01.04.2018 and the individual pan number of various MPAKVN’s including the petitioner entity were duly surrendered and deactivated and merged with the PAN number of MPIDC. The petitioner duly filed his reply to the various notices issued by the respondent No. 2 even then without considering the same the respondent No. 3 passed the wrong order in question. He further submitted that an identical circumstance had arisen for the assessment Year 2019-20 wherein the Respondent no.3 after duly considering the reply submitted by the petitioner himself hold that MPAKVN, Bhopal stood merged with the MPIDC and dropped the proceedings u/s 148 (A)(b) of the act for the assessment Year 2019-20 on the very same ground as raised in the instant petition. It was also held that all the transactions of the said financial year has duly been incorporated in the audited financial statement of the new entity. He further argued that the respondent no. 3 ought to have appreciated the fact that identical proceedings were also initiated by the Assistant Commissioner of Income Tax, Katni and Sagar and the same were also dropped on the grounds that amalgamation of MPAKVN into the MPIDC with effect from 01.04.18. The petitioner further submitted that Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 6 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

the respondent authority smacks foul of malafide and ulterior motives as they have preconceived notion against the petitioner, which has the effect of only penalizing the petitioner. Further, the impugned orders have been passed in utter violations of the principles of natural justice and is purely illegal, arbitrary, malafide and has been passed on false basis and the same is a non-speaking orders, warranting interference of this Court. In support of his contention, the learned counsel for the petitioner has relied upon the order passed by this Court in the case of Jhansi Baran Pathways Pvt. Vs. Office Of The Income Tax Officer & ors. reported in I.L.R. 2024 M.P. 90 (DB). 8. On the other side, learned counsel for the respondent filed reply and opposed the petition. He argued that the petitioner has not filed ITR for the A.Y. 2020-21 and information in the case of the petitioner, for the A.Y. 2020-21 (F.Y. 2019-20) was reflected under the non-filer management system of verification module of the Insight Portal, which suggests that the petitioner has undertaken transactions of Rs.66,14,59,826/- during the year under consideration, thus, the Assessment Officer was duty bound to brought the same for taxation by initiating income escapement from taxation assessment proceedings u/s 147 of the Act, 1961. The respondent authority has issued show-cause notice to the petitioner following the due procedure of law given under Section 148 A (b) of Act, 1961 electronically on15.02.2024 alongwith the information flagged on the non-filer management system. The assessee was required to submit its response with supporting documents (if any) on or before 22.02.2024. In response to the same the assessee has furnished partial reply on 21.02.2024. However, the reply of the assessee was not found to be satisfactory and accordingly, another show-cause notice was issued to the assessee as last opportunity of being heard on 09.03.2024, whereby, the assessee was categorically asked Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 7 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

to establish that all the transactions undertaken by the transferor company i.e., MPAKVN, Bhopal were duly incorporated in the audited financial statement of the transferee entity i.e., MPIDC by providing transferor company wise bifurcation of the receipts, expenditures, investments and the complete TDS claimed by the transferee entity i.e. MPIDC. The assessee was required to file reply on or before 03:00 PM of 11.03.2024 with respect to the captioned notice. However, the assessee has neither sought adjournment nor filed reply by given date as well as during the entire 148A proceedings. Therefore, in the absence of any reply from the assessée, the matter was decided ex-parte and the order u/s 148A(d) of the Act dated 21.03.2024 was passed after obtaining approval from competent authority. The petitioner stated incorrect facts that he has filed an application for granting adjournment to file reply whereas no adjournment application was submitted by the assessee with respect to the captioned show cause notice u/s 148A(b) of the Act dated 09.03.2024 either on e- mail of this office or on e—filing portal. It is submitted that the assessee was categorically showcaused to establish that all the transactions undertaken by the transferor company i.e., MPAKVN, Bhopal were duly incorporated in the audited financial statement of the transferee entity i.e., MPIDC. He prays for dismissal of the petition. In Support of his contention, he relied upon the order passed by Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax (Central)-2 Vs. Mahagun Realtors (P) Ltd. reportd in Manu/SC/0410/2022. 9. Heard. 10. The main contention of the petitioner's counsel is that the impugned order is unsustainable in as much as the petitioner entity i.e. MPAKVN, Bhopal has already been amalgamated with MPIDC with effect from Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 8 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

01.04.2018. It is urged that the action of the respondents in initiating assessment proceedings against an amalgamated company is void ab initio and bad in law. The learned Counsel for the petitioner has drawn attention of this Court towards the order passed by this Court in the case of Jhansi Baran Pathways Pvt. (Supra) wherein this Court relying upon the judgment passed by Hon’ble Supreme Court in the case of Saraswati Industrial Syndicate Ltd. Vs. CIT, 1991 AIR 70 and Principal Commisioner of Income Tax, New Delhi Vs. Maruti Suzuki(India) Ltd., (2020) 18 SCC 331, has held that assessment/re-assessment proceedings cannot be initiated against amalgamated entities as they cease to remain in existence by virtue of amalgamation. 11. The learned counsel for the respondent confronted the petitioner's arguments saying that the assessee was categorically showcaused to establish that all the transactions undertaken by the transferor company i.e., MPAKVN, Bhopal were duly incorporated in the audited financial statement of the transferee entity i.c., MPIDC and the petitioner entity failed to do so, hence, the impugned order is justifiable. To counter the verdict given by this Court in the case of Jhansi Baran Pathways Pvt. (Supra), the learned counsel for the respondent produced the judgment passed by Hon'ble Superme Court in the case of Mahagun Realtors (P) Ltd (Supra) wherein the Hon'ble Supreme Court has held that amalgamation does not necessarily nullify tax assessment as only the outer shell of the amalgamating company gets destroyed but the business and the adventure lives on. The relevant para is quoted hereinafter:- “Amalgamation, thus, is unlike the winding up of a corporate entity. In the case of amalgamation, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues – enfolded within the new or the Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 9 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

existing transferee entity. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. It is, therefore, essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action or the complaint does not per se cease – depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall.”... 12. While passing the said judgment, the Hon’ble Supreme Court has also noticed its earlier judgment passed in the case of Maruti Suzuki (India) Ltd. (Supra), however, the same has been distinguished on the facts but still holds the field subject to proper scrutiny of the facts. 13. On perusal of above mentioned judgment, the Hon'ble Supreme Court specifically noticed and distinguished the facts of Mahagun Realtors (P) Ltd (Supra) with the Maruti Suzuki (India) Ltd. (Supra) stating therein that in Mahagun's case the amalgamation was known to the assessee, but he supressed the same even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group. A return was filed, pursuant to notice, which also suppressed the fact of amalgamation. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT. Even the affidavit before the Hon'ble Supreme Court was filed on behalf of the director of MRPL (non-existing company). The assessment order painstakingly attributed specific amounts surrendered by MRPL, and after Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 10 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

considering the special auditor’s report, brought specific amounts to tax, in the search assessment order. The Court was, hence, of the opinion that all the aforementioned points clearly indicated that the order adopted a particular method of expressing the tax liability. The AO, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home Décor Pvt. Ltd.). The mere choice of the AO in issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it. The Hon'ble Supereme Court further held that whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the year 2013 Act), but would depend on the amalgamation and the facts of the each case. 14. In the light of above mentioned verdicts of Hon'ble Supreme Court as well this Court, we examined the facts and found that the petitioner entity MPAKVN was amalgamated into MPIDC vide order dated 25.10.2018 but made effective from 01.04.2018 and liabilities were transferred thereunder. The respondent, in reply, no where stated that the department was not aware with the facts of amalgamation or the petitioner had ever suppressed the amalgamation proceedings, rather, the respondent himself admitted that the after the amalgamation in the year 2018, during the course of 148A proceedings for Assesment Year 2019-20, the assessee has made complete compliance with respect to the notices issued u/s 148A(b) of the Act and accordingly, established that the information flagged for verification for Assesment Year 2019-20 were duly accounted in the audited financial statement of MPIDC. The respondent did not deny Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 11 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

the fact that the PAN Number alloted to petitioner entity was surrendered, deactivated after its amalgamation and merged with the MPIDC. Hence, in the instant case as pointed out earlier the fact of amalgamation was well within the knowledge of the assessing officer. 15. Therefore, the decision of the Hon’ble Supreme Court in Mahagun Realtors Pvt. Ltd. (supra) cannot be of any assistance to the facts and circumstances of the present case. 16. In the case at hand, admittedly, the order under Section 148A(d) of Act, has been passed by the respondent against a non existent entity. Therefore, the impugned order is bad in the eyes of law. 17. Accordingly, the impugned order dated 21.03.2022 passed under Section 148A(d) of the Act by respondent No.3 in case No. ITBA/AST/S/148_1/2023-24/1063125561(1) and all consequential proceedings in the name of amalgamated company are null and void and consequently it is hereby set aside. 18. The petition is allowed. No order as to costs. (SUSHRUT ARVIND DHARMADHIKARI) (ANURADHA SHUKLA) JUDGE JUDGE skt Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified 12 NEUTRAL CITATION NO. 2024:MPHC-JBP:56694 W.P. No. 13145/2024

Signed by: SANTOSH KUMAR TIWARI Signing time: 11/21/2024 4:47:54 PM Signature Not Verified