TaxTMI 
TaxTMI 
2025 (8) TMI 1181
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....UN/2025 for assessment year 2013-14. 2. Facts of the case, in brief, are that the assessee is a company engaged in business of promoter and developer. It filed its return of income on 30.09.2013 declaring total income of Rs. 1,13,80,777/-. The case was selected under CASS. Notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') were issued and served on the assessee in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 3. The Assessing Officer observed from the details furnished in respect of advances received from the customers against sale of flats / office space that the assessee has shown liability of advances against the bookings in respect of completed as well as ongoing projects. According to the Assessing Officer, showing of liability in respect of ongoing projects is found to be reasonable. However, there should not be any reason for appearing of such liability in respect of projects completed. Rejecting the various explanations given by the assessee, the Assessing Officer made disallowance of Rs. 26,90,56,640/- in respect of advances received in re....
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....of approval for scheme of amalgamation on 02.09.2014 itself. Therefore, the said decision is not applicable to the facts of the present case. He further held that even if it were to be assumed that order needs to be passed in the hands of the amalgamated company only and not in the hands of amalgamating company, the assessee has to appreciate that there is an impossibility of performance on part of the Assessing Officer to pass the assessment order in the hands of the transferee or successor company, when the procedure to be adopted to record the succession is omitted to be undertaken by the assessee in the e-filing portal of the Income-tax Department. Distinguishing the various decisions cited before him including the decision of Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki Ltd. (supra), the Ld. CIT(A) / NFAC rejected the grounds raised by the assessee challenging the validity of assessment. 8. Similarly, the Ld. CIT(A) / NFAC upheld the addition of Rs. 49,40,351/- made by the Assessing Officer on account of disallowance u/s 36(1)(iii) and the disallowance of depreciation of Rs. 10,74,599/-. However, since the assessee is not in appeal before us on these two issu....
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....be Rs. 26,25,57,362/- and the actual value being advance from customer of CEREBRUM(B3) as on 31.03.2023 is only Rs. 21,32,83,561/-. The tabulation provided in page no. 161of the paper book is captured and provided below: Summary Sr.no Particulars Advances from customers as on 31 March 2013 Corrected Incorrect Updated based on Trial balance and audited financial statements As per submission dated 11 March 2016 A Sophronia 2.39,303 1,94,521 B Kumar City 1,13,74,000 15,00,000 C Business Court 50,54,757 48,04,757 D Celebrum B3 21,32,83,561 26,25.57,362 E Sophronia - extension 2,49,46,974 1,66,20,395 F Laxmi Vilas 1,94,82,438 3,24,31,438 G KUL aura 8,06,41,870 7,66,07,270 H Kumar Puram 3.09,53,228 1,52,13,248 1 Other advances 2,39,52,862 TOTAL 40,99,28,990 40,99,28,990 6.6.6 From the tabulation provided in the preceding paragraph, the relief is restricted to the project CEREBRUM(B3) only. The appellant itself admits that in respect of the other three projects -Business Court, Sophronia and Kumar City, the advances re....
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....tponing the revenue to the subsequent years needed verification. The necessity to undertake this process was accentuated by the entries exhibited in the tabulation contained in page no. 52 of the paper book. For ease of reference the tabulation is captured and provided below: 6.7.5 From the values exhibited in the fifth column which reveals the percentage of completion as on 31.03.2013, it is affirmed by the appellant that the projects CEREBRUM(B3), Kumar City, Sofronia and Business Court are all completed entirely and the percentage of completion as stated in the said table is 100%. 6.7.6 Obviously, when the projects are cent percent complete, there is no principle by which the revenue recognition can be postponed. Accordingly, the balance sheet cannot exhibit, both the items being "Advance from customers" and "Closing work in progress" in respect of these four projects. It was under such circumstances, a notice u/s 250 was issued on 26.11.2024 and the relevant content of the annexure to the said notice is captured and provided below. 1. As per the WIP statement as on March 2013, the project "CEREBRUM B3" is complete and as per column 5 of the said statement 1....
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....llant sought adjournment to provide the said details and the same was accorded by another notice dated 06.12.2024. requiring the appellant to submit the details on or before 11.12.2024. Though, the information sought by the earlier notice dated 26.11.2024 was simple and readily available in the possession of the Department, the appellant had sought further time and in order to remain justified, the time for submission further extended by a week. 6.7.8 Subsequently, in the letter dated 10.12.2024, it was clarified by the appellant that the project is exempted u/s 80-IA and the income was offered based on stated work completion. There were some pending issues of construction which can be seen in balance sheet (WIP-Cost Incurred). Income was recognized in subsequent years. As income was exempted u/s 80-IA, there is no ulterior motive to defer the tax. 6.7.9 The reply provided by the appellant were carefully considered. The said reply, fails to address the principal bone of contention being the issue as to whether the revenue recognition can be postponed in respect of a completed project. While the clarification is silent on this aspect, it construes that the appellan....
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....ue of closing work in progress in respect of these four projects as on 31.03.2013. The tabulation which is also provided in page no. 53 of the same paper book is also exhibited below: 6.7.15 Therefore, when the advances received from the customers in respect of these four projects is treated as revenue for the year, the corresponding closing WIP as on 31.03.2013 should get automatically set off from such income, as effectively by this process the expenditure in respect of the receipts forming part of the closing WIP has to be shifted from this nomenclature and recognized as revenue for the year and thus the closing WIP as on 31.03.2013 would get deficient by Rs. 14,85,24,400/-, Therefore, the income for the year has to be reduced by Rs. 14,85,24,400/-. Accordingly, the addition to total income gets restricted to Rs. 8,14,27,221/-. 6.7.16 Though the addition is made on the finding that the source of advances received from customers is not explained, as stated earlier, the appellant had failed to address the qualification provided by the AO in para 6.5 of the said order. Hence, as a matter of abundant caution, exercising the powers conferred u/s 251(1)(a) of the Act....
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....n holding that mere intimation by the assessee regarding the amalgamation without registering itself as a successor on the e-filing portal resulted in non compliance on the part of the assessee and therefore, the asst. order passed in the name of Kumar Housing Corporation Pvt. Ltd. was valid in law. 4] The learned CIT(A) erred in not appreciating that there was no such procedure of registering the assessee as a successor on the e-filing portal and hence, there was no reason to hold that there was non compliance on the part of the assessee and accordingly, the asst. order passed in the name of non-existent entity was bad in law and the same should have been declared null and void. 5] The learned CIT(A) erred in holding that filing of intimation letter along with the copy of High Court order sanctioning the amalgamation was a dumb document without appreciating that the assessee had duly informed the learned A.O. regarding the amalgamation of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. and hence, the asst. order passed by the learned A.O. is invalid in law. 6] The learned CIT(A) erred in enhancing the revenue of the assessee co....
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....21/- without verifying evidence(s) in respect of advance received from customers and without rebutting the conclusion drawn by the AO? b. Whether on facts and circumstances of the case, the CIT(A)/NFAC was justified in further restricting addition amount from Rs. 22,99,51,621/- to 8,14,27,221/- without examining the correctness of the WIP shown by the assessee and without rebutting the conclusion drawn by the AO? c. The order of Ld. CIT(A) may be vacated on this issue discussed alive and that of the AO be restored. d. The appellant craves to leave, add, amend, alter any of the above Questions of Law at the time of hearing of appeal. 11. The first issue raised by the assessee in the grounds of appeal relate to the order of the Ld. CIT(A) / NFAC rejecting the claim of validity of assessment framed on a non-existing company. 12. The Ld. Counsel for the assessee submitted that the assessee had filed a letter informing the fact of amalgamation to the Assessing Officer. The Ld. Counsel for the assessee referring to the provisions of section 170A which were introduced w.e.f. 01.04.2022 submitted that the said section provides that in case of a business re-....
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....reason to make any addition in the year under consideration. Without prejudice to the above, the Ld. Counsel for the assessee referring to page 90 of the paper book submitted that out of Rs. 22.99 crore the major amount is relating to project Cerebrum amounting to Rs. 21.32 crore. He submitted that the said project is eligible for deduction u/s 80IA and even if, the addition is made in the year under consideration, the deduction u/s 80IA should be granted. He submitted that the Ld. CIT(A) / NFAC rejected the contention of the assessee on the ground that the starting date of the project mentioned in Form 10CCB for assessment year 2014-15 was 24.03.2014 and therefore, the assessee is not entitled to deduction u/s 80IA. Referring to pages 131 to 171 of the paper book, he submitted that the project Cerebrum was started on 02.12.2005 and the deduction u/s 80IA has been allowed in the earlier years i.e. assessment years 2007-08, 2008-09, 2010-11 & 2011-12. He submitted that even for assessment year 2014-15, the assessee had made the claim of deduction u/s 80IA which has been allowed by the Assessing Officer. Referring to the order of the Ld. CIT(A) / NFAC, he submitted that according to ....
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....have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the assessee vide letter dated 17.12.2015 received by the office of the Assessing Officer on 22.12.2015 has intimated the merger of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. along with the copy of Hon'ble Bombay High Court order approving the scheme of amalgamation on 30.10.2015. We find the Ld. CIT(A) / NFAC observed that although the assessee has filed a copy of the Hon'ble High Court order along with covering letter intimating about the merger, however, the said letter is a dumb document before the income tax department and cannot be taken cognizance of the same since the jurisdictional Assessing Officer is incapacitated to register the modification in the income tax portal as it can only be altered by the assessee and not by the Assessing Officer. According to him, when the Assessing Officer cannot register in the system, the order of assessment and even the appeal order would conti....
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....nd developing infrastructure facilities got merged with its wholly owned subsidiary "Amanora Future Tower Pvt. Ltd." (AFTPL) with effect from 01 April 2018. By communication dated 27.04.2020 the Petitioner informed the Income Tax Authority of the merger effective from 01.04.2018. On 31.03.2023 the Assessing Officer issued a notice u/s 148 of the Act to AFTPL seeking to reopen the case after obtaining due approval from the PCCIT to issue this notice to AFTPL which is now merged with City Corporation Ltd. The petitioner, therefore, challenged the validity of notice issued on a non-existing company. The Hon'ble High Court relying on the decision of Hon'ble Supreme Court in the case of PCIT Vs. Maruti Suzuki Ltd. dated 25.07.2019 reported in [2019] 107 taxmann.com 375 (SC) and various other decisions quashed the said notice on the ground that the notice issued to a non-existing company or entity despite the respondent has knowledge of its non-existence. The relevant observations of the Hon'ble High Court read as under: "1. Heard learned counsel for the parties. 2. Rule in each of these Petitions. The rule is made returnable immediately at the request of and with the c....
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....ssioner of Income-tax, Circle 6(1)(1), Mumbai3; in support of the contention that the notice issued to a non-existing entity post-merger was a substantive illegality and not some procedural violation. Accordingly, he urged that the impugned notices be quashed and set aside. 10. Mr. Suresh Kumar, the learned counsel for the Respondents, submitted that issuing notices in the name of AFTPL was not illegal. He also submitted that the Principal Commissioner of Income Tax specifically approved the issuance of such notices. 11. Mr. Suresh Kumar submitted that the material on record shows that the notice was meant to be served upon the Petitioner. However, due to certain technical glitches, the utility system generated a notice in the name of AFTPL. He said the facts in the present case were like those in Skylight Hospitality LLP vs Asstt. CIT4. He submitted that, in this case, the Delhi High Court upheld a notice issued to the company that had already merged. Mr. Suresh Kumar Accordingly urged that these Petitions may be dismissed. 12. Rival contentions now fall for our determination. 13. In all these Petitions, the merger between City Corporation Limit....
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....rnish, within 30 days from the service of this notice, a return in the prescribed form for the Assessment Year 2013-14. GANESH SHAMRAO RAKH CIRCLE 1(1), PUNE" 16. The impugned notices in the connected Petitions are also similar, the crucial factor being that all such notices were issued to and in the name of 'Amanora Future Towers Private Limited' 17. As of the date of the issue of the impugned notices, the noticee 'Amanora Future Towers Private Limited' could not have been regarded as a 'person' under Section 2(31) of the IT Act. In fact, that was a non-existent entity. In Maruti Suzuki (supra) the Hon'ble Supreme Court has held that notice issued in the name of a non-existent company is a substantive illegality and not merely a procedural violation of the nature adverted to in Section 292B of the IT Act. 18. In Maruti Suzuki (supra), the Hon'ble Supreme Court noted that the merged company had no independent existence after the merger. The Court noted that even though the Assessing Officer was informed of the merged company having ceased to exist due to the approved merger scheme, the jurisdictional notic....
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....mited and same were reflected on the PAN of Amanora Future Towers Private Limited on insight portal. The insight portal shows and highlights/flags information as per the PAN and Name of the Party. A search action was conducted on 15/02/2023 on the City Group. The conducting DDIT(Inv.) who is holding the incriminating documents for the years prior to the merger of AFTPL into CCL, uploaded the information on the PAN of AFTPL. But while taking the approval from the competent authorities (Respondent No.2) as per the provisions of Sec. 148, 148A, 149, 151 of the Act, the name of both the entities i.e. AFTPL and CCL along with the respective PANs were duly quoted. The Copy of the approval of the competent authority is shared with the assessee as well with the Notice u/s 148 of the Act. In short, the notice u/s 148 was issued on the PAN of non- existent entity as the information was reflected/ flagged on that PAN on the insight portal. There is not a single field on this notice which is editable. So the Notice was generated on the PAN of AFTPL. But assessee was simultaneously communicated that all the approvals are taken in the name of- 'M/s Amanora Future Towers Pvt. Ltd. (Now Merged....
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....r (CCL). There was a reference to seizure proceedings, the two PAN numbers, and the lack of an editable field on this notice. Therefore, it was submitted that the notice was generated on AFTPL's PAN. 23. In short, the averments in paragraphs 4.2 and 4.3 of the affidavit purport to apportion the blame on the department's utility system. Based upon this, the fundamental error is sought to be passed off as a mere technical glitch. Finally, the concluding sentence of paragraph 4.2 of the affidavit urges this Court: "Thus, Hon'ble Court is requested to direct petitioner to treat the notice as good as in the name of existent entity. " 24. Based on the above averments and the arguments, we are afraid we cannot condone the fundamental error in issuing the impugned notices against a non-existing company despite full knowledge of the merger. The impugned notices, which are non-est cannot be treated as "good" as urged on behalf of the Respondents. In Maruti Suzuki (supra), the Hon'ble Supreme Court has held that issuing notice in the name of a non-existing company is a substantive illegality and not a mere procedural violation of the nature adverted ....
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....ax -7, Delhi Vs. Vedanta Limited 7 rejected a contention very similar to that raised by Mr Suresh Kumar, relying on Skylight Hospitality LLP (supra). The Delhi High Court noted that the decision of the Supreme Court in Maruti Suzuki (supra), while enunciating the legal position concerning an order being framed in the name of a non- existent entity, had unequivocally held as being a fatal flaw which could neither be corrected nor rectified. It had held explicitly that such an order cannot be salvaged by taking recourse to Section 292B of the IT Act. The Court also noticed the peculiar facts obtained in Skylight Hospitality LLP (supra), which alone had led to the Supreme Court upholding the assessment made, albeit in the name of an entity that had ceased to exist. 29. Accordingly, after considering the above facts and circumstances and the law, we are satisfied that the impugned notices deserved to be quashed and set aside. We do so by making the rule absolute in these petitions. 30. Before we conclude, we need to clarify that nothing in this order would preclude the respondents from issuing a fresh notice to CCL for reassessment, should the law otherwise permit it,....
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....,56,640 E Sophronia - extension 2,49,46,974 1,66,20,395 F Laxmi Vilas 1,94,82,438 3,24.31,438 G KUL aura 8,06,41,870 7,66.07,270 H Kumar Puram 3,09,53,228 1,52,13,248 1 Other advances 2,39,52,862 TOTAL 40,99,28,990 40,99,28,990 24. There is no dispute to the fact that the assessee was enjoying the benefit of deduction u/s 80IA of the Act in respect of the project Cerebrum from assessment years 2007-08, 2008-09, 2010-11 and 2011-12 by the orders of the Tribunal, copies of which are placed at pages 133 to 171 of the paper book. We find the Tribunal vide ITA Nos.1432/PUN/2014, 1463/PUN/2014, 1165/PUN/2015 & 1170/PUN/2015, order dated 23.11.2017 for assessment years 2010-11 and 2011-12, following the order of the Tribunal for assessment years 2007-08 and 2008-09 vide ITA Nos.1190/PUN/2013, 1271 & 1272/PUN/2013, order dated 12.08.2016 has allowed the claim of deduction u/s 80IA of the Act and the appeal filed by the Revenue has been dismissed for both the years. The relevant observations of the Tribunal from para 12 onwards read as under: "12. Now, coming to the appeals filed by the Revenue....
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....0. After notification of the project under IPS 2008, the eligibility of deduction has to be seen with respect to the new scheme. Thus, in view of the facts of the case and the observations of the Co-ordinate Bench of the Tribunal we find no merit in the contentions of the ld. DR that the assessee is not eligible to claim deduction u/s. 80IA(4)(iii) in assessment years under appeal." 12. Further, second objection of the Revenue of not establishing 30 units was also considered by the Tribunal in assessee's own case and following the ratio laid down by the Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT (supra) vide para 6.7 reference was made to the said decision at pages 22 to 25 of the order and held as under:- "... The order of the Tribunal in the case of M/s. Kolte Patil Developers Ltd. Vs. Dy. Commissioner of Income Tax (supra) further strengthens the case of assessee in allowing the deduction u/s. 80IA(4)(iii) of the Act. Accordingly, the ground of appeal raised by Department against allowing deduction u/s. 80IA(4)(iii) to the assessee is dismissed." 13. We are making reliance on the said decision of Tribunal in assessee's own ....
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....at in the course of asst. proceeding, the assessee had duly informed the learned A.O. regarding the amalgamation of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. and hence, the asst. order passed was null and void. 2] The learned CIT(A) erred in holding that the assessee company had not registered itself as a successor to Kumar Housing Corporation Pvt. Ltd. on the e-filing portal of the Income Tax Department and therefore, since there was failure on the part of the assessee, the asst. order passed by the learned A.O. was valid in law. 3] The learned CIT(A) erred in holding that mere intimation by the assessee regarding the amalgamation without registering itself as a successor on the e-filing portal resulted in non compliance on the part of the assessee and therefore, the asst. order passed in the name of Kumar Housing Corporation Pvt. Ltd. was valid in law. 4] The learned CIT(A) erred in not appreciating that there was no such procedure of registering the assessee as a successor on the e-filing portal and hence, there was no reason to hold that there was non compliance on the part of the assessee and accordingly, the asst. or....
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....urther held that the assessee is free to approach the JAO and get the amount written back in assessment years 2018-19, 2019-20 and 2020-21 of Rs. 49,33,641/- Rs. 69,95,555/- and Rs. 1,31,64,066/- respectively, reversed in those years, if it so desires, consequent to giving appeal effect since the above sums cannot be brought to tax twice. The Revenue is not in appeal before the Tribunal against the relief granted by the Ld. CIT(A) / NFAC. 30. So far as the additions sustained by the Ld. CIT(A) / NFAC on account of those creditors lying for a long time and no confirmations were filed are concerned, we find Hon'ble Delhi High Court in the case of CIT vs. Jain Exports (P.) Ltd. (2013) 35 taxmann.com 540 (Del) following the decision of Hon'ble Supreme Court in the case of CIT vs. Sugauli Sugar Works (P.) Ltd. (1999) 236 ITR 518 (SC) has held that credit amount outstanding for several years cannot be held as cessation of trading liability on the ground that the assessee could not prove genuineness of transaction where the assessee had acknowledged its liability successively over several years. 31. We find the Hon'ble Bombay High Court in the case of PCIT vs. Batliboi Environmental....
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....siness Court (27.912) (1,500,316) 2 Cerebrum B2 Cerebrum B3 121,283,909 (28.051.789) 4 Kumar City 25.676,897 (36,965) Kumar Puram - E Bidg 12,788,197 12,788,197 Sofronia 1.591,506 2,432 7 Sofroniz -Extention 102,368,223 46,956,946 8 FunN Fair 1,537,552 19,014 9 Triviono 258,370,205 44,806,794 10 Laxmi Vilas F Bidg. 141,623,119 141,579,887 11 Kul Aura (Jagdusha pagar) 463,502,303 463,502,303 Grand Total 1,128,713,998 680,066,503 Document 3 FORM NO. 10CCB [Seo rule 18BBB] Audit Report under section 80-1 (7)/ 80-IA (7)/80-IB/80-IC 1. Name of the assessee KUMAR HOUSING CORPORATION PRIVATE LIMITED 2 PAN AACCS9537K 3 Status PRIVATE LIMITED COMPANY 4 Ownership status of the undertaking/ enterprise: a) Fully owned by assessee Yes x No b) Partly owned by assessee Yes No x If yes, please specify the percentage of ownership 100% 5. Address CTS NO. 29, OPP. PUNE CENTRAL, BUND GARDEN ROAD, PUNE:411001 6 Name of the enterprise or undertaking eligible for deduction under section 80-IA, 80-IB or 80-IC KUMAR HOUSING CORPORATION LIMITED: CEREBRUM IT PARK 80IA 7 Section and sub-section of the Income-tax Act, 1961, under....