M/s. Bright Town Investment Advisor Private Limited vs. The Income Tax Officer

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WP/27454/2023HC TelanganaHBHC01049917202306 April 2026Author: P.SAM KOSHY,NARSING RAO NANDIKONDA8 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the writ petition, holding that the order passed by the Income Tax Officer under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act, 1961, dated April 6, 2023, against M/s. Nagarjuna Impex Private Limited for the assessment year 2019-20 were illegal, arbitrary, and without application of mind. The Court reasoned that initiating proceedings against a dissolved company, which has merged with another entity, is contrary to established legal principles. The Court relied on the Supreme Court's decision in PCIT v. Maruti Suzuki India Limited and other High Court judgments, which consistently hold that proceedings cannot be continued against a non-existent entity after an approved scheme of amalgamation. The impugned notice and consequential proceedings were set aside. However, the right of the Income Tax Department was reserved to initiate appropriate proceedings against the successor company, M/s. Bright Town Investment Advisor Private Limited, if they so wished.

What were the facts?

The petitioner, M/s. Bright Town Investment Advisor Private Limited, is the transferee and successor company to M/s. Nagarjuna Impex Private Limited. M/s. Nagarjuna Impex Private Limited had merged with the petitioner through a scheme of amalgamation approved by the National Company Law Tribunal on November 6, 2019. The amalgamation was effective from March 11, 2018, with all assets, properties, rights, and liabilities of the dissolved company transferring to the petitioner. The scheme also stipulated that all legal proceedings pending against the transferor company would be continued by or against the transferee company. The Income Tax Officer initiated proceedings under Section 148A(d) and issued a notice under Section 148 of the Income Tax Act, 1961, for assessment year 2019-20 against the dissolved entity, M/s. Nagarjuna Impex Private Limited.

What were the issues?

1. Whether the proceedings initiated under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act, 1961, against a dissolved company, M/s. Nagarjuna Impex Private Limited, are legally sustainable, given that the company has merged with the petitioner, M/s. Bright Town Investment Advisor Private Limited. Assessee's Contention: The assessee argued that proceedings could not be initiated against a dissolved company. If permissible, such proceedings should have been against the petitioner, the successor entity. The assessee relied on the High Court judgments in M/s. Virchow Drugs Limited v. The Income Tax Officer and Numbhums India Private Limited v. The Deputy Commissioner of Income Tax Circle 512, which in turn relied on Supreme Court decisions. Revenue's Contention: The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 148A(d),Section 148

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
13447 | IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) MONDAY, THE SIXTH DAY OF APRIL TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTIGE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA WRIT PETITION NO: 27454 OF 2023 Between M/s. Bright Town lnvestment Advisor Private Limited, (Transferee and Successor company to M/s. Nagarjuna lmpex Private Limited), Having its Regd. Office at AJ612, Dalamal Towers,211, Nariman Point, Mumbai-400121 , and corporate office at Plot No.13, Opp. UBI Bank, First Floor, NFCL Project Office, Nagarjuna Hills, Panjagutta, Hyderabad-500082, Rep. by its Director Sri A.Vyasa Maheswara Rao ...PETITIONER AND 1. The lncome Tax Officer, Ward - 16(1), Hyderabad, l.T. Towers, A.C. Guards, Masab Tank, Hyderabad-500004. 2. The Pr. Commissioner of lncome Tax-4, l.T. Towers, A.C. Guards, Masab Tank, Hyderabad-500004. ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to pass an order or direction, especially one in the nature of WRIT OF MANDAMUS holding that the order passed by '1st respondent u/s.148A(d) of the Act, dt.06.O4.2023 with DIN . ITBtuAST/F/148N2O23-2411051900186(1) and the notice dated 06.04.2023 issued under section 148 of the Act with DIN.ITBA/AST/Si 148 112023- 2411051900313(1) for the assessment year 2019-20 against M/s. NAGARJUNA IMPEX PRIVATE LIMITED (Substituted and to be represented by the Petitione| for the assessment yeat 2019-20 as being illegal, arbitrary and without application of mind apart from being violative of judgments of Hon'ble High courts and Hon'ble supreme Court, and consequently set aside the same. Counsel for the Petitioner: SRI A.V.RAGHU RAM Counsel for the Respondents: Ms. J.SUNITHA, SENIOR SC FOR ITD FOR SRI J.V,PRASAD, SENIOR SC FOR INCOME TAX

The Court made the following: ORDER --- /

THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE, SRI JUSTTCE NARSING RAO NANT,IKONDA lV.i'}.No.2745,1 of 2023 Date:06.0,1.2026 Bctween: M/s.Bright ['ovi,n lnr;cstrncnt Advisor pr-ivate [,imited Petitioncr And 'fhc Income Tax Ofilccr. Ward- i 7( I ). I{r.dcrabad and another. . . . Respondents ORDBR, (per tlon'bta .\ri .Itr.sri.r- !'.,\unt Ktt.;h;,) Fleard Mr.A.V.Raghu Ranr, leamed counsel appears for the petitioner and Ms.J.Sunitha, Iearned Senior Standing Counsel fbr the Inconte Tax l)eparlrnenL, r.epresctrting Mr.J.V.prasad, learned Senior Standing Counsel lbr the Incoute Tax Depadment, appears fbr the respondents.

2.

This writ petition has bccn fitecl aggrieved by the initiation of proceedings undcr. Section llSA (d) of'thc lncome Tax Act, 196l (for short "the Act") against a dissolvtd or.non-existing entity. The proceedings were initiated against ,\{/s.Nagarjuna Impex private Limited, r.vhich stood nrerged rvith the petitioner, in a scheme of amalgamation, instituted befbre rhe National Company Law Tribunal, Bench- l, Hyderabacj. 'l'hc Scherne of amalgamation rvas

2 allorved on 06.11.2019 and all the assets, propenies, rights and liabitities of the dissoh,ed M/s.VVSS Agr',--' Irarms l)rivate Limited stood transferred to ihe i:tna ir'.a tlrated cstablishrnent i.e. the petitioner entity viz., N4is.Bright Torvn Investtnent .\dvisor Private Limited, with effect ftom i i .03.2{1 18. [t was also alrreed upon that atl legal proceedings pending ol against the trzrusleror company shall be continued by or against thc transieree llolnpany-

3.

In the said admitted 1'ar:ttial matrix. thr: initiation of proceedings under Scction l'18r\ (cl) of tho Act could not- had been initiated against the dissolved colnpanv ie. M/s.lrlagarjuna Itnpex Private Lirnited, it could had bccr.r onl,v against the petitioner establishment, if at all, permissible uuder iar,r'.

4.

Leamed counsel lor the pctitiorrei' relietl upon the judgments of this t-ligh Court in NI/s.Virchorv Drugs Lirnited v. The Incorne Tax Officerrdecided on 20.09.2023 and aiso in Ntrnhcms India Private Limited v. The Deputl, Commissioner rtf Income Tax Circle 512 decided on 04.01.21)2rr. Both thcsc u'rir petitions stood allora,ed relying upon the decisions oi- the Llon'ble Supreme Court. ' wp.No,112+z of 2023 ' wp-No.:2863 of 2021

3 For ready ref-erence, the relevant portion of paragraph Nos.9 and l0 of the .judgment in the case of Nunhcms India Private Limited (2 supra) is reproduced helein undcr "9: . It s,ould be re lcvant at lhis.it-ulcture to take note ol thc rclcvant portiou of'the orcler pusscd by this Court in W.['.No. I 1247 of 202.], rlhich is reproduced herein un d cr:

"20. 'l hc Hon'ble Suprenrc ('ourt Iinally endorsing the carlicr vies,of rhe High ('oLu.t ol't)e Ihi in the case ol'Spicc Inlbtainnrent. supra. in parau:-aph Nos.ii to 3-s held as under: "ln the prcscnt case. rle,pile thc tact that thc AO rvas inlbrnred of thc alrralganratir)g ({)ntl)iltv lrirr,ing ceased to exist as a rcsult of lhe approved schernc ot arnalsarrration, the jurisdictional rrotice was issLrctl orrll in its narrrc. Ilrc basis on rvhich jurisdictkrn rvas invokcd rvas fundantcntalll at <xld:, rrith the legal principle that the antalgamatirrt entit_r ceascs k) c\iit upon the approved schcnte ol auralgarnation. Participatiorr irr tlrc prtrccedings by the appcllant irt llrc circurustancer cannot opcratu irs an cstoppels against larv. I his positiorr now holds tiic lri.'.1 irr r icri of iltc judoment ol'a cG ordinatc []cnch ol two learrrerl -jrrtlllc: u lriuh disnrisscd the appcal ol the ltcventre irr Spice Finlbrainnrcnt on 2nd Nov., 2011 . 'l'he decision in Spicc Enfbtainnrenr I]as t)ccn lbllowed in the case of the lcspondcnt while dismissing tlrc Spccial [.eave Petition lor asst. yr. 201 l-12. ln doing so, this C'orrrt hrrs rclicd on the decision in Spicc Ilnfbtainrrcnt. Wc find no rcason to talic u dilltrcnt vievr. There is a valuc u'lrich lhe Court must abide b_r iI pror ()ring thc interest oIce[aint] in tar litigatiol. The vicrr rrltich has bccn taken by this Court in relation to thc rcspondcnt lirr asst. _r r. l(rl l- 12 ,,.,,,r,, in our view be adopted in rcspcct of rhc prescnt irl,pcrrl rr,hich relates to asst. yr. 2012-13. Not doing so rvill onl,r lesulr in uncertainty and displaccnrent of settled c\pcctations. I-here is a significant valuc rvhich nrust attach to obscrving llle rcquircnrent of consistency and certainty. lndividual affairs are corrducted and business decisions are lrade in the expectation of corrsisterrcy, uniformity arrd cc(ailrty. l-o dctracr !-rom thosc prirrciplcs is neither cxpedient nor desirable. For thc ieasons. *e !lrrri r,u nrerit in the appeal. -lhc appeal is accordiugll, dismissctl. lhcre shall be no order as to ctrsfs."

21.

It is also rclcvanr, at this.juticturc to take note ol yct anothcr rcccnt dccision ol'thc I ligh Cotut, of Bombay in thc

4 t CASE Of SLSA INDIA (P} LTi). VS. I)',IPTJ'IY COVIMISSIONER OF lN(-OME '[AX. rvhcr':irt thc llomba-v- l{igh Court reittraiitt..: lir': vicu olthe f{igh r'(\url of Dclhi in the cilsc o[' Snicr In lirtairrnrerrt. -'ttpra. ittl'l alstr tbllorlrts thc dictum t,l Lltc iioit hli Sttpre tll'-- /-''rrrit irt iltc cusc ol' Maruti Suzriki i lni-li.r i i irllitc'.1. sulr: a. itl i'iilil.!'rlil)h Nos.7 and 8 has hc|i its tut.l(:r: "Thc stand ol ihe ficretttrc tl];lt the (e3ssessrTcnt \\as itrstified in vicrv oi tlre taci lliilt lllc !'AN in th; name ol lilc tttln- c\islcrt cnlily had rcmaitlc'd r,,:ll\c (ir)ei llrrl crealc ilrl (\t(:|li(rrl irl tlle l'avour of thc Reven.te trr rlilrrl,' irr anv liiallnct llic 1'rinctltlcs enunciated hereinabor c. Ile that as it ma) tlre \\ ril l-':'(ilion is allorveil. 1he i nPtrgrrcd noticc dl.llst \4arch- 201 1 tlrc.rt,.lcr olasscssmertI dl.l ]stlt'litrclr. 2022 as also thc conscqLrentiul dctt';rnd ntltic: :t irii pol,rlr\ tl()ticc Cr I I ' Marclr. 20ll rrc sct a.r,l. '

22.

Given thc aforcsaid l'lte is irnri c irc ittls'.iulces ol'tlti crtsc ltttl also thc adnritted t'acttral nral[i;i- as h:ts bcetr re\cr {d ill the prcceding paragraphs, uc at. ol lllc cotlsidt:tr:'l licr" tlt'rl tlrc prcsent is also the casL- ',111j,'11 srltralcll t'",.t6.."i'-'1;11 hr lhc dccision of thc Hon'trlc StiIttnic (',,urt irr iir,-- ct''-' :rl' \laruti Suzuki (lndia) Limited (rrLrpra). .lnil the reccni r:lcci'r trn rrl'thc I tigh C'ourt of Botrtxtl in iiic iasc ol' SI.SA INDL'\ rl'>) I l i).. (supra). and the earlier.ltt.lt:rtr.!tl t)i'lhrl lligh ('orrrt ol l)elhi irr llie caso of Spice InltrtiritttttcrtL lstrptar) 23. fltc present Wlit itciitiol rlt're tt't:.'; t.r be and is atcorcliullll allowed, hotding that thc ttotici: dated 2{.03.10-l i issucd Section l48A(d) of the Act artd tltc consequential tlorit'c rrl thc sarne clatc i.e. 24.03-lt)21 Lrirrlcr Section l4E j1- tltc r\ct. hotlt bcing had in lau,- are set atr,.iu ttr. t'te crrtil,: pi.)cci'(l;trl: itselt-is ag;tinst a non-cx istint arrnririttr-\ I 0. Keeping in v ierr thg l iirrcsilitl .iudicia! Ilrecc('cl!(:i and the decision rcndered by the ll()l) i)lc liilprelnc (-.rut1.irt lltc caso oi PCIT'v. MARUTI SLIZ|lk:l !Nl)I.\ t,l14t'I'E[]''. rr* {rrcol'the considercd opinion that thc pt r:scttl is a [i'. casi: \\'ilicil dcs']rves to bc allorved and is accor(iingli ailorved. 1'he imprrgncd Notice datcd 17.06.201 and thc conscqtrcntial procecdings drasn by the rcspoudent authoritics statl(l\ scl asidc/tluas;hed. llortt:r'er. the right ol the Departffeirt sl.rrirls I cscrved to inil-iat.: apprt)priatc pioccedings, il1he1' so \\ ant. ,tgaiost ilte mergecl collrlan\'-" 'AtR otrtLtttE 20t9 sc;1+

To 5. In view of the judicial plecedent rvhich is consistently being followed by the Hon'ble Suprcme Court as also by alt the High Courts, we are inclincd to allow ihe instant writ petition as well. As a consequcnce, the irnpugned noticc issued against the going company i.e. Mis.Nagarjuna [mpcx Prii'ate Limited is set aside reserving the right ol the Department of availing appropriate legal remedies for the statute still pcrrrrirs agaillst the successor company i.e.,the petitioner.

6.

It is needless to mention that the petitioncr also, if at att, if the Incorne Tax otficcr initiates an_r, proceedings would be entitled represent and contest thc casr on rnerits. in accordance with law

7.

Accordingly, this Writ Petition stands allowed. No order as to costs. Miscellaneous applications pencliug. il any, shall stand closed M.JAWAHAR REDDY SSISTANT REGISTR //// SECTION OFFICER

1.

The lncome Tax Officer, Ward - 16(1), Hydera LT. Towers, A.C. Guards, Masab Tank, HYderabad-500004. The Pr. Commissioner of lncome Tax-4, l.T. Towers, A.C. Guards, Masab Tank, 2 3 4 5 K. Hyderabad-500004. One CC to SRI A.V.RAGHU RAM, Advocate [OPUC] One CC to SRI J.V.PRASAD, SENIOR SC FOR INCOME TAX [OPUC] Two CD Copies PS TKS

HIGH COURT DATED: 0610412026 ORDER WP.No.27454 of 2023 ALLOWING THE WRIT PETITION WITHOUT COSTS toR lHE S 2 i tpr ilZE z J 9,.9 \. a+ * 4^^",r.',^,raf] * ,

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