J M MHATRE INFRA PVT. LTD vs. THE UNION OF INDIA THR. SECRETARY MINISTRY OF FINANCE DEPT. AND ORS

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WP/11915/2024HC BombayHCBM01019806202216 December 2025Bench: HON'BLE SHRI JUSTICE B.P. COLABAWALLA,HON'BLE SHRI JUSTICE AMIT SATYAVAN JAMSANDEKAR4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the impugned notice dated March 31, 2021, and the consequent Assessment Order dated March 31, 2022, are quashed and set aside. The Court found that it was undisputed that the erstwhile Firm, M/s J. M. Mhatre, had merged into the Petitioner Company w.e.f. January 29, 2010, and ceased to exist thereafter. Therefore, the Assessing Officer was attempting to re-assess the income of the erstwhile Firm for a period when it was not in existence. The Court ruled that Section 189 of the Income Tax Act, 1961, which allows assessment of a dissolved firm, has no application in this case because the notice was issued for a period when the firm was not in existence, not merely after its dissolution. The Court relied on the Supreme Court's decision in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Limited (416 ITR 613) and other High Court decisions.

What were the facts?

The petitioner, J M Mhatre Infra Pvt. Ltd., formerly a partnership firm, challenges a Notice dated March 31, 2021, and a consequent Assessment Order dated March 31, 2022. The petitioner contends that the notice under Section 148 was issued for Assessment Year 2016-17 against a non-existent entity, M/s. J. M. Mhatre (a partnership firm), which had merged into the petitioner company on January 29, 2010. The revenue argued that Section 189 of the Income Tax Act, 1961, allows assessment of a dissolved firm as if it continued to exist. The dispute centers on the validity of a notice issued to a merged entity.

What were the issues?

1. Whether a notice issued under Section 148 of the Income Tax Act, 1961, for re-opening the assessment of a partnership firm for Assessment Year 2016-17 is valid when the firm had merged with a company prior to the assessment year in question? Assessee's contention: The notice is null and void because it was issued in the name of a non-existent entity, as the partnership firm had merged with the petitioner company on January 29, 2010. Consequently, the assessment order is also invalid. Revenue's contention: Section 189 of the Income Tax Act, 1961, permits the Assessing Officer to make an assessment of a dissolved firm as if it had not discontinued its business, making the notice issued under Section 148 valid. The Writ Petition should be dismissed.

Which sections of the Income-tax Act were involved?

Section 148,Section 189

AI-generated summary — verify with the full judgment below

50.as.wpl.11915.2024.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 11915 OF 2024 J M Mhatre Infra Pvt. Ltd.(Erstwhile J M Mhatre, Partnership firm) .. Petitioner Versus The Union of India, through the Secretary and Ors. .. Respondents Mr. Bharat Raichandani a/w Ms. Bhagrati Sahu i/b UBR Legal, Advocates for Petitioner. Mr. Ashok Kotangale a/w Mr. Nikitesh Kotangale a/w Mr. Nikhil Kamble, a/w Mr. Suresh Kabra a/w Ms. Neha Pande a/w Ms. Lizna Namavati, Advocates for the Respondents/Revenue.

CORAM: B. P. COLABAWALLA & AMIT S. JAMSANDEKAR, JJ. DATE: DECEMBER 16, 2025 P. C. 1. Rule. Respondents waive service. With the consent of the parties, Rule made returnable forthwith and heard finally. 2. The above Writ Petition is filed, inter alia, challenging the validity and legality of the impugned Notice dated 31st March 2021 and the consequent Assessment Order dated 31st March 2022. The short ground on Page 1 of 4 DECEMBER 16, 2025 Rohit Ghuge (PA) VINA ARVIND KHADPE Digitally signed by VINA ARVIND KHADPE Date: 2025.12.23 20:20:08 +0530

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which the aforesaid notice, as well as the assessment order are challenged, is that the notice itself has been issued against a non existent entity. 3. According to the Petitioner, the Notice has been issued in the name of M/s. J. M. Mhatre, which is a partnership Firm. This partnership Firm merged into the Petitioner Company w.e.f. 29th January 2010. The Notice issued under Section 148 (dated 31st March 2021) is seeking to re-open the Assessment of the said Firm for Assessment Year 2016-17. At that time, the Firm was not in existence and had already merged with the Petitioner Company. This being the factual position, it is submitted that the impugned notice, being issued in the name of a non-existence entity, is null and void and has to be set aside. Consequently, the Assessment Order also has to go, is the submission of the petitioner. 4. The Learned Advocate appearing on behalf of the Revenue submitted that under Section 189 of the Income Tax Act, 1961, notwithstanding the fact that the Firm is dissolved, or the business is dis- continued, the Assessing Officer can make an Assessment of the total income of the Firm as if no such dis-continuance or dissolution has taken place, and all the provisions of the Income-Tax Act, including the provisions relating to the levy of penalty or any other sum, would apply to such Assessment. He Page 2 of 4 DECEMBER 16, 2025 Rohit Ghuge (PA)

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submitted that once the provisions of Section 189 specifically provide for the same, the Petitioner cannot contend that the notice issued under Section 148 in the name of the erstwhile Firm is bad in law. Consequently, the Learned Advocate on behalf of the Revenue submitted that the Writ Petition be dismissed with costs. 5. We have heard the learned counsel for the parties. We have also perused the papers and proceedings in the present case. It is not in dispute that the erstwhile Firm, M/s J. M. Mhatre, merged into the Petitioner Company w.e.f. 29th January 2010. After 29th January 2010, the Firm ceased to exist and merged into the Petitioner Company. The Assessing Officer has issued a notice under Section 148 for Assessment Year 2016-17. 6. In other words, the Assessing Officer was to re-assess income of the erstwhile Firm for a period when it was not in existence. Once this is the factual position, Section 189 can be of no assistance to the Revenue. What Section 189 postulates is that, notwithstanding the fact that the firm may be dissolved or dis-continued, the Assessing Officer can bring to tax any income of that Firm even after its dissolution or discontinuance. Section 189 would have absolutely no application in a case like the present one. Once we have negated the contention of the Revenue that Section 189 would not apply to Page 3 of 4 DECEMBER 16, 2025 Rohit Ghuge (PA)

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the facts of the present case, then, it is clear that the impugned notice cannot be allowed to stand, as the same has been issued in the name of non-existent entity. This has now been consistently held not only by the Hon’ble Supreme Court in the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Limited (416 ITR 613) (SC), but several other decisions of this court. 7. In view of the aforesaid discussion, the impugned notice dated 31st March 2021 and the impugned order dated 31st March 2022 are hereby quashed and set aside. 8. Rule is made absolute in the aforesaid terms, and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs. 9. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order. [ AMIT S. JAMSANDEKAR , J.] [B. P. COLABAWALLA, J.] Page 4 of 4 DECEMBER 16, 2025 Rohit Ghuge (PA)

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