TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1181
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....s 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 respect of various projects treating the same as un....
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....cision 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 issues, we are not concerned with the same. 9. So far as the addition of trade advances ....
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....-. 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 received from customers and due as on 31.03.2013 is of Rs. 50,54,757/- Rs. 2,39,303/- and Rs. 1,13,74,000/- totaling Rs. 1,66,68,060/-. Therefore, if the advances claimed to be received in respect of these four projects is not proven to be....
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....rom 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 100% of the project is complete. Therefore, the question of receiving of advance in respect of this property does not arise. Even if it were received, in excess of the revenue already recognized in the yester years, the same should be automatically converted into revenue for the year and added to the t....
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....epartment, 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 appellant accepts that this method of revenue recognition is not in order. 6.7.10 On the eligibility of deduction u/s 80-IA(4)(iii), if it were a genuine claim, the revenue should be recognized in respect of this completed project and the appellant ought to have submitted Audit Report in Form No. 10CCB. Moreover, substantial portion ....
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....13 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, in the notice u/s 250 dated 26.11.2024, the appellant was apprised about the likely deviation from the principle of taxation adopted in the assessment order, despite a clear finding in it in para 6.5 of the said order into the concept and principle of revenue recognition as detailed in the preceding sub-paras. 6.7.17 Therefore, the error in the title of the addition made ....
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.... 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 company by an amount of Rs. 22,99,51,621/- an after allowing the deduction of a closing WIP erred in making an addition of Rs. 8,14,27,221/- in the hands of the assessee company. 7] The learned CIT(A) erred in holding that the assessee company had postponed the revenue of Rs. 22,99,51,621/- in respect of the following projects and as per the regular method of accounting followed by the assessee company, the said revenue was taxable in the year un....
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.... 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-organization which has taken place on the basis of the order of Hon'ble High Court or the Tribunal or an adjudicating authority and the successor has already filed the return u/s 139(1) prior to the said order, the successor shall file modified return in Form No.ITR-A within a period of six months from the end of the month in which the order was issued. Therefore, after insertion of section 170A w.e.f. 01.04.2022, the assessee as a successor has to file a modified return. However, prior to this amendment, there was no provision enabling such fi....
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....ect 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 him the assessee has mentioned the date of commencement in Form 10CCB for assessment year 2014-15 as 24.03.2014 and therefore, he rejected the claim of the assessee. Referring to page 118 of the Paper Book, the Ld. Counsel for the assessee drew the attention of the Bench to Form No.10CCB for assessment year 2014-15 and submitted that the date of commencement is mentioned as 02.12.2005, therefore, the findings of the Ld. CIT(A) / NFAC that the date of commencement is 24.03.2014 is factually incorrect. He submitted that even if the addition is made on the basis of the order of the Ld.....
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....d. 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 continue to be passed in the name and PAN of the assessee being the amalgamating company and cannot be passed in the name of amalgamated company as the essential procedure has not been accomplished by the appellant. 18. We do not find any merit in the logic of the Ld. CIT(A) / NFAC on this issue. We find the provisions of section 170A which were introduced by the Finance Act, 2022 w.e.f. 01.04.2022 read as under: "Effect of order of tribunal or court in respect of business reorganisation 170A. Notwithstanding anything to the contrary contained in section 139, in a case of business reorgan....
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....n 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 consent of learned counsel for the parties. 3. The learned counsel for the parties agree that all these Petitions can be disposed by a common order since they involve substantially common issues of law and fact. The learned counsel also agree that Writ Petition No.6076 of 2023 be treated as lead Petition. 4. Writ Petition No.6076 of 2023 concerns Assessment Year 2013-14. The remaining Writ Petitions are concerned with Assessment Years 2014-15, 2016-17, 2017-18, 2018-19 and 2019-20 respectively. 5. All these Petitions are instituted by "City Corporation Limited" [CCL], which is engaged in constructing and developing infrastructure facilit....
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.... 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 Limited and Amanora Future Towers Private Limited, which was effective from 01 April 2018, is not disputed. This merger was based on the NCLT's order dated 27 April 2020. 14. There is also no dispute about the Petitioner, vide a communication received by the Income Tax Department on 27 August 2020 informing about the merger effective 01 April 2018. The communication, along with an endorsement from the office of the Deputy Commissioner of Income-tax, Circle 1(1), Pune, is placed on record at Exhibit-b (page 34 of the paper book in Writ Petition No.6076 of 2023), as also in the connected Petitions. In the affidavit in reply filed, no dispute was raised about the department not receiving the intimation on 27 August 2020....
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....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 notice was issued only in its name. The Court held that the basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the merged entity ceases to exist upon the approved merger scheme. Participation in the proceedings by the petitioner company into which the merged company had merged or amalgamated could not operate as an estoppel against the law. 19. In Ubber India Systems (supra), the Coordinate Bench held that where by virtue of an order passed by the NCLT, the assessee company stood amalgamated with the petitioner, notice issued under Section 148A(b) and Section 148 to the assessee, which was a non-existent company was illegal, invalid and non-est. Similarly, in Alok Knit Exports Ltd (supra), another Coordinate Bench where the Assessing Officer had committed a fundamental error by issuing notice under Section 148 of the IT ....
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....ted/ 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 with M/s City Corporation Ltd.)'. So, considering the above facts and after verifying that Amanora Future Towers Private Limited was merged with City Corporation Limited, the approval was taken from competent authority in the name of Amanora Future Towers Private Limited (PAN:AAKCA3074H) which merged in City Corporation Limited (PAN:AACCC2820K). A copy of the same approval is attached herewith for kind reference as Exhibit-R1. The same copy was also shared with petitioner wp.6076-2023 & ors.docx alongwith notices issued u/s. 148 of the Act. All the internal procedure has been communicated with the name of resultant entity. However, due to non-linking of amalgamating entity's PAN to amalgamated entity's PAN, and non-availability of modification option in the 148 notice before issuance, notice u/s 148 was generated through system in the name of Amanora Future Towers Priva....
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....ted 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 to in Section 292B of the IT Act. 25. Mr Suresh Kumar's contention about the facts in the present case being akin to those in Skylight Hospitality LLP (supra) cannot be accepted. Except for submitting that the facts are similar or comparable, nothing was shown to us based upon which such a submission could be entertained, much less sustained. In any event, the Hon'ble Supreme Court, in the case of Maruti Suzuki (supra), considered the Delhi High Court's decision in Skylight Hospitality LLP (supra) and held that the same was delivered "in the peculiar facts of wp.6076-2023 & ors.docx the case". In fact, even the Delhi High Court had clarified that the decision was in the case's peculiar facts. 26. In that case, there was substantial and affirmative material and evidence on record to show that issuing the notice in the name of the dissolved company was only a mistake. The Court held that the Special Leave ....
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.... 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, and if the circumstances justify it. We have quashed the impugned notices only because they were issued to a non- existing company or entity despite the respondents' knowledge of its non-existence. All contentions in this regard are left open because we have not addressed them in this order." 21. Since in the instant case the assessment order has been passed on a non-existing company despite being informed by the assessee to the Assessing Officer of such merger, therefore, respectfully following the decision of jurisdictional High Court in the case of City Corporation Ltd. (supra) which in turn has relied on the decision of Hon'ble Supreme Court in the case of PCIT Vs. Maruti Suzuki Ltd. (supra), we hold that the order passed by the Assessing Officer on a non-existing company is void ab initio. The first issue raised by the assessee in the grounds of appeal is accordingly allowed. 22. Even otherwise also, it is an admitted fact that the assessee has offered ....
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....of the Tribunal from para 12 onwards read as under: "12. Now, coming to the appeals filed by the Revenue, wherein in both the appeals, the Revenue has raised similar grounds of appeal i.e. against the order of CIT(A) in allowing the claim of deduction under section 80IA(4)(iii) of the Act, on the ground that the project of assessee was not notified by the Government for claiming the aforesaid deduction. 13. The learned Authorized Representative for the assessee in this regard pointed out that the Tribunal in assessment years 2007-08 and 2008-09 has deliberated upon the issue vide paras 11 to 13. Further, the Tribunal in assessment year 2009-10 in ITA Nos.1290/PUN/2013 and 1291/PUN/2013, relying on earlier order, vide order dated 12.07.2017 has held as under:- "11. Now, coming to the grounds of appeal raised by the Revenue, wherein the Revenue is first aggrieved by the order of CIT(A) in allowing the deduction under section 80IA(4)(iii) of the Act. The Tribunal had considered various aspects of the claim of assessee and had noted the factual aspects and had relied on earlier decision of the Pune Bench of Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT in ITA Nos.1411 to ....
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....aid decision of Tribunal in assessee's own case but for the sake of brevity, only relevant paras are being reproduced as against complete factual and legal aspects noted by the Tribunal and referred to in the said order. Following the same parity of reasoning, we uphold the order of CIT(A) in allowing the claim of deduction under section 80IA(4)(iii) of the Act." 14. The issue arising in the present appeals filed by the Revenue is identical to the issue before the Tribunal in earlier years and following the same parity of reasoning, we find no merit in the grounds of appeal raised by the Revenue. The assessee is entitled to claim the deduction under section 80IA(4)(iii) of the Act. Accordingly, we dismiss the grounds of appeal raised by the Revenue." 25. We further find the assessee's claim of deduction u/s 80IA for assessment year 2014-15 has been allowed by the Assessing Officer. We find the Ld. CIT(A) / NFAC in his findings basically rejected the claim 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. However, a perusal of For....
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....der 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 confirming an addition of Rs. 3,87,15,056/-in respect of sundry creditors on the ground that the said sundry creditors had ceased to exist as on 31.03.2014 and therefore, the said amount was taxable u/s 41(1) of the Act. 7] The learned CIT(A) erred in not appreciating that the sundry creditors totaling to Rs. 3,87,15,056/- were not written back by the assessee company in its books as on 31.03.2014 and therefore, question of taxing the said amount u/s 41(1) in the hands of the assessee simply did not arise. 8] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal 28. The first issue rais....