TMI Blog2019 (1) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 coordinate 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 builtup area. - Decided in favour of assessee. - I.T.A. No.5851/Mum/2015, I .T.A. No.207/Mum/2016, I .T.A. No.516/Mum/2016 And I .T.A. No.1272/Mum/2016 - - - Dated:- 2-1-2019 - Shri Mahavir Singh, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : Vimal Punmiya, Prakash Bohra Ketan Jain- Ld. ARs For the Revenue : Purushottam Tripuri - Ld. DR ORDER PER MANOJ K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 pot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the Camelia Building Project . The claim u/s 80IB(10) was enhanced by ₹ 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 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 ₹ 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 provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore 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 Sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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 Jul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment being completed in the name of the 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 nonexistent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... level open to sky and outside the scope of definition of built up area. It was submitted that the flower bed area is 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 bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us that the flower bed area is ornamental and 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 consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners. 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 act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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