TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 530
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.... and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the Scope of Section 153A is limited to assessing only search relating to incriminating documents found during search and not examining the issue following the decision of Hon'ble Bombay Court in the case of Continental Warehousing and also in the case of Al Cargo Logistics without appreciating that Department has not accepted the said decision and SLP has been filed in the Hon'ble Supreme Court," iii. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that no evidence or incriminating material found during the search without appreciating that evidence for wrong claim of deduction u/s.80IB(10) was found in the form of statements taken, photograph taken which shows that area claimed is not correct and evidence need not be only written documents." iv. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in excluding cupboard projection from built up area when amendment brought in by Finance Act (No.2), 2004 w.e.f. 01.04.2005 clearly defines built up area to mean and to include projections and balconies." v. On the f....
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....ing deduction u/s 80IB (10) of Rs. 21,23,67,5897- on the plea that Built up area of majority of the residential units exceed 1000 sq.ft. by solely relying on the measurements taken by the Search team i.e. Ld. DVO; 3.1 On facts and circumstances of the case and in law, Ld. CIT (A) erred in interpretation of the provisions of Section 80IB(14)(a) and thereby included the Flower bed (projection) at non-floor level of the residential unit as a part of Built up area; 3.2 The Ld. CIT(A) failed to appreciate that once factually it was proved that 'flower bed' area is below the floor level, it ought not to have treated the same as 'balcony' which is contrary to fact as well as the DCR Regulations and permission / sanctions. 3.3 The Ld. CIT (A) erred in substituting the meaning/definition assigned to 'flower bed' as 'balcony' according to its own convenience so as to deny the deduction u/s. 80IB (10) of the Act. 3.4 On facts and circumstances of the case and in law, Ld. CIT (A) erred in assuming that structural changes made by the flats owner after handing over possession were done by the appellant. 3.5 On facts and circumstances of the case and in law, Ld. ....
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....Section 153A on 14/03/2014 by Ld. Deputy Commissioner of Income Tax, Central Circle, OSD-1, Mumbai [AO] wherein the assessee was denied the benefit of deduction u/s 80IB (10) against certain building construction projects. The assessee group was subjected to search / survey action on 02/02/2012 wherein it transpired that the group wrongly availed deduction u/s 80IB (10), booked bogus purchases to reduce the profits, received / advanced loans in cash and charged on-money on sale of shops in certain projects. The search action was concluded on 28/03/2012, being the last date on which authorization was executed. The group was stated to be engaged in the business of development of commercial and residential projects, comprising of residential apartments, villas, row houses, super luxurious apartments, providing therein all modern amenities such as clubhouse, swimming pool and shopping complex. The seized paper and other incriminating documents found during the course of search was confronted to the assessee and the statements of concerned persons were recorded. During the course of search proceedings, the assessee admitted undisclosed income for AYs 2007-08 to 2012-13, the details of w....
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..../02/2012 was issued in the name of dissolved entity namely Nahar Enterprises which was no more in existence at the time of search and no search warrant could be issued in the name of a person / entity which was not in existence. However, rejecting the same, Ld. AO denied deduction u/s 80IB(10) amounting to Rs. 21.23 Crores to the assessee and completed the assessment vide order dated 14/03/2014. 3.1 Aggrieved, the assessee agitated the assessment proceedings on legal grounds as well as on merits before Ld. CIT(A) vide impugned order dated 16/10/2015. The assessee urged that the proceedings u/s 153A were bad in law since there was no incriminating material found during search operations from the assessment originally concluded u/s 143(3) of the act. However, the same was controverted by Ld. AO in remand report dated 23/03/2015. The objections raised by the assessee with respect to measurement of built-up area and plea to exclude service area, window/cupboard projections, sunken area was also confronted to the Ld. DVO. The Ld. DVO submitted a detailed report on 20/06/2014. The relevant extracts of all these communications / reports / correspondences etc. have exhaustibly been repro....
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....vey conducted by the department on 23/02/2010 and the claim was subsequently been allowed after due verification in scrutiny assessment u/s 143(3). The Ld. CIT(A) further concluded that the material gathered during the search proceedings could not be termed as incriminating material and therefore the aforesaid deduction as allowed to the assessee during original assessment proceedings could not be disturbed. 3.5 Aggrieved, the assessee as well as revenue has sought our indulgence in the matter by way of these cross appeals. 4. The Ld. Authorized Representative for Assessee [AR], Shri Vimal Punmiya, at the outset, drew our attention to the fact that the impugned search proceedings triggered assessment u/s 153A against the assessee for AYs 2008-09 to 2012-13 and the matter for AYs 2010-11 to 2012-13 already travelled up-to the level of this Tribunal vide common order ITA Nos. 2853 to 2855/Mum/2015, 3572 to 3574/Mum/2015 dated 07/04/2017 wherein a view has already been taken by the Tribunal in the matter and therefore, the same should be followed, facts and circumstances being identical. The Ld. AR further submitted that the assessment order has been quashed by the Tribunal finding ....
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.... The assessee firm Nahar Enterpises was dissolved on 20.11.2011 and the business of the firm was taken over by the said company Nahar Builders Ltd. The Income Tax Department was informed qua the said change in status of the assessee vide letter dated 1.12.2011. 5.The dissolved firm M/s Nahar Enterprises was engaged in the business of developing residential complex with the name "Amrut Shakti" at Chandivali, Andheri (E), Mumbai wherein it had completed as many as 19 different residential blocks. The said firm claimed deduction u/s 80IB(10) of the Act in respect of residential buildings from the assessment years 2006-07 to 2011-12 6.A search action u/s 132(1) and also survey action u/s 133A were carried out on 2.2.2012 on Nahar Group of cases and its associate concerns. The search was concluded on 28.3.2012 being the last date on which authorization was executed. The assessee and its entire group of concerns were engaged in the business of development of commercial and residential projects. A search warrant was issued in the name of erstwhile firm "M/s Nahar Enterprises" a non existent entity and so was the search whereas as a matter of fact the business of M/S Nahar Enterprises ....
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....hanamas were prepared - one at the project site at Chandivali and another one at the office premises at Mahalaxmi Chambers, Vallabhbhai Desai Road - and both the Panchnamas have been witnessed and signed by independent Panchas, namely Shri Mohan J. Chopda & Shri Satnam Singh and Shri Sagar B Padalkar and Shri Hanumantan Imalopankar, respectively. Moreover, both the Panchnamas have been signed by Shri Sukhraj Nahar, main person of the group, also. Besides, the Panchnama drawn at Mahalaxmi Chambers clearly shows that the warrant had been issued in the name of M/s. Nahar Enterprises (now known as M/s. Nahar Builders Ltd.), though the other Panchnama drawn at Chandivali carries the name of M/s.Nahar Enterprises only and the name of M/s. Nahar Builders Ltd. has not been' mentioned. But that may be because of some oversight. 14. From the assessment order, therefore, it appears that warrant of authorization for search was apparently issued in the name of M/s. Nahar Enterprises (now known as M/ s. Nahar Builders Ltd.) and the correct address of the office premises as also the project site were mentioned therein. On conclusion of the search proceedings, the Panchnama has been drawn in....
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.... in 178 Taxman 224(P&H) and this decision was challenged before the Hon' ble Supreme Court which was dismissed. The decision in the case of Late Smt Laximibai Karanpuria V/s ACIT reported in 130 ITD 40 (Indore), the decision of the Hon'ble Delhi High Court in the case of CIT V/s Indu Surveyors and Loss Assessors Pvt Ltd in ITA No.365 of 2013, dated 15.10.2015. 9. The ld. AR further submitted that no valid assessment could be framed on the strength of invalid search warrant and the assessment proceedings framed on the basis of invalid search warrants were bad in law and void ab- initio. The ld. AR further submitted that the entity on which the search warrant was served was holding PAN AAAFN1599D which was disallowed on 20.11.2011 meaning thereby that the assessment proceedings were initiated against the non-existing person and ultimately the assessment order was passed on the very same entity which is not in existence and therefore the assessments made on such entity u/s 143(3) r.w.s.153A were bad in law and prayed that the same should be quashed as being invalid and void-abinitio. 10. The ld. DR , on the other hand, strongly opposed the arguments of the ld. AR and submitted tha....
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....Nahar Enterprises, the firm which was dissolved on 20.11.2011 prior the issue of search warrant. The observations of the AO was that assessments were framed by believing that search warrant was issued to "M/s Nahar Enterprises (now known as M/s Nahar Builders Ltd)" which was clerical mistake while preparing Punchanama. The First Appellate Authority confirmed the action of the AO on the ground that old company was merged into new company and both the names appear in the Panchanama. 12. Now, the issue before us for adjudication is as to whether the search warrant was issued in the name of dissolved entity or the existing company and whether the consequent assessments were void abinitio and non-est. It is an admitted fact and also apparent from the AO in the assessment order that the search warrant was issued in the name of the erstwhile firm i.e.Nahar Enterprises and the same is evident from the Punchanama itself. The AO observed that while drawing up the Punchanama some clerical mistake or by one sight the full name was not mentioned but just it was mentioned as Nahar Enterprises. It is the observation of the AO that it is a procedural mistake and no way affects the legality of th....
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....o not see any mention of Nahar Builders Ltd. However, in the Panchanama prepared on 28.3.2012 with reference to warrant No.9302, there is a mention of assessee firm name "Nahar Enterprises" (Now Known as Nahar Builders Ltd). We further find that the PAN of Nahar Enterprises is AAAFN1599D and the PAN of Nahar Builders Ltd is AADCN8065A. The assessments were completed on Nahar Enterprises with PAN AAAFN1599D. 14.In our opinion, the search action is a strict action taken against the privacy of any person by the investigating and searching the premises of any person with extreme powers bestowed on the department. Search action u/s 132(1) of the Act cannot be allowed to be taken place without proper evidence and information in the hands of the department. The revenue is expected to exercise utmost precaution while exercising these powers as search action is normally conducted after detailed enquiry and investigation by investigating authority after analyzing the background of group companies, partners, and directors, their PAN, residential status, address etc. We are therefore not in agreement with the conclusion of the authorities below that mistake is simply a clerical and procedura....
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....y Nahar Enterprises are nullity in the eyes of law as has been laid down in the various decisions discussed hereunder: 16. In the case of Spice Infotainment Ltd. v. CIT [2012] 247 CTR 500 (Delhi), the Hon'ble High Court of Delhi has held as under: "3. In this backdrop, the question that arises for consideration is as to whether the assessment in the name of a company which had been amalgamated and had been dissolved with the said amalgamating company will be null and void or whether framing of assessment in the name of such a company is a mere procedural defect which can be cured. The appeals were, thus, finally admitted and heard on the following questions of law : "(i) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the action of the AO in framing assessment in the name of 'Spice Corp. Ltd.', after the said entity stood dissolved consequent upon its amalgamation with MCorp (P) Ltd. w.e.f 1st July, 2003, was a mere procedural defect ? (ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that in view of the provisions of s. 292B of the Act, the assessment, having in subs....
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.... we, therefore, hold that the assessment made by the AO, in substance and effect, is not against the non-existent amalgamating company. However, we do agree with the proposition or ratio decided in the various cases relied upon by the learned counsel for the assessee that the assessment made against non-existent person would be invalid and liable to be struck down. But, in the present case, we find that the assessment, in substance and effect, has been made against amalgamated company in respect of assessment of income of amalgamating company for the period prior to amalgamation and mere omission to mention the name of amalgamated company along with the name of amalgamating company in the body of assessment against the item 'name of the assessee' is not fatal to the validity of assessment but is a procedural defect covered by s. 292B of the Act. We hold accordingly." 7.The aforesaid line of reasoning adopted by the Tribunal is clearly blemished with legal loopholes and is contrary to law. No doubt, M/s Spice was an assessee and as an incorporated company and was in existence when it filed the returns in respect of two assessment years in question, however, before the case....
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....Generally, where only one company is involved in change and the rights of the shareholders and creditors are varied, it amounts to reconstruction or reorganisation of scheme of arrangement. In amalgamation two or more companies are fused into one by merger or by taking over by another. Reconstruction or amalgamation has no precise legal meaning. The amalgamation is a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company become substantially the shareholders in the company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. Strictly amalgamation does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsburys Laws of England 4th Edition Vol. 7 para 1539. Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to a....
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.... other proceedings furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reasons of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act. 13.The Punjab & Haryana High Court stated the effect of this provision in CIT vs. Norton Motors (2006) 200 CTR (P&H) 604 : (2005) 275 ITR 595 (P&H) in the following manner : "A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, s. 292B can be relied upon for resisting a challenge to the no....
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....Act as well as certain decisions of the Apex Court and other High Courts, clearly held that the framing of assessment against the non-existing entity/person goes to the root of the matter which is not a procedural irregularity, but, a jurisdictional defect and as there cannot be any assessment against the dead person. 7.In the present case also, the proceedings had been initiated against a non-existing company/SSS Limited even after the amalgamation of the said company with M/s Intel Technology India Pvt. Ltd.. We do not see any good ground to differ with the said judgment of the Delhi High Court. 8. Accordingly, for the reasons given in the judgment of the Delhi High Court in the case of Spice Infotainment Ltd. (supra), these appeals are dismissed and we decide the substantial questions of law in favour of the assessee and against the revenue." 18. In the case of CIT V/s Micron Steels (P.) Ltd. [2015] 372 ITR 386 (Delhi), the Hon'ble high Court of Delhi held as under: "The Revenue in these appeals claims to be aggrieved by the order of the Income-tax Appellate Tribunal ("the ITAT"), dated February 19, 2013. The Income-tax Appellate Tribunal had affirmed the order of the ....
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....Income-tax (Appeals) guided by various previous decisions of this court, formed the opinion that the contentions of the respondent-assessee was substantial and that the assessment orders as framed, were unsustainable. He, accordingly, set aside the assessment order. 4.The Revenue's appeal was rejected. The Income-tax Appellate Tribunal relied upon several judgments including one of the Division Bench of this court in Spice Entertainment Ltd. v. CST [I.T. Appeal No. 475 of 2011, dated August 3, 2011] the Income-tax Appellate Tribunal held as follows : "8. We have carefully considered the submission in this regard and perused the records. We fully concur with the finding of the learned Commissioner of Income-tax (Appeals) that a company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with incorporation and it dies with the dissolution as per the provisions of the Companies Act. On amalgamation, the company ceases to exist in the eye of the law. Thus, assessment upon a dissolved company is impermissible as there is no provision in the Income-tax Act to make an assessment thereupon. The learned Commissioner of Income-tax (Appea....
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....on of the company. The company judge in the High Court can order dissolution of a company on the grounds stated therein. The effect of the dissolution is that the company no more survives. The dissolution puts an end to the existence of the company. It is held in M.H. Smith (Plant Hire) Ltd. v. D.L. Mainwaring (T/A Inshore) [1986] BCLC 342 (CA) that 'once a company is dissolved it becomes a non-existent party and, therefore, no action can be brought in its name. Thus, an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter had been dissolved." 19.In the case of CIT V/s Micra India (P) Ltd (2015) 231 Taxman 809 (Delhi), the Hon'ble Delhi High Court has held as under: "10. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed. Instead, he resorted to a peculiar procedure of describing the original assessee as the one in existenc....
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....s no substance and therefore, the ground raised by the assessee is dismissed. 24.On merits the assessee challenged the order of the ld.CIT(A) in denying the claim for deduction u/s 80IB(10) for including the flower bed area which is open to sky and not on floor level and 50% of common wall area as part of built up area prescribed under section 80IB(14) of the Act. The AO while completing the assessment included the service area, window projection, cupboard projection, sunken area (flower bed) and common wall area in arriving at the eligible limit of 1000 sq.ft. of built up area of each flat. The AO observed that after inclusion of these areas in built up area, the total built up area is exceeding 1000 sq.ft and therefore he denied the assessee the benefit of deduction 80IB(10) of the Act on various flats. 25.However, the ld. CIT(A) sustained the action of the AO in including sunken area (flower bed) and 50% of common wall area for the purpose of computing eligible area of 1000 sq. ft of built up area for the purpose of computing deduction u/s 80IB(10) of the Act. 25.The assessee before us filed detailed written submissions and argued extensively and submitted that the flower ....
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.... "10.9 By a combined reading of the provisions of the IT Act and the Development control regulations, it transpires that the area of a unit the floor level used in the IT Act and the exception of area with the level difference of 0.3 Mts under the DCR have a greater significance. They have not been used in the relevant provisions without any meaning or reason. The areas stipulated under the DCR to be with the level difference to the floor lever are chajjas, flower beds, dry balcony etc which are to be provided for proper ventilations, light and protection from weather to the actual useable flat area of the flat. They are not on the same floor level as the useable area for the occupant and therefore under the definition of built up area, these areas are not includable. In the case of Commonwealth Developers V/s ACIT (2014) 44 taxmann.com 303, the Hon'ble Jurisdictional High Court held that "Area of courtyard which is open to sky and appurtenant to residential unit is not to be included to compute built-up area in terms of section 80-IB(10)" 28. Therefore as could be seen from the above, the co-ordinate Bench held that chajjas, floor bed, dry balcony etc which are below floor le....
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....ion on this account may not be warranted in built-up area. In some cases, when it is projected in other room, it would have already included in the area of other room. Therefore, separate addition in this regard may not be warranted. I, therefore, hold that cupboard area. is not liable to be added separately in the built-up area and wall area will take care of it. d)Service area: Next issue is relating to inclusion of service areas. The service area is in the nature of service pipe duct, which continues from top floor to ground floor and carries service pipes, namely soil pipe, waste water pipe, water mains, etc. During the course of physical inspection of various apartments on 5/6/2014, it was noticed that this area is quite small and carries as many as 12 - 14 pipes - about 4 pipes having 4" diameter, about 3 pipes having 2" diameter, and some pipes having about one inch diameter. No doubt, a slab has been constructed at every floor and a door is provided in the bathroom to enter into the service area, But this area is primarily meant for repair of service pipes and it cannot be used for any other purposes. Further, this service duct is some kind of common area like stair case,....
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....he other experts. Accordingly, considering overall facts of the case, I direct the AO to exclude this area from the BUA. e)Window projections: It is gathered that the Valuation Officer, in respect of some of the flats, has added certain area in the nature of window projections. During the course of physical inspection, it was noticed that these window projections are areas in the nature of ornamental projections done with a view to beautify the building. These areas are situated at window-sill level, about three feet above the floor level, and some kind of projections / extension of the building. In my opinion, these projections cannot be used for any purposes, because the area is highly unsafe and anybody can fall from such area. However, it was noticed that some people are using the area to put Air Conditioner, flower pots, etc. Considering the facts of the case, I am of the view that this is essentially an elevational feature and has nothing to do with carpet area of the flat. Therefore, it cannot form part of BUA. It is like a sill of a window, which is slightly extended and in some cases may be used for protection from sunlight and rain. It is also not the case that the bu....