Income Tax Appellate Tribunal - Mumbai
Nahar Enterprises, Mumbai vs Dcit (Osd-I) Cen Rg 7, Mumbai on 2 January, 2019
1 आयकर अपीलीय अिधकरण "बी" ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI माननीय ी महावीर िसंह, ाियक सद एवं माननीय ी मनोज कुमार अ वाल ,ले खा सद के सम ।
BEFORE HON'BLE SHRI MAHAVIR SINGH, JM AND
HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकरअपील सं./ I.T.A. No.5851/Mum/2015
(िनधा रण वष / Assessment Year: 2008-09)
M/s. Nahar Enterprises Dy. Commissioner of
[n o w k no wn as Na h ar B ui l d er s Lt d ] Income Tax-(OSD-I)
B-1, Mahalaxmi Chambers, बनाम/
Central Range-7,
Bhulabhai Desai Road, Vs.
Mumbai.
Mahalaxmi, Mumbai-400 026
थायीले खासं ./जीआइआरसं ./PAN/GIR No. AAAFN-1599-D
(अ पीलाथ!/Appellant) : ("#थ! / Respondent)
&
आयकरअ पील सं./ I.T.A. No.207/Mum/2016
(िनधा रण वष / Assessment Year: 2008-09)
Dy. Commissioner of Income M/s. Nahar Enterprises
Tax- Central Circle 4(4) [n o w k no wn as Na h ar B ui l d er s Lt d ]
बनाम/ B-1, Mahalaxmi Chambers,
Central Range-4
Vs. Bhulabhai Desai Road,
Mumbai.
Mahalaxmi, Mumbai-400 026
थायीले खासं ./जीआइआरसं ./PAN/GIR No. AAAFN-1599-D
(अपीलाथ!/Appellant) : ("#थ! / Respondent)
&
आयकर अपील सं./ I.T.A. No.516/Mum/2016
(िनधा रण वष / Assessment Year: 2009-10)
M/s. Nahar Enterprises Dy. Commissioner of
[n o w k no wn as Na h ar B ui l d er s Lt d ] Income Tax-(OSD-I)
B-1, Mahalaxmi Chambers, बनाम/
Central Range-7,
Bhulabhai Desai Road, Vs.
Mumbai.
Mahalaxmi, Mumbai-400 026
थायीले खासं ./जीआइआरसं ./PAN/GIR No. AAAFN-1599-D
(अ पीलाथ!/Appellant) : ("#थ! / Respondent)
&
आयकरअ पील सं./ I.T.A. No.1272/Mum/2016
(िनधा रण वष / Assessment Year: 2009-10)
Dy. Commissioner of Income M/s. Nahar Enterprises
Tax- Central Circle 4(4) [n o w k no wn as Na h ar B ui l d er s Lt d ]
बनाम/ B-1, Mahalaxmi Chambers,
Central Range-4
Vs. Bhulabhai Desai Road,
Mumbai.
Mahalaxmi, Mumbai-400 026
2
थायीले खासं ./जीआइआरसं ./PAN/GIR No. AAAFN-1599-D
(अ पीलाथ!/Appellant) : ("#थ! / Respondent)
Assessee by : Vimal Punmiya, Prakash Bohra & Ketan
Jain- Ld. ARs
Revenue by : Purushottam Tripuri - Ld. DR
सुनवाई की तारीख/
: 04/12//2018
Date of Hearing
घोषणा की तारीख /
: 02/01/2019
Date of Pronouncement
आदे श / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member)
1. These cross appeals for Assessment Years [AY] 2008-09 & 2009- 10 agitate separate orders of first appellate authority. Since identical issues are involved and similar grounds of appeal have been raised, we proceed to dispose-off the same by way of this common order for the sake of convenience & brevity. First, we take up cross-appeals for AY 2008-09 wherein the grounds urged by revenue reads as under: -
i. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to allow deduction 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 up area to mean and to include projections and balconies."
3v. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in excluding service area from built up area when its exclusive ownership has not been disproved by the assessee."
vi. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in excluding window projections 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."
The effective grounds urged by the assessee reads as under: -
The appellant firm prefers an appeal against an order dated 16/10/2015 passed by Ld. Commissioner of Income Tax Appeals-52, Mumbai on following amongst other grounds each of which are without prejudice to any other: -
1.0 The Ld. CIT (A) erred in confirming the assessment order passed u/s 143(3) r.w.s. 153A by the Ld. AO, which is bad-in-law without appreciating that: -
a) Assessment order u/s 143(3) r.w.s 153A can be passed only on issuance of valid Search Warrant;
b) Assessment cannot be framed in the name of a dissolved entity;
c) The PAN of the appellant firm is no more in existence and hence assessment framed and demand notice issued in the name of old PAN is invalid;
d) There is complete change in the constitution of the appellant from firm to company and not merely a change in the "name" of the appellant and hence merely mention of ("now known as "Nahar Builders Limited") in the search warrant is irrelevant;
1.1 On facts and circumstances of the case and in law, Ld. CIT (A) erred in not directing the assessing officer for proving the satisfaction note on initiation for search proceeding initiated on the appellant.
2.0 On facts and circumstances of the case and in law, Ld. CIT (A) erred in ignoring the fact that the appointment of the Departmental Valuation Officer (DVO) itself is bad in law on understated facts:
(a) The Ld. DVO was not a member of Search party nor his services were requisitioned by the Authorized officer in terms of provision u/s 132(2) of the Act. The same is supported by the fact that the Panchnama does not mention the name of the Ld. DVO;
(b) The measurement sheets do not contain the signatures of the Independent Panchas which 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.
43.3 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. CIT (A) erred in excluding only 50% area of common wall from built-up area instead of 100% area of common wall.
4.0 The Ld. CIT (A) erred in disallowance of deduction u/s 80IB (10) on ignoring the understated vital facts, being;
a) The residential units in respect of all the housing projects, including those measured by the department, as on the date of search were not in the ownership of the appellant and already sold approximately 5 to 6 years back;
b)The measurement taken by the Ld. DVO were not taken accurately and were rough and approximate. The wall thickness adopted by the Ld. DVO for calculation purposes were on the higher side as compared to those approved as per the plan sanctioned by the MCGM;
c)the local authority is the appropriate Government Authority for development of housing project and area approved by the local Authority and Certificate issued by Municipal architect is reliable evidence;
d)The Built up area of each residential unit in each plan approved by the local authority (BMC/ MCGM), architect certificate and Engineers Report, Letter of Allotment, Registered Agreement for sale, Commencement Certificate, Building Completion Plan and Occupation certificate are less than 1000 sq.ft.;
e)The Built up area of each residential unit ought to be considered as on the day when the Occupation/completion certificate was issued by the local authority and any alterations/modifications made/done thereafter by the Purchasers/Flatholders, the appellant shall not be held responsible;
f)The projection such as flower bed etc. are not at the floor level and are on the outer side of the residential unit for the purpose of keeping flower pots. They are merely elevational/ ornamental features which are open to sky, not enclosed by walls, add to the beautification of the housing project and in no manner constitute the inner part of the residential unit;
g)The local authority (BMC)/ MCGM also, even as on date charges property tax on the entire residential unit excluding elevational features such as flower bed etc. and common areas shared with other residential units; 5.0 The 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 5 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 which have already been extracted in the quantum assessment order. 2.2 The original return of income filed by the assessee at Rs.18.70 crores after claiming deduction u/s 80IB(10) for Rs.21.22 Crores was assessed in scrutiny assessment u/s 143(3) on 16/12/2010 at Rs.18.95 Crores. In response to notice u/s 153A, the assessee offered income of Rs.18.95 crores after claiming deduction u/s 80IB (10) for Rs.21.23 Crores claimed against the Camelia Building Project. The claim u/s 80IB(10) was enhanced by Rs.1.66 Lacs to account for surrender of bogus purchases made by the assessee.
2.3 One of the main allegations leading to the search action was the fact that the assessee made wrong claim of deduction u/s 80IB(10) since it violated the conditions of Section 80IB(10) by constructing residential units in excess of threshold limit of 1000 Square Feets in its Amrit Shakti 6 Building Projects, Powai, Mumbai. During pre-search inquiries, it was noted that the assessee was converted into Private Limited Company during financial year 2011-12 and it started claiming deduction u/s 80IB(10) against Amrit Shakti Project since AY 2008-09 onwards. The quantum of this deduction for AY 2008-09 was Rs.21.22 Crores on account of Camelia A, B & C building.
2.4 During search proceedings, a detailed exercise was undertaken for carrying out the measurements of the built-up area in consultation with valuation officer [DVO] appointed by the searching authorities. Upon perusal of DVO's report, it transpired that most of the flats were of area exceeding 1000 Square Feets which was in violation of provisions of Section 80IB(10) and therefore, the assessee was not entitled for the aforesaid exemption. The assessee was confronted with the same vide detailed notice u/s 142(1) dated 25/11/2013, as reproduced in the quantum assessment order on page numbers 21 to 44.
2.5 The assessee defended its stand along with supporting documents, building plans, copies of agreements and certificates and submitted that it was eligible to claim the aforesaid deduction. The assessee, inter-alia, disputed the measurements undertaken 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 7 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 reproduced in the impugned order.
3.2 The assessee also raised a legal plea that search warrant was executed on 02/02/2012 when the assessee firm was not in existence and had already dissolved on 20/11/2011 and therefore, search proceedings were not valid in terms of decision of Hon'ble Punjab & Haryana High Court rendered in CIT Vs Rakesh Kumar and certain other decisions of the Tribunal. However, Ld. CIT(A), after due consideration of relevant material, came to a conclusion that search warrants dated 01/02/2012 and 09/03/2012 as well as Panchnamas drawn subsequent to search carried the name of old entity as well as new entity and therefore, the proceedings were valid.
3.3 The assessee also disputed the calculation of built-up area vide submissions dated 05/01/2015 and in support furnished a legal opinion 8 from Hon'ble Shri S.H. Kapadia, Former Chief Justice, Supreme Court in support of the contention that flower bed area, dry balcony area and ornamental projections which were not at floor level were not to be included in computing the built-up area. Similar opinion expressed by Kanga & Co., Solicitors and Shri Rajesh Shah Engineers & Consultants Private Limited was furnished in support of the same. However, not convinced and after considering the meaning of built-up area as defined u/s 80IB (14)(a), Ld. CIT(A), as concluded for AYs 2010-11 to 2012-13, opined that areas of service ducts attached to the bathrooms etc. and area of window projections was not to be included in the built-up area whereas area of flower beds being in the nature of balcony was liable to be included while computing built-up area.
3.4 During appellate proceedings, the assessee raised another plea by submitting that original assessment was completed u/s 143(3) wherein the assessee's claim u/s 80IB(10) was duly examined by Ld. AO and in the absence of any incriminating material found during the course of search action, the assessment could not be disturbed in terms of decision of Hon'ble Bombay High Court rendered in Murli Agro Products Ltd Vs CIT. Reliance was placed on many other judicial pronouncements 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 9 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 force in legal plea of the assessee and further, the issue on merits has also been decided substantially in assessee's favor. The copy of the cited order of the Tribunal has been placed on record. Per Contra, Ld. Departmental Representative [DR], Shri Purushottam Tripuri stressed that the order of Ld. AO should be uphold since the appeal filed by the assessee in the name of dissolved entity before first appellate authority as well as before the Tribunal is non-est and could not be taken cognizance of. However, the fact that the matter has already been delved upon by the Tribunal for AYs 2010-11 to 2012-13 remained uncontroverted.
5. We have carefully perused the rival contentions and gone through relevant material on record including the cited order of this Tribunal rendered in assessee's own case for AYs 2010-11 to 2012-13. It is 10 undisputed fact that search proceedings have triggered assessment u/s 153A for AYs 2008-09 to 2012-13 and the search proceedings spring from common search warrants / Panchnamas etc. & identical grounds have been taken in cross appeals. Nothing on record suggest that the aforesaid decision has ever been overruled or stayed by the decision of any higher judicial authority. Under these circumstances, having no other option, respectfully following the same, we conclude the matter in similar manner. For ease of reference, the relevant findings / observations etc. on legal grounds as well on merits, as adjudicated by the Tribunal could be extracted in the following manner: -
3.Issue raised by the assessee in the first ground of appeal is a legal issue. The order of the CIT(A) was challenged on the ground that the order passed by the AO under section 143(3) r.w.s.153A was an order passed on the non-existing entity on the ground that the firm on which the order was passed was M/s Nahar Enterprises which stands closed with effect from 20.11.2011 and the business was taken over by "M/s Nahar Builders Limited" and therefore the assessment order passed on non- existing entity is bad in law and void ab-initio.
4.Brief facts of the case 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.
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 was taken over by "M/s Nahar Builders Ltd" upon dissolution on the date of search and was non-existent. The assessee firm was dissolved on 20.11.2011 and not in 11 existence when the warrant was served on 2.2.2012. Thus, the warrant was issued in the name of assessee firm which was dissolved with effect from 20.11.2011 even though the department was informed to this fact of dissolution of assessee firm by a letter dated 1.12.2011. Whereas in Punchanama No. 9303, dated 27.3.2012 and in the Punchanana dated 28.3.2012 the name was mentioned as "Nahar Enterprises"
(now known as "M/s Nahar Builders Ltd). The assessee contended before the AO that since the search warrant was issued in the name of Nahar Enterprises and the assessment was completed in the name of Nahar Enterprises a firm which was not in existence when the warrant was issued the assessment could not be made on the dissolved assessee firm.
7.The AO did not agree with the legal and technical issue raised by the assessee that the search was conducted on non-existing entity and also consequent assessment being bad in law. The Assessing Officer concluded that the warrant issued in the name of "Nahar Enterprises (now known as Nahar Builders Ltd) is legally valid and the assessments were not bad in law. Aggrieved by the order of the AO, the assessee preferred appeals before the ld.CIT(A) who also dismissed the appeals of the assessee confirming the stand of the AO on this issue by observing and holding as under (para 13 and 14 of CIT(A)'s order) :
"13. I have considered the facts of the case and contentions of the assessee. From the discussion in foregoing paragraphs, it appears that the search warrant was issued in the name of M/ s. Nahar Enterprises (now known as Nahar Builders Ltd.). It further appears that the names of both the entities, namely the old entity, which was claimed to have been dissolved on 20/11/2011, and the new entity M/s. Nahar Builders Ltd., which took over the business of M/s. Nahar Enterprises, as going concern, have been clearly mentioned in the Panchnama 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 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 the name of M/s. Nahar Enterprises (now known as M/s. Nahar Builders Ltd.) and the entire proceedings were carried out in the presence of two independent Panchas, who have signed and verified the Panchnamas. Further, the Panchnamas have also been signed and verified by Shri Sukhraj Nahar, the main person of the group. Accordingly, the objections raised by the learned AR about the validity of the search proceedings are misplaced and untenable and the same are therefore rejected. Accordingly, the proceedings initiated u] s.153A of the Act and assessment completed u/s 143(3) read with section 153A are held valid. I further hold that the ratio of the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Rakesh Kumar and the decision of Hon'ble ITAT, Indore Bench, in the case of Late Smt. Laxmibai Karanpuria vs. ACIT (supra.) are distinguishable on facts of the present case, in as much as, in the Panchnama drawn subsequent to search, names of the old entity as well as the new entity had been very clearly mentioned, and, therefore, it is not the case as if the search warrant was 12 executed on a dead person and Panchnarna was drawn in the name of a dead person. Since the Panchnama has been drawn in the name of M/s. Nahar Enterprises (now known as M/s.Nahar Builders Ltd.), it makes the entire proceedings quite clear and there is no ambiguity whatsoever. Accordingly, this ground of anneal of the assessee is rejected."
8. The ld. AR vehemently argued before us that as per the provisions of section 2(31) of the Income Tax Act, the company and firm were separate and distinct entities. He further submitted that it was clear from the Punchanama that the search warrant was authorized/issued against the old non-existent entity "NAHAR Enterprises" but not in the name of "Nahar Builders Ltd". The ld. AR also pointed out that no separate search warrant /notices were issued in the name of formal partners of the assessee firm as required under the provisions of section 283(2) of the Act indicating their status 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 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 that there is only one Punchanama bearing No.9303 dated 27.3.2012 which was executed in the name of several parties out of which one name appearing was "NAHAR ENTERPRISES" whereas other Punchanama bearing No.9302 dated 28.3.2012 was issued in the name of M/s Nahar Enterprises (now known as M/s Nahar Builders Ltd) and thus correctly issued. The ld. DR argued that Punchanama was drawn in the name of M/s Nahar Enterprises (now known as M/s Nahar Builders Ltd) and thus cannot be said to be it was issued invalidly. The ld. DR also argued that since both the entities were at the same premises, the Punchanama was drawn in the name of both entities and hence cannot be held to be invalid. The ld. DR further argued that the assessee never objected at the time of search proceedings to the same and duly acknowledged receipt of warrant which proved beyond doubt that search warrant was correctly issued and arguments raised by the ld.AR that the search warrant and Punchanama were in the name of dissolved entity was an after thought and should not be considered. The ld. DR also expressed his inability rather declined to furnish the search warrant issued against the assessee on the 13 ground that search warrant cannot be produced before the Tribunal. Lastly, the ld. DR submitted that the mistake in the Punchanama was purely clerical in nature and deserves to be overlooked and the legal and technical objection taken by the assessee should be rejected.
11.We have carefully considered the rival submissions and perused the material placed before us including the orders of authorities below and decisions relied upon by the parties. Undisputed facts are that the firm M/s Nahar Enterprises was dissolved on 20.11.2011 and the business of the said firm was taken over by a Limited Company which was incorporated on 9.9.2011 registered under the name and style of M/s Nahar Builders Ltd, which tookover the business of erstwhile firm. The fact of dissolution of the erstwhile firm and taking over the business by the newly 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 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 the search as the warrant is correctly issued according to law. The relevant observations are as under :
" The above allegation is absolutely unfounded, baseless and arbitrary and it seems has been made with a motive to divert attention from the main issue and/ or to dilute the sanctity of search action conducted u/s 132(1) of the Income Tax Act, 1961. In support of your allegation you have taken support of the copy of Panchnama enclosed by you. A per this in Col A it is written as- Warrant in the case of Nahar Enterprises. This Panchnama relates to warrant no.9303 and was drawn at Nahar Amrit Shakti (sales office), Chandivali Farm Road, Near Chandivali Studio, Andheri(E), Mumbai-72. While enclosing the said Panchnama, you have conveniently ignored what is written on the Warrant of Authorisatiori No. 7303 which is the most important document. It states that it is issued to- Nahar Enterprises (now known as Nahar Builders Ltd). Thus the search warrant has been correctly issued and is not in the name of a person or an entity which is not in existence as wrongly alleged by you. While drawing up the Panchnama, there appears to be some clerical mistake or oversight in writing the full name and just Nahar Enterprises has been mentioned. It is a procedural mistake and no way affects the legality of the search as the warrant is correctly issued.
The other warrant in your case i.e warrant no. 9302 has also been issued to - Nahar Enterprises (now known as Nahar Builders Ltd) and was drawn on -B-1, Mahalaxmi Chambers, 32, Bhulabhai Desai road, Mahalaxmi, Mumbai-26. There were two Panchnamas 14 drawn here i.e dated 4.2.12 and 23.2.12. In both these Panchnama's the name has correctly been written as - Nahar Enterprises (now known as Nahar Builders Ltd). Thus there is no mistake either in the warrant or in both the Panchnamas. Copies of both these Panachnamas and the copy of warrant no 9302 and 9303 are enclosed for your reference and record.
Thus there 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. 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 procedural mistake of either side in mentioning the full name of the existing entity. Moreover, the appellant has duly informed the department vide its letter dated 1.12.2011 which was acknowledged by the office of the Dy.CIT on 1.12.2011 with reference to the dissolution of the firm. For the sake of convenience, we reproduce the letter dated 30.11.2011 intimating the AO about the dissolution as under :
"Udani Mehta and Co, Chartered Accountants Tushar D Udani B.Com(Hon)LLB(Gen),FCA, Ref :No:------------------- Date November 30th, 2011 ACIT/NE/2011-12 To, The Asstt.CIT, Circle 16(2), Mumbai.
Re : M/s Nahar Enterprises, PAN AAAFN1599D, Intimation of dissolution of firm.
With reference to the above and under instructions from our clients and as required u/s 176(3) we have to inform you that consequent to conversion of the firm, M/s Nahar Enterprises, into a company by the name of M/s Nahar Builders Ltd' under part IX of the companies Act, 1956, the above referred firm has been dissolved w.e.f. end of 20.11.2011. Copy of the Deed of dissolution is enclosed herewith.15
Thanking you Yours faithfully, (Udani Mehta) CA Under these circumstances, when the department has been fully informed about the dissolution of the firm, new company has taken over the business of the old firm before initiation of search proceedings, than the issue of Punchanama in the name of dissolved firm cannot be valid. In our opinion, when the search under section 132 was conducted and to be valid, the warrant and notice should be issued in the name of successor only and the assessment has to be made on the successor but in the present case Punchanchama was drawn in the name of M/s Nahar Enterprises on a non- existing entity and so was the case and is not a clerical mistake.
15. On a query from the Bench to ld.DR to satisfy regarding the service of search warrant 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 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 substance and effect, been framed on the amalgamated company which could not be regarded as null and void ?"
4. The rationale given by the Tribunal, giving it to be a mere procedural defect is summed up as under :
(i)Spice Corporation Ltd. (the amalgamating company) was an income-tax assessee in the status of a company incorporated under the provisions of Companies Act,1956.
(ii)The amalgamating company was in existence during the relevant asst. yrs. 2002-03 and 200304.
(iii)The returns of income for these assessment years were filed on 30th Nov., 2002 and on 30th Oct., 2003 respectively by M/s Spice.
(iv)The scheme of amalgamating was sanctioned much subsequently on 11th Feb., 2004 by the High Court.
(v)The return filed by M/s Spice was selected for scrutiny and notices were issued.
Pursuant thereto, the amalgamated company i.e. the appellant appeared and participated in the proceedings. Even the assessment orders were challenged by the appellant/amalgamated company. Thus, the appellant accepted that the assessment proceedings in respect of the assessment of Spice for the period prior 16 to its amalgamation are being taken up against the appellant and it is the appellant which felt aggrieved of the assessment order and preferred appeal. The order was thus in substance and in effect, against the appellant/amalgamated company. The mere omission on the part of the AO to mention the name of the appellant/amalgamated company in place of M/s Spice was, therefore a procedural defect covered by the provisions of s. 292B of the Act
5. According to the Tribunal, if the Spice was non-existent, there was no reason for the amalgamated company to represent the same or to feel aggrieved against the said order and prefer appeal and get the same decided on merits. In other 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 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 could be selected for scrutiny and assessment proceedings could be initiated, M/s Spice got amalgamated with MCorp (P) Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Court which was duly sanctioned vide orders dt. 11th Feb., 2004. With this amalgamation made effective from 1st July, 2003, M/s Spice ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, M/s Spice was also stood dissolved by specific order of this Court. With the dissolution of this company, its name was struck off from the rolls of companies maintained by the RoC.
8.A company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with the incorporation. It dies with the dissolution as per the provisions of the Companies Act. It is trite law that on amalgamation, the amalgamating company ceases to exist in the eyes of law. This position is even accepted by the Tribunal in para 14 of its order extracted above. Having regard to this consequence provided in law, in number of cases, the Supreme Court held that assessment upon a dissolved company is impermissible as there is no provision in income-tax can to make an assessment thereupon. In the case of Saraswati Industrial Syndicate Ltd. vs. CIT (1990) 88 CTR (SC) 61 : (1990) 186 ITR 278 (SC) the legal position is explained in the following terms :
"The question is whether on the amalgamation of the Indian Sugar Company with the appellant company, the Indian Sugar Company continued to have its entity and was alive for the purposes of s. 41(1) of the Act ? The amalgamation of the two companies was effected 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 17 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 amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity."
9.The Court referred to its earlier judgment in General Radio & Appliances Co. Ltd. vs. 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.Sec. 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. vs. 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".
11.After the sanction of the scheme on 11th Feb., 2004, the Spice ceased to exist w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the IT authorities to substitute the successor in place of the said 'dead person'. When notice under s. 143(2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, 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 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 notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other 18 words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to s. 292B."
17. In the case of CIT V/s Intel Technology India (P.) Ltd. [2016] 380 ITR 272 (Karnataka), the Hon'ble High Court of Karnataka held as under :
"5. The tribunal had rejected the claim of the department on the ground that the assessment proceedings against SSS Limited (which was non-existent on the date of passing of the assessment order) cannot be held to be valid proceedings, learned counsel for the appellant has submitted that the return of income had been filed by the assessee-SSS Limited much prior to the amalgamation order dated 1.4.2004 and as such, the proceedings would continue against the said company even after the amalgamation, especially when the successor company - M/s Intel Technology India Pvt. Ltd. had participated in the proceedings. Learned counsel for the appellant further submits that the department would be entitled to the benefit of Section 292(B) of the Income Tax Act.
6.On the other hand, learned counsel for the respondent has submitted that any proceeding against a non-existing company would be null and void, especially after the respondent/company (which had succeeded M/s SSS Limited) had given notice of amalgamation to the department on 29.6.2004. It is thus submitted 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 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 Commissioner of Income-tax (Appeals) who had set aside the block assessment of M/s. Micron Steels Pvt. Ltd. (the original assessee which subsequently amalgamated with M/s. Lakhanpal Infrastructure Pvt. Ltd. with effect from February 1, 2008, by virtue of an order dated February 19, 2010). The assessment years in question are 2003-04 to 2008-09.
2.The grounds on which the Commissioner of Income-tax (Appeals) and later the Income-tax Appellate Tribunal set aside the assessment was that the assessee had amalgamated with M/s. Lakhanpal Infrastructure Pvt. Ltd. and neither was it assessed in the relative periods and that the amalgamation of the original assessee corporate had rendered the assessment framed against it as void.
3.The facts relevant for deciding this appeal are that on October 20, 2008, a search and seizure action was conducted in the cases of B.K. Dhingra, Smt. Poonam Dhingra, M/s. Madhusudan Buildcon Pvt. Ltd. and others connected. Based upon the said search, and the materials secured during that proceedings, block assessments were finalised in respect of those assessees. The Assessing Officer ("the AO") was of the opinion that during the course of the search, materials were seized which belonged to the respondents-assessees and, accordingly, issued notice to M/s. Micron Steels Pvt. Ltd. on July 6, 2010. By that time, M/s. Micron Steels Pvt. Ltd. as noticed at the outset in this judgment had been amalgamated with M/s. Lakhanpal Infrastructure Pvt. Ltd. The assessment was finalised on December 31, 2010, by the Assessing Officer. In the course of assessment, various additions were made.
This was the subject-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 19 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 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 (Appeals), in our view, has, therefore, rightly held that the assessment on a company which has been dissolved by amalgamation under sections 391 and 394 of the Companies Act, 1956, is invalid. Admittedly, the assessee-company in the present case stood dissolved on September 19, 2010, on amalgamation with M/s. Lakhanpal Infrastructure Pvt. Ltd. and the assessment order in the present case was framed on December 31, 2010. Hence, we uphold the order of the learned Commissioner of Income-tax (Appeals).
9. In view of the above finding on the maintainability of the assessment order itself, which has been held to be a nullity, the issue raised in the other grounds of appeals preferred by the Revenue and cross-objections raised by the assessee have become infructuous and they don't need adjudication."
5.It is urged on behalf of the Revenue that the assessment as framed could not have been set aside. To say so, the learned counsel, firstly, contended that the Assessing Officer took note of the fact that the M/s. Micron Steels Pvt. Ltd. had been amalgamated as is evident from the fact that the assessment was framed in respect of "Micron Steels", and, consequently, the assessee effectively participated and made its view on its own and filed its return. Learned counsel contended that the operation of section 292B, therefore, precluded the assessee's contention with regard to nullity of the entire proceedings.
6.This court notices, at the outset, that the issue urged is no longer res integra. As stated earlier, Spice Entertainment Ltd. (supra) is an authority for the proposition 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 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 existence; the order also mentioned the transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to the assessment being completed in the name of the 20 transferee company. According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed against a non- existent company. The ITAT's decision is, in the circumstances, justified and warranted.
11. For the above reasons it is held that these appeals do not involve any substantial question of law and of liability. The appeals are accordingly dismissed."
Therefore, following the above decisions, we hold that the assessment made u/s 143(3) r.w.s.153A are bad in law being nullity in the eyes of law as the search warrant was issued in the name of non-existing entity. The ground no 1 is accordingly allowed.
20. The issue raised by the assessee in the second ground of appeal is with respect to appointment of DVO being bad in law and therefore, the Valuation Report prepared by the DVO which was relied upon by the lower authorities was also bad in law.
21.The facts of the case are that after search proceedings the matter was referred to the DVO for valuation, which was duly submitted by the DVO and relied upon by the AO and also in the First Appellate Proceedings. The assessee objected to the appointment of the DVO on the ground that the DVO was not a member of search party and therefore the report prepared by the DVO could not be relied upon.
22.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 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 bed area should not be included in the definition of built up area as the flower bed area is below the floor level open to sky and outside the scope of definition of built up area. It was submitted that the flower bed area is 21 open to sky and area open to sky including terrace shall not be included in the built up area. The ld. Counsel also contended that when the survey was carried out on 2.2.2012 the allowability for claiming deduction u/s 80IB(10) was duly verified by the survey party. They have visited project site. They have conducted exercise during the course of survey with regard to measurement of flats by the CPWD, Departmental Valuation Officers. They have satisfied with the construction area of each flat i.e. built up area of each flat is within eligible limit of 1000 sq. ft. Therefore, it was contended that the report of the District Valuation Officer of the department cannot be brushed aside and the AO cannot rely on the subsequent DVO's report which was not based on the any scientific measurement but was taken on rough sketch taken by the DVO. It was contented that wide variation between the two valuation reports is practically not possible and therefore the subsequent valuation report prepared by the DVO without proper measurement cannot be the basis for denying the benefit u/s 80IB(10) of the Act. During the course of hearing before us, the assessee filed detailed submissions as under:
.....
......
(truncated)
26.We find considerable 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 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 level shall not be included in the definition of built up area.
29.It was further contended before us that the flower bed area is ornamental and 22 elevative feature provided on the outer side of the residential unit, these are not habitable area, provided mainly for the elevation or designing part of the building, such area are not covered by wall of either sides and hence did not constitute the inner part of the residential unit which makes it a non habitable area. Therefore, it was contented that since the flower bed area are open to sky and not covered by the wall it cannot be counted in built up area. For the proposition that an area open to sky cannot be included in built up area, the assessee relied upon the following cases:
i) Naresh Wadhwani -ITA No.18/PN/2013;
ii) Ceebros Hotel (P) Ltd V/s DCIT TC NO.581,1186 of 2008 and 136 of 2009 judgment dated 19.10.2012 (Madras High Court);
iii) CIT v/s Mahalakshmi Housing (2014) 41 taxmann.com 146 (Madras High Court);
iv) CIT V/s Sanghvi and Doshi Enterprise Tax Case (Appeal) Nos. 581 and 582 of 2011 and 314 and 315 of 2012 MP No.1 of 2011(Madras High Court)
v) Amaltax Associates V/s ITO (2011) 11 taxmann.com 420 (Ahd);
vi) Commonwealth Developers V/s ACIT (2014) 44 taxmann.com 303 (Bom)
30.After considering the rival submissions and materials placed before us including the decisions of the rival parties we find that the 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, 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, flowing from top to bottom, and in case of any blockage of pipes or repair or leakage, etc, the mechanic has to enter this area for repairing the same. Generally speaking, this area, being small, cannot be used for any other purposes. This area has also not been sold by the assessee to the flat owners, as is evident from sale agreements. Further, it is also not part of the carpet area or BUA calculated by the BMC authorities. This is not also considered for FSI computation of the building, as per bye laws. In fact, on physical inspection, it was noticed that some of these pipes were leaking, giving a foul smell, and, therefore, I am of the view that it cannot be used for any other purposes. The photographs submitted by the assessee clearly show that these ducts are open and dangerous, and a child may in 23 fact fall through it. These photos were forwarded to the AO for her comments. Also, for the sake of clarity, the same are enclosed as annexure to this order. Though the AO has enclosed some photos of such areas in respect of some flats, where such areas are being used towards storage, etc. by a few flat owners, but it is on their own peril and builder cannot be blamed for it. As per the bye laws, this area cannot be used for any purpose and flat owners are prohibited from doing so. But still, if some people, because of any reasons, are using the same 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:
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 builder has sold this area to various flat owners. Accordingly, this area is also directed to be excluded. while calculating BUA. I would like to further clarify that this area is very small and still have very insignificant bearing upon overall BUA."
32. Ongoing through the above findings of the ld. CIT(A), we do not find any valid reason to include service area, window area, window projections and cupboard projection in the built up area for calculating eligible built up area of 1000 sq.ft for the purpose of computation of deduction u/s 80IB(10) of the Act. ....
....
39. In view of the above discussion and observations, we are of the considered view that even on merits the assessee succeeds. In any case, we hold that the assessments in these cases are bad in law for the reason that the assessments were made on non-existing entity. In the circumstances, we quash the assessment orders passed under section 143(3) r.w.s.153A of the Act for the assessment years 2010-11 to 2012-13.
40. In the results, all the appeals of the assessee are partly allowed and that of revenue stand dismissed.
The perusal of para-14 of the above decision reveal that the co-ordinate bench has observed that search action was a strict action taken against the privacy of any person and therefore the aforesaid powers bestowed 24 upon the authorities were to be exercised with utmost precaution and only after conducting detailed enquiries & investigation. Therefore, non- mentioning 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 380 ITR 272 Court 3. CIT Vs Micron Steels Pvt. Ltd. Hon'ble Delhi High Court 372 ITR 386 4. CIT Vs Micra India P.Ltd. Hon'ble Delhi High Court 232 Taxman 809
Similar facts exist in the given year. No contrary judgment has been placed on record by the revenue. Therefore, material facts and circumstance being the same, respectfully following the view of the co- ordinate bench of the Tribunal, we hold that the assessment proceedings were bad in law and therefore, could not be sustained in the eyes of law. We order so. The issue on merits has also been decided in assessee's favor by holding that service area, window area, window projections and cupboard projections were not to be included while computing the built- up area. Accordingly, Ground Numbers-1, 3 & 4 of assessee's appeal succeeds whereas ground Number-2 stand adjudicated against the 25 assessee. Resultantly, the revenue's appeal stands dismissed. The assessee's appeal stands partly allowed.
Cross Appeals for AY 2009-10
6. For this AY, the assessee has similarly been assessed u/s 143(3) read with Section 153A on 14/03/2014 and has been denied deduction u/s 80IB(10) amounting to Rs.36.63 Crores. The first appellate authority has granted part relief to the assessee on similar lines against which the cross appeals have been filed before us with similar grounds of appeal. Facts and circumstances, being pari-materia, the same, taking the same view, the revenue's appeal stand dismissed whereas the assessee's appeal stands partly allowed.
Conclusion
7. The appeals of the revenue stands dismissed whereas the appeals of the assessee stands partly allowed in terms of our above order.
Order pronounced in the open court on 02nd January, 2019.
Sd/- Sd/-
(Mahavir Singh) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member
मुंबई Mumbai; िदनां क Dated : 02/01/2019
Sr.PS, Jaisy Varghese
आदे शकी ितिलिपअ!ेिषत/Copy of the Order forwarded to :
1. अपीलाथ!/ The Appellant
2. "#थ!/ The Respondent
3. आयकरआयु*(अपील) / The CIT(A)
4. आयकरआयु*/ CIT- concerned
5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाड/ फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुं बई / ITAT, Mumbai.