TaxTMI 
TaxTMI 
2019 (1) TMI 530
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....tion u/s.80IB(10) of the IT Act." ii. On the facts 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....
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....hich proves that the Ld. DVO's report did not form a part of the Panchnama; 3.0 On facts and circumstances of the case and in law, Ld. A.O. erred in denying 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.....
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....Ld. CIT (A) erred in considering an incentive provision in a strict manner, which should be construed liberally; 2.1 Facts in brief are that the assessee being resident firm stated to be engaged as builders & developers was assessed for impugned AY u/s 143(3) read with 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 oth....
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....aken by DVO during search proceedings and contended that certain areas were to be excluded while computing the built-up area. It was contended that notice u/s 153A was bad in law as no valid search was conducted against the assessee in view of the fact that search warrant dated 01/02/2012 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....
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....ts to support the same. Upon due consideration of material on record, assessee's submissions and contentions, remand reports, Ld. CIT(A), at paragraph 62, concurred with the aforesaid plea by observing that the assessee's claim u/s 80IB(10) was duly examined during the course of earlier survey 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....
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....are that the assessee- Nahar Enterprises a Partnership Firm was formed in the year 1978 and was engaged in the business of construction of buildings and development of the properties. On 9.9.2011 a new company was incorporated under the Companies Act, 1956 in the name and Style of "M/s Nahar Builders Limited". 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. ....
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....nchnama prepared after search. Further, both the search warrants dated 1/2/2012 and 9/3/2012 were shown to Shri Sukhraj Nahar, partner in M/s. Nahar Enterprises and Managing Director of M/s. Nahar Builders Ltd., who happens to be the main person of the two entities who signed both the search warrants. It is further gathered that two Panchanamas 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 asse....
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....tus as formal partners of the dissolved firm. The ld. AR submitted that authorization of the search party was illegal and so was the consequent search proceedings and assessment proceedings. In defence of his arguments, the ld.AR heavily relied on the decision of Punjab and Hariyana High Court in the case of CIT V/s Rakesh Kumar, Mukesh Kumar reported 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 ....
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....ewly incorporated firm M/s Nahara Builders Ltd was intimated to the department vide letter dated 30.11.2011 which was acknowledged on 1.12.2011 by the Office of the Dy.Commissioner of Income Tax. A search was conducted on 2.2.2012 and concluded on 28.3.2012 in the premises of assessee Nahar Group and the assessments were completed under section 143(3) r.w.s. 153A in the name of 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....
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....ere is no basis to your allegation and the same is therefore not acceptable and is rejected." 13.The ld. CIT(A) confirmed the stand of the AO for the reason that both the names of the entities are mentioned on Punchanama, and therefore, the proceedings are valid. We further find that the Panchanama prepared on 27.3.2012 with reference to warrant No.9302, the warrant was issued in the name of Nahar Enterprises and we do 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. ....
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....t on Nahar Builders Ltd and to place before the Bench the said satisfaction respectively, the ld. DR declined to reply the question by submitting that the Bench has no jurisdiction to call for such record and expressed his inability to place before the Bench. Therefore, in this case since the department could not establish that the search warrant was issued in the name of the successor entity Nahar Builders Ltd, we therefore inclined to hold that the assessment proceedings initiated and completed on the dissolved entity 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 qu....
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.... words, any appeal preferred by a nonexistence person must also be treated as non est. All these acts of the appellants/amalgamated company clearly show that it had been constantly treated the assessment made against the appellant in respect of the assessment of amalgamated company. Further, no prejudice is caused to the assessee merely because in the body of the assessment order name of the amalgamated company is not shown. 6.On the aforesaid reasoning and analysis, the Tribunal summed up the position in para 14 of its order which reads as under : "In the light of the discussions made above, 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 me....
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....under the order of the High Court in proceedings under s. 391 r/w s. 394 of the Companies Act. The Saraswati Industrial Syndicate, the transferee company was a subsidiary of the Indian Sugar Company, namely, the transferor company. Under the scheme of amalgamation the Indian Sugar Company stood dissolved on 29th Oct., 1962 and it ceased to be in existence thereafter. Though the scheme provided that the transferee company the Saraswati Industrial Syndicate Ltd. undertook to meet any liability of the Indian Sugar Company which that company incurred or it could incur, any liaiblity, before the dissolution or not thereafter. 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 blen....
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....nstead, the AO made the assessment in the name of M/s Spice which was non-existing entity on that day. In such proceedings an assessment order passed in the name of M/s Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law. 12.Once it is found that assessment is framed in the name of non- existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of s. 292B of the Act. Sec. 292B of the Act reads as under : "292B. No return of income assessment, notice, summons or 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 P....
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....ed that after the issuance of the demand notice, it was for the department to substitute the respondent company in the proceedings for assessment and by not having done so, the entire assessment proceedings would be null and void. In support of his submission, learned counsel for the respondent has placed reliance on a Division Bench decision of the Delhi High Court rendered in Spice Infotainment Ltd. v. CIT [IT Appeal Nos. 475 & 476 of 2011, dated 3-8-2011]. It is contended that the facts of the present case are similar, if not identical, to the facts in the case of Spice Infotainment Ltd. (supra) wherein the Delhi High Court has, after considering the various provisions of the Income Tax 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 Tec....
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....ject-matter of appeal to the Commissioner of Income- tax (Appeals). It was urged in the appeal that on account of amalgamation and by operation of section 170 of the Income-tax Act the income-tax authorities were under a duty, upon receipt of information, to initiate complete proceedings against the transferee company which they had not done. This plea was accepted by the Commissioner of Income-tax (Appeals), who, inter alia, noted that on October 19, 2010, since the Assessing Officer changed, on account of an administrative order, an intimation was received by the Assessing Officer on November 18, 2010, stating that M/s. Micron Steels Pvt. Ltd. no longer existed on account of the amalgamation order, dated February 19, 2010. The Commissioner of 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 Enter....
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.... that completion of assessment in respect of a non-existent company, due to the amalgamation order, would render assessment in the name and in respect of the original assessee- company, a nullity. In Spice Entertainment Ltd. (supra), after referring to Saraswati Industrial Syndicate Ltd. v. CIT [1990] 186 ITR 278/53 Taxman 92 (SC), this court held as follows : "9. The court referred to its earlier judgment in General Radio and Appliances Co. Ltd. v. M.A. Khader [1986] 60 Comp Cas 1013 (SC). In view of the aforesaid clinching position in law, it is difficult to digest the circuitous route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect. 10. Section 481 of the Companies Act provides for dissolution 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 b....
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.....We have carefully considered the rival contentions and perused the material placed before us. We find that the valuation office was engaged by the Department from Central Public Works Department, Government of India, who was technical expert. After perusing the provisions of section 132(2) of the Act, we find in the search cases it is usually to take opinion of technical experts from the qualified engineers working in CPDW. In the case before us, the services of DVO was taken for the measurements of flats which in our opinion, no other person could have done better way as the matter being highly technical. We also find that due opportunity was given to the assessee by the department to controvert the finding of the AO by giving copy of the valuation report, so, in view of these facts we are of the considered view that the ground raised by the assessee has 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 pre....
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....rable force in the submissions of the assessee that the flower bed area and common wall area are not includible in the definition of built up area while calculating the eligible limit of 1000 sq. ft for the purpose of allowing deduction u/s 80IB(10) of the Act. The flower bed area is open to sky and not covered by any sides whereas balcony is covered with three sides. The flower bed area is few inches below floor level. It is the submission of the assessee that the flower bed area is outside the balcony area and the starting point for the flower bed area is a point where the balcony area ends. 27.In the case of ITO V/s Poddar Ashish Developers in ITA No.3408/M/2010 dated 12-03-2014, the co-ordinate Bench of the Tribunal has considered the situation as to whether the areas of a unit which is not on floor level whether should be includible in the definition of built area or not and the co-ordinate Bench held: "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 gre....
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....e flower beds which are below the floor level cannot form part of constructed area of flat for the purpose of determining the eligibility of the assessee to deduction u/s 80(IB)(10) of the Act. 31.Coming to the Revenue's appeals, the department has challenged the orders of the ld.CIT(A) in directing the AO to exclude the service area, window area, window projection, cupboard projection from the definition of built up area for calculating the deduction u/s 80IB(10) of the Act and the eligible area of 1000 sq. ft. The ld. CIT(A) excluded the said services area, cupboard projection and window projection by observing as under: c.Cupboard projections: The next objection is about inclusion of cupboard area. It is gathered that cupboards are normally carved out of wall area only. In some cases, cupboards may be projected a few inches outside the walls. Considering the facts of the case, I am of the view that as cupboard area is already included in the wall area itself, so separate addition 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, ....
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.... for storage or putting a washing machine or a LPG cylinder, they are doing it on their own accord. Moreover, there is no evidence to suggest that the assessee has sold these areas to respective buyers, or otherwise, buyers own such areas. Therefore, the observation of the AO that such area was under exclusive possession of flat owners, remains unsubstantiated, as in my opinion, the flat owners may be using the area, but largely the area is meant for common facilities for all the flats and acts as duct for various kinds of facilities for all the floors. In any case, it does not alter the material position. Considering the overall facts of the case, I am of the opinion that this area. should not form part of the BUA, as it is in the nature of common area meant for all the flat owners from top floor to ground floor, and purpose of this area is to provide a platform for repair, and replacement of the service pipes, including soil pipe, waste water pipes, water mains, etc. Similar opinion' has been given by the other experts. Accordingly, considering overall facts of the case, I direct the AO to exclude this area from the BUA. e)Window projections: ....
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....d powers bestowed upon the authorities were to be exercised with utmost precaution and only after conducting detailed enquiries & investigation. Therefore, nonmentioning of correct name of the entities could not be termed as mere clerical or procedural mistake particularly when the assessee had already intimated the fact of dissolution of the firm to the department much before the date of the search. Therefore, the issue of Panchnama in the name of dissolved firm could not be said to be valid. When the search u/s 132 was conducted and to be valid, the warrant and notice should be issued in the name of the successor only whereas these, in the present case, had been issued in the name of Nahar Enterprises, a non-existent entity which could not be said to be mere clerical mistake. While arriving at such conclusions, ratio was drawn from the following decisions of higher judicial authorities: - No. Title Rendered by Citation 1. Spice Infotainment Ltd. Vs. CIT Hon'ble Delhi High Court 247 CTR 500 2. CIT Vs Intel Technology India (P) Ltd. Hon'ble Karnataka High Court 380 ITR 272 3. CIT Vs Micron Steels Pvt. Ltd. Hon'ble Delhi High Court ....