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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI ABY T VARKEY & SHRI OM PRAKASH KANT
This appeal has been preferred by the Revenue against the order dated 29thJanuary 2018 passed by the Ld. Commissioner of M/s Dreamz Dwellers LLP 2 ITA No. 2394/M/2018 Income Tax (Appeals) Appeals) – 18, Mumbai [in short ‘the the Ld. CIT(A)’] for A.Y. 2014-15, raising following grounds: 15, raising following grounds:
1. The learned assessing officer has erred in making addition of The learned assessing officer has erred in making addition of The learned assessing officer has erred in making addition of Rs.1,22,87,70,000/ Rs.1,22,87,70,000/-U/s 56(2)(viib) of the Income Tax Act, 1961 U/s 56(2)(viib) of the Income Tax Act, 1961 being Share Premium received Rs. 9,990/ being Share Premium received Rs. 9,990/- each on issue of each on issue of 1,23,000 1,23,000 1,23,000 Preference Preference Preference Shares Shares Shares during during during the the the year year year under under under consideration. It is submitted that addition is made by the consideration. It is submitted that addition is made by the consideration. It is submitted that addition is made by the Learned Assessing Officer Learned Assessing Officer on the pretext that Assessee has on the pretext that Assessee has failed to justify the consideration received towards issue of failed to justify the consideration received towards issue of failed to justify the consideration received towards issue of shares at premium. shares at premium.
It is submitted that the Learned assessing officer has rejected It is submitted that the Learned assessing officer has rejected It is submitted that the Learned assessing officer has rejected the valuation report submitted by the Appellant durin the valuation report submitted by the Appellant durin the valuation report submitted by the Appellant during the course of Assessment Proceedings on the pretext that course of Assessment Proceedings on the pretext that course of Assessment Proceedings on the pretext that Discounted Cash Flow method adopted by the Valuer is not Discounted Cash Flow method adopted by the Valuer is not Discounted Cash Flow method adopted by the Valuer is not justifiable. It is submitted that Appellant has obtained It is submitted that Appellant has obtained necessary Share Valuation Report from an independent necessary Share Valuation Report from an independent necessary Share Valuation Report from an independent chartered accountant. It is sub chartered accountant. It is submitted that Learned Assessing mitted that Learned Assessing Officer has failed to understand the basic fact that Valuer has Officer has failed to understand the basic fact that Valuer has Officer has failed to understand the basic fact that Valuer has followed Dividend Discounting Model for valuing its shares. It is followed Dividend Discounting Model for valuing its shares. It is followed Dividend Discounting Model for valuing its shares. It is therefore submitted that addition made by the Learned therefore submitted that addition made by the Learned therefore submitted that addition made by the Learned Assessing Officer is unjustified and on th Assessing Officer is unjustified and on th Assessing Officer is unjustified and on the basis of assumptions & presumption and without understanding the assumptions & presumption and without understanding the assumptions & presumption and without understanding the facts of the case. It is therefore prayed to your honour that such facts of the case. It is therefore prayed to your honour that such facts of the case. It is therefore prayed to your honour that such addition made by the learned assessing officer should be addition made by the learned assessing officer should be addition made by the learned assessing officer should be deleted and necessary guidance shall be given in this regard. deleted and necessary guidance shall be given in this regard. deleted and necessary guidance shall be given in this regard.
M/s Dreamz Dwellers LLP 3 ITA No. 2394/M/2018
Briefly the facts of the case are that the assessee Briefly the facts of the case are that the assessee Briefly the facts of the case are that the assessee – M/s.
Megacrop Developers Pvt. Ltd. (assessed as Dreamz Dwellers LLP) Megacrop Developers Pvt. Ltd. (assessed as Dreamz Dwellers LLP) Megacrop Developers Pvt. Ltd. (assessed as Dreamz Dwellers LLP), a real estate company had filed its return of income for A.Y. 2014 real estate company had filed its return of income for A.Y. 2014 real estate company had filed its return of income for A.Y. 2014-15 on 28.11.2014 declaring total income of Rs. 4 declaring total income of Rs.1,08,28,783/ 1,08,28,783/-. Later, the case was selected for scrutiny and statutory notices under the the case was selected for scrutiny and statutory notices under the the case was selected for scrutiny and statutory notices under the Income Tax Act, 1961 [in short, “the Act”] were issued. In the Income Tax Act, 1961 [in short, “the Act”] were issued. In the Income Tax Act, 1961 [in short, “the Act”] were issued. In the assessment completed, the Assessing Officer was not satisfied with assessment completed, the Assessing Officer was not satisfied with assessment completed, the Assessing Officer was not satisfied with the explanation given by the assessee regarding the fair the explanation given by the assessee regarding the fair the explanation given by the assessee regarding the fair market value of 1,23,000 redeemable redeemable preference shares of face value of Rs. of face value of Rs. 10 each issued by it to M/s. Altus Developer issued by it to M/s. Altus Developers Pvt. Ltd. at a s Pvt. Ltd. at a premium of Rs.9,990/ 9,990/- per share and hence, he added the share added the share premium of Rs.1,22,87,70,000/ 1,22,87,70,000/- u/s. 56(2)(vii)(b) of the u/s. 56(2)(vii)(b) of the Act.
Aggrieved by the addition, the assessee preferred appeal before the Aggrieved by the addition, the assessee preferred appeal before the Aggrieved by the addition, the assessee preferred appeal before the Ld. Commissioner of Income Tax Commissioner of Income Tax – Appeals [in short, “the Appeals [in short, “the Ld. CIT(A)] challenging the addition made u/s. 56(2)(vii)(b) of the Act. In CIT(A)] challenging the addition made u/s. 56(2)(vii)(b) of the Act. In CIT(A)] challenging the addition made u/s. 56(2)(vii)(b) of the Act. In the course of the first appellate proceedings, the the course of the first appellate proceedings, the Ld. Ld. Counsel of the assessee raised an additional ground assessee raised an additional ground that the statutory notice u/s. that the statutory notice u/s. 143(2) has issued in the name of a non 143(2) has issued in the name of a non-existent entity and the existent entity and the assessment so completed is bad in law. The assessment so completed is bad in law. The Ld. CIT(A) agreed with CIT(A) agreed with M/s Dreamz Dwellers LLP 4 ITA No. 2394/M/2018 the contention of the assessee and acco the contention of the assessee and accordingly held that the rdingly held that the assessment order passed u/s. 143(3) of the Act on the basis of a assessment order passed u/s. 143(3) of the Act on the basis of a assessment order passed u/s. 143(3) of the Act on the basis of a notice issued u/s. 143(2) in the name of a non notice issued u/s. 143(2) in the name of a non-existent company is existent company is bad in law and allowed the additional ground of the assessee and bad in law and allowed the additional ground of the assessee and bad in law and allowed the additional ground of the assessee and did not decide further the other grou did not decide further the other ground on merits of the case. nd on merits of the case.
Aggrieved by the order of the Aggrieved by the order of the Ld. CIT(A), the department is in appeal CIT(A), the department is in appeal before us and have raised the grounds of appeal referred above. before us and have raised the grounds of appeal referred above. before us and have raised the grounds of appeal referred above.
3. The ground no. 1 to 3 relates to the issue of quashing of the The ground no. 1 to 3 relates to the issue of quashing of the The ground no. 1 to 3 relates to the issue of quashing of the assessment order in view of the assessment order in view of the fact that the notice u/s. 143(2) was fact that the notice u/s. 143(2) was issued in the name of a non issued in the name of a non-existent company i.e. M/s. Megacorp existent company i.e. M/s. Megacorp Developers Developers Pvt. Pvt. Ltd. Ltd. The The Ld. Departmental Departmental Representative Representative appearing for the revenue argued that in the present facts of the appearing for the revenue argued that in the present facts of the appearing for the revenue argued that in the present facts of the case, before issuing the statut case, before issuing the statutory notice u/s. 143(2) of the Act, the ory notice u/s. 143(2) of the Act, the assessee has never informed the jurisdictional Assessing Officer assessee has never informed the jurisdictional Assessing Officer assessee has never informed the jurisdictional Assessing Officer that the company M/s. Megacorp Developers Pvt. Ltd. had been that the company M/s. Megacorp Developers Pvt. Ltd. had been that the company M/s. Megacorp Developers Pvt. Ltd. had been merged with M/s. Dreamz Dwellers Pvt. Ltd. Dreamz Dwellers Pvt. Ltd. vide amalgamation vide amalgamation order of the Hon’ble jurisdict order of the Hon’ble jurisdictional High Court dated 10.10.2014 and ional High Court dated 10.10.2014 and that the same was later converted into an LLP namely M/s. Dreamz that the same was later converted into an LLP namely M/s. Dreamz that the same was later converted into an LLP namely M/s. Dreamz
M/s Dreamz Dwellers LLP 5 ITA No. 2394/M/2018 Dwellers LLP. He further emphasized that the fact that the final Dwellers LLP. He further emphasized that the fact that the final Dwellers LLP. He further emphasized that the fact that the final assessment order is passed in the name of correct entity on the assessment order is passed in the name of correct entity on the assessment order is passed in the name of correct entity on the basis of such informatio basis of such information provided by the assessee to the Assessing n provided by the assessee to the Assessing Officer only during the assessment proceedings Officer only during the assessment proceedings vide vide letter dated 21.11.2016. Accordingly, he argued that the decision of Hon’ble 21.11.2016. Accordingly, he argued that the decision of Hon’ble 21.11.2016. Accordingly, he argued that the decision of Hon’ble Delhi High Court in the case of Delhi High Court in the case of M/s. Spice Entertainment (ITA M/s. Spice Entertainment (ITA no. 475 of 2011) is not applicable in the present case. He further is not applicable in the present case. He further is not applicable in the present case. He further stated that if at all there is any jurisdictional defect in issuing the stated that if at all there is any jurisdictional defect in issuing the stated that if at all there is any jurisdictional defect in issuing the notice u/s. 143(2), the same is curable u/s. 292B of the Act and notice u/s. 143(2), the same is curable u/s. 292B of the Act and notice u/s. 143(2), the same is curable u/s. 292B of the Act and has been taken care of while passing the assessment order in the has been taken care of while passing the assessment order in the has been taken care of while passing the assessment order in the name of the correct entity i.e. M/s. Dreamz Dwellers LLP. e of the correct entity i.e. M/s. Dreamz Dwellers LLP. e of the correct entity i.e. M/s. Dreamz Dwellers LLP.
4. On contrary, the On contrary, the Ld. Counsel of the assessee placed reliance Counsel of the assessee placed reliance on the order of the on the order of the Ld. CIT(A) and the case laws referred therein CIT(A) and the case laws referred therein being squarely applicable in this case. being squarely applicable in this case. He referred to the Paper He referred to the Paper Book containing 323 pages and drew our attention to the letter containing 323 pages and drew our attention to the letter containing 323 pages and drew our attention to the letter dated 21.11.2016 filed before the Assessing Officer at page no. 39 of dated 21.11.2016 filed before the Assessing Officer at page no. 39 of dated 21.11.2016 filed before the Assessing Officer at page no. 39 of the Paper Book to show that in reply to the notice u/s 142(1), the the Paper Book to show that in reply to the notice u/s 142(1), the the Paper Book to show that in reply to the notice u/s 142(1), the Assessing Officer was informed that the preference shares of Assessing Officer was informed that the preference shares of Assessing Officer was informed that the preference shares of the M/s Dreamz Dwellers LLP 6 ITA No. 2394/M/2018 assessee company are not redeemed on account of merger of assessee company are not redeemed on account of merger of assessee company are not redeemed on account of merger of assessee company into M/s. Dreamz Dwellers Pvt. Ltd. and gave the assessee company into M/s. Dreamz Dwellers Pvt. Ltd. and gave the assessee company into M/s. Dreamz Dwellers Pvt. Ltd. and gave the copy of the order of merger order of the Hon’ble High Court. order of merger order of the Hon’ble High Court. order of merger order of the Hon’ble High Court. He also drew our attention to the submission filed before the drew our attention to the submission filed before the drew our attention to the submission filed before the Ld. CIT(A) which is reproduced in para 8 of the CIT(A)’s order wherein it is which is reproduced in para 8 of the CIT(A)’s order wherein it is which is reproduced in para 8 of the CIT(A)’s order wherein it is stated that a letter dated 09.07.2014 stating that stated that a letter dated 09.07.2014 stating that stated that a letter dated 09.07.2014 stating that the petition for merger was filed with the Assessing Officer on 10.07.2014; whereas with the Assessing Officer on 10.07.2014; whereas with the Assessing Officer on 10.07.2014; whereas the notice u/s. 143(2) was issued thereafter on 2 the notice u/s. 143(2) was issued thereafter on 28.08.2015. Hence, 8.08.2015. Hence, the plea of the Ld. Ld. Counsel of the assessee is that once the Counsel of the assessee is that once the Assessing Officer was aware about the merger petition being filed Assessing Officer was aware about the merger petition being filed Assessing Officer was aware about the merger petition being filed before the Hon’ble High Court, the notice issued u/s. 143(2) in the before the Hon’ble High Court, the notice issued u/s. 143(2) in the before the Hon’ble High Court, the notice issued u/s. 143(2) in the name of a non existing company is a nullity name of a non existing company is a nullity and consequently, the and consequently, the assessment framed on the basis of such invalid notice is also a assessment framed on the basis of such invalid notice is also a assessment framed on the basis of such invalid notice is also a nullity. He relied on the decision of the Hon’ble Supreme Court in nullity. He relied on the decision of the Hon’ble Supreme Court in nullity. He relied on the decision of the Hon’ble Supreme Court in the case of Maruti Suzuki Maruti Suzuki (SC)
We have gone through the rival contentions and perused the We have gone through the rival contentions and perused the We have gone through the rival contentions and perused the material on record. The brief fact qua the issue involved in these on record. The brief fact qua the issue involved in these on record. The brief fact qua the issue involved in these grounds of appeal is that although the assessee had informed the grounds of appeal is that although the assessee had informed the grounds of appeal is that although the assessee had informed the M/s Dreamz Dwellers LLP 7 ITA No. 2394/M/2018 Assessing Officer vide letter dated 09.07.2014 (filed on 10.07.2014) Assessing Officer vide letter dated 09.07.2014 (filed on 10.07.2014) Assessing Officer vide letter dated 09.07.2014 (filed on 10.07.2014) about the petition for merger being filed with the Hon’ble about the petition for merger being filed with the Hon’ble about the petition for merger being filed with the Hon’ble jurisdictional High Court, it did not file the copy of the final order of dictional High Court, it did not file the copy of the final order of dictional High Court, it did not file the copy of the final order of the Hon’ble High Court sanctioning the amalgamation on the Hon’ble High Court sanctioning the amalgamation on the Hon’ble High Court sanctioning the amalgamation on 10.10.2014. Nor the assessee has categorically informed the 10.10.2014. Nor the assessee has categorically informed the 10.10.2014. Nor the assessee has categorically informed the Assessing Officer about the said fact after the receipt of the said Assessing Officer about the said fact after the receipt of the said Assessing Officer about the said fact after the receipt of the said amalgamation order before the notice u/s. 143(2) was issued on gamation order before the notice u/s. 143(2) was issued on gamation order before the notice u/s. 143(2) was issued on 28.08.2015. Further, the intimation given by the assessee during Further, the intimation given by the assessee during Further, the intimation given by the assessee during the assessment proceedings the assessment proceedings vide letter dated 21.11.2016 was only a letter dated 21.11.2016 was only a month prior to the expiry of limitation for completing assessment month prior to the expiry of limitation for completing assessment month prior to the expiry of limitation for completing assessment and that the due date of issuing notice u/s. 143(2) was already and that the due date of issuing notice u/s. 143(2) was already and that the due date of issuing notice u/s. 143(2) was already expired by that date. Hence, it was impossible for the Assessing expired by that date. Hence, it was impossible for the Assessing expired by that date. Hence, it was impossible for the Assessing Officer to issue a fresh notice u/s. 143(2) in the name of the new Officer to issue a fresh notice u/s. 143(2) in the name of the new Officer to issue a fresh notice u/s. 143(2) in the name of the new entity.
5.1 In light of the said fact, we are constrained to follow the In light of the said fact, we are constrained to follow the In light of the said fact, we are constrained to follow the decisions relied upon by the decisions relied upon by the Ld. CIT(A) and the Ld. Ld. Counsel of the assessee as the facts of those cases and the present case are as the facts of those cases and the present case are as the facts of those cases and the present case are different in as much as the moot point involved here is that the in as much as the moot point involved here is that the in as much as the moot point involved here is that the M/s Dreamz Dwellers LLP 8 ITA No. 2394/M/2018 assessee has not informed about the fact of order passed by the sessee has not informed about the fact of order passed by the sessee has not informed about the fact of order passed by the Hon’ble High Court sanctioning the amalgamation prior to the issue Hon’ble High Court sanctioning the amalgamation prior to the issue Hon’ble High Court sanctioning the amalgamation prior to the issue of notice u/s. 143(2) of the Act. In this regard, gainful reference is of notice u/s. 143(2) of the Act. In this regard, gainful reference is of notice u/s. 143(2) of the Act. In this regard, gainful reference is made from the decision of the Hon’ble Supreme Court in t made from the decision of the Hon’ble Supreme Court in t made from the decision of the Hon’ble Supreme Court in the case of PCIT v. Mahagun Realtors (P.) Ltd. [2022] 137 taxmann.com 91 (SC) PCIT v. Mahagun Realtors (P.) Ltd. [2022] 137 taxmann.com 91 (SC) PCIT v. Mahagun Realtors (P.) Ltd. [2022] 137 taxmann.com 91 (SC) wherein it is held that where post amalgamation, no indication was wherein it is held that where post amalgamation, no indication was wherein it is held that where post amalgamation, no indication was given to AO during search conducted at premises of assessee given to AO during search conducted at premises of assessee given to AO during search conducted at premises of assessee- amalgamating company about amalgamation and return f amalgamating company about amalgamation and return f amalgamating company about amalgamation and return filed pursuant to notice issued u/s. 153A suppressed fact of pursuant to notice issued u/s. 153A suppressed fact of pursuant to notice issued u/s. 153A suppressed fact of amalgamation, since conduct of assessee reflected that it amalgamation, since conduct of assessee reflected that it amalgamation, since conduct of assessee reflected that it consistently held itself as assessee, assessment order passed in consistently held itself as assessee, assessment order passed in consistently held itself as assessee, assessment order passed in name of assessee-amalgamating company was valid. The Hon’ble amalgamating company was valid. The Hon’ble amalgamating company was valid. The Hon’ble Supreme Court, after considering all the relevant decisions t, after considering all the relevant decisions t, after considering all the relevant decisions including the decision relied upon by the including the decision relied upon by the Ld. Counsel of the Counsel of the assessee, have held as under: assessee, have held as under:-
“40. The facts of the present case are distinctive, as evident 40. The facts of the present case are distinctive, as evident 40. The facts of the present case are distinctive, as evident from the following sequence: from the following sequence:
The original return o 1. The original return of MRPL was filed under f MRPL was filed under Section 139(1) on 30.06.2006. on 30.06.2006.
M/s Dreamz Dwellers LLP 9 ITA No. 2394/M/2018
2. The order of amalgamation is dated 11.05.2007 2. The order of amalgamation is dated 11.05.2007 2. The order of amalgamation is dated 11.05.2007 – but made effective from 01.04.2006. It contains a condition effective from 01.04.2006. It contains a condition – – Clause 220 - whereby MRPL’s liabilities whereby MRPL’s liabilities devolved on MIPL.
The original return of income was not revised even though 3. The original return of income was not revised even though 3. The original return of income was not revised even though the assessment proceedings were pending. The last date for the assessment proceedings were pending. The last date for the assessment proceedings were pending. The last date for filing filing filing the the the revised revised revised returns returns returns was was was 31.03.2008, 31.03.2008, 31.03.2008, after after after the the the amalgamation order. amalgamation order.
A search and seizure proceeding was conduc 4. A search and seizure proceeding was conducted in respect of ted in respect of the Mahagun group, including the MRPL and other companies: the Mahagun group, including the MRPL and other companies: the Mahagun group, including the MRPL and other companies:
“2. That all the liabilities and duties of the Transferor “2. That all the liabilities and duties of the Transferor “2. That all the liabilities and duties of the Transferor Companies be transferred without further act or deed to the Companies be transferred without further act or deed to the Companies be transferred without further act or deed to the Transferee Company and accordingly the same shall pursuant Transferee Company and accordingly the same shall pursuant Transferee Company and accordingly the same shall pursuant to Section 394 Section 394 (2) of the Companies Act, 1956 be transferred to , 1956 be transferred to and become the liabilities and duties of the Transferee and become the liabilities and duties of the Transferee and become the liabilities and duties of the Transferee Company”
(i) When search and seizur (i) When search and seizure of the Mahagun group took place, e of the Mahagun group took place, no indication was given about the amalgamation. no indication was given about the amalgamation.
(ii) A statement made on 20.03.2007 by Mr. Amit Jain, MRPL’s (ii) A statement made on 20.03.2007 by Mr. Amit Jain, MRPL’s (ii) A statement made on 20.03.2007 by Mr. Amit Jain, MRPL’s managing managing managing director, director, director, during during during statutory statutory statutory survey survey survey proceedings proceedings proceedings under Section 133A Section 133A, unearthed discrepancies in the books of , unearthed discrepancies in the books of account, in relation to amounts of money in MRPL’s account. account, in relation to amounts of money in MRPL’s account. account, in relation to amounts of money in MRPL’s account. The specific amount admitted was The specific amount admitted was �5.072 crores, in the course �5.072 crores, in the course of the statement recorded. of the statement recorded.
M/s Dreamz Dwellers LLP 10 ITA No. 2394/M/2018
(iii) The warrant was in the name of MRPL. The direc (iii) The warrant was in the name of MRPL. The direc (iii) The warrant was in the name of MRPL. The directors of MRPL and MIPL made a combined statement under MRPL and MIPL made a combined statement under MRPL and MIPL made a combined statement under Section 132 of the Act, on 27.08.2008. of the Act, on 27.08.2008.
(iv) A total of (iv) A total of � 30 crores cash, which was seized � 30 crores cash, which was seized- was surrendered in relation to MRPL and other transferor surrendered in relation to MRPL and other transferor surrendered in relation to MRPL and other transferor companies, as well as MIPL, on 27.08.2008 in the course of the companies, as well as MIPL, on 27.08.2008 in the course of the companies, as well as MIPL, on 27.08.2008 in the course of the admission, when a statement was recorded under admission, when a statement was recorded under admission, when a statement was recorded under Section 132 (4) of the Act, by Mr. Amit Jain. (4) of the Act, by Mr. Amit Jain.
5. Upon being issued with a notice to file return 5. Upon being issued with a notice to file returns, a return was s, a return was filed in the name of MRPL on 28.05.2010. Before that, on two filed in the name of MRPL on 28.05.2010. Before that, on two filed in the name of MRPL on 28.05.2010. Before that, on two dates, i.e., 22/27.07.2010, letters were written on behalf of dates, i.e., 22/27.07.2010, letters were written on behalf of dates, i.e., 22/27.07.2010, letters were written on behalf of MRPL, intimating about the amalgamation, but this was for AY MRPL, intimating about the amalgamation, but this was for AY MRPL, intimating about the amalgamation, but this was for AY 2007-08 (for which separate proceedings had been initiat 08 (for which separate proceedings had been initiat 08 (for which separate proceedings had been initiated under Section 153A Section 153A) and not for AY 2006-07.
The return specifically suppressed 6. The return specifically suppressed – and did not disclose the and did not disclose the amalgamation (with MIPL) amalgamation (with MIPL) – as the response to Query 27(b) as the response to Query 27(b) was “N.A”.
7. The return 7. The return – apart from specifically being furnished in the rom specifically being furnished in the name of MRPL, also contained its PAN number. name of MRPL, also contained its PAN number.
During the assessment proceedings, there was full 8. During the assessment proceedings, there was full 8. During the assessment proceedings, there was full participation participation – on behalf of all transferor companies, and MIPL. on behalf of all transferor companies, and MIPL. A special audit was directed (which is possible only A special audit was directed (which is possible only A special audit was directed (which is possible only after issuing notice under issuing notice under Section 142). Objections to the special ). Objections to the special audit were filed in respect of portions relatable to MRPL. audit were filed in respect of portions relatable to MRPL. audit were filed in respect of portions relatable to MRPL.
M/s Dreamz Dwellers LLP 11 ITA No. 2394/M/2018
After fully participating in the proceedings which were 9. After fully participating in the proceedings which were 9. After fully participating in the proceedings which were specifically in resp specifically in respect of the business of the erstwhile MRPL for ect of the business of the erstwhile MRPL for the year ending 31.03.2006, in the cross the year ending 31.03.2006, in the cross-objection before the objection before the ITAT, for the first time (in the appeal preferred by the Revenue), ITAT, for the first time (in the appeal preferred by the Revenue), ITAT, for the first time (in the appeal preferred by the Revenue), an additional ground was urged that the assessment order an additional ground was urged that the assessment order an additional ground was urged that the assessment order was a nullity because MR was a nullity because MRPL was not in existence. PL was not in existence.
Assessment order was issued 10. Assessment order was issued – undoubtedly in relation to undoubtedly in relation to MRPL (shown as the assessee, but represented by the MRPL (shown as the assessee, but represented by the MRPL (shown as the assessee, but represented by the transferee company MIPL). transferee company MIPL).
Appeals were filed to the CIT (and a cross 11. Appeals were filed to the CIT (and a cross 11. Appeals were filed to the CIT (and a cross-objection, to ITAT) – by MRPL “represented by by MRPL “represented by MIPL”.
At no point in time 12. At no point in time – the earliest being at the time of search, the earliest being at the time of search, and subsequently, on receipt of notice, was it plainly stated and subsequently, on receipt of notice, was it plainly stated and subsequently, on receipt of notice, was it plainly stated that MRPL was not in existence, and its business assets and that MRPL was not in existence, and its business assets and that MRPL was not in existence, and its business assets and liabilities, taken over by MIPL. liabilities, taken over by MIPL.
The counter affidavit 13. The counter affidavit filed before this court filed before this court – (dated 07.11.2020) has been affirmed by Shri Amit Jain S/o Shri P.K. 07.11.2020) has been affirmed by Shri Amit Jain S/o Shri P.K. 07.11.2020) has been affirmed by Shri Amit Jain S/o Shri P.K. Jain, who- is described in the affidavit as “Director of M/S is described in the affidavit as “Director of M/S is described in the affidavit as “Director of M/S Mahagun Realtors(P) Ltd., R/o…”. Mahagun Realtors(P) Ltd., R/o…”.
In the light of the facts, what is overwhelmingly evident 41. In the light of the facts, what is overwhelmingly evident 41. In the light of the facts, what is overwhelmingly evident- is that the amalgamation was known to the assessee, even at the that the amalgamation was known to the assessee, even at the that the amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as stage when the search and seizure operations took place, as stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the well as statements were recorded by the revenue of the well as statements were recorded by the revenue of the directors and managing director of the group. A return was directors and managing director of the group. A return was directors and managing director of the group. A return was filed, pursuant to no filed, pursuant to notice, which suppressed the fact of tice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL. amalgamation; on the contrary, the return was of MRPL. amalgamation; on the contrary, the return was of MRPL.
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Though that entity ceased to be in existence, in law, yet, Though that entity ceased to be in existence, in law, yet, Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeals were filed on its behalf before the CIT, and a cross appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT. Even the affidav appeal was filed before ITAT. Even the affidav appeal was filed before ITAT. Even the affidavit before this court is on behalf of the director of MRPL. Furthermore, the court is on behalf of the director of MRPL. Furthermore, the court is on behalf of the director of MRPL. Furthermore, the assessment order painstakingly attributes specific amounts assessment order painstakingly attributes specific amounts assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special surrendered by MRPL, and after considering the special surrendered by MRPL, and after considering the special auditor’s report, brings auditor’s report, brings specific amounts to tax, in the search specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of sessment order. That order is no doubt expressed to be of sessment order. That order is no doubt expressed to be of MRPL (as the assessee) MRPL (as the assessee) - but represented by the transferee, but represented by the transferee, MIPL. All these clearly indicate that the order adopted a MIPL. All these clearly indicate that the order adopted a MIPL. All these clearly indicate that the order adopted a particular method of expressing the tax liability. The AO, on the particular method of expressing the tax liability. The AO, on the particular method of expressing the tax liability. The AO, on the other hand, ha other hand, had the option of making a common order, with d the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to MIPL as the assessee, but containing separate parts, relating to MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., the different transferor companies (Mahagun Developers Ltd., the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home Décor Pvt. Ltd.) ADR Home Décor Pvt. Ltd.). The mere choice of the AO in . The mere choice of the AO in issuing a separate order in respect of MRPL, in these issuing a separate order in respect of MRPL, in these issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it. Right from the time it was circumstances, cannot nullify it. Right from the time it was circumstances, cannot nullify it. Right from the time it was issued, and at all stages of various proceedings, the parties issued, and at all stages of various proceedings, the parties issued, and at all stages of various proceedings, the parties concerned (i.e., MIPL) treated it to be in respe concerned (i.e., MIPL) treated it to be in respect of the transferee ct of the transferee company (MIPL) by virtue of the amalgamation order company (MIPL) by virtue of the amalgamation order company (MIPL) by virtue of the amalgamation order – and Section 394 Section 394 (2). Furthermore, it would be anybody’s guess, (2). Furthermore, it would be anybody’s guess, if any refund were due, as to whether MIPL would then say if any refund were due, as to whether MIPL would then say if any refund were due, as to whether MIPL would then say that it is not entitled to it, because the refund order would be not entitled to it, because the refund order would be not entitled to it, because the refund order would be issued in favour of a non issued in favour of a non-existing company (MRPL). Having existing company (MRPL). Having regard to all these reasons, this court is of the opinion that in regard to all these reasons, this court is of the opinion that in regard to all these reasons, this court is of the opinion that in the facts of this case, the conduct of the assessee, commencing the facts of this case, the conduct of the assessee, commencing the facts of this case, the conduct of the assessee, commencing from the date from the date the search took place, and before all forums, the search took place, and before all forums, reflects that it consistently held itself out as the assessee. The reflects that it consistently held itself out as the assessee. The reflects that it consistently held itself out as the assessee. The M/s Dreamz Dwellers LLP 13 ITA No. 2394/M/2018 approach and order of the AO is, in this court’s opinion in approach and order of the AO is, in this court’s opinion in approach and order of the AO is, in this court’s opinion in consonance with the decision in Marshall & Sons (supra), consonance with the decision in Marshall & Sons (supra), consonance with the decision in Marshall & Sons (supra), which had held that: which had held that:
“an assessment can always be made and is supposed to be assessment can always be made and is supposed to be assessment can always be made and is supposed to be made on the Transferee Company taking into account the made on the Transferee Company taking into account the made on the Transferee Company taking into account the income of both the Transferor and Transferee Company.” income of both the Transferor and Transferee Company.” income of both the Transferor and Transferee Company.”
Before concluding, this Court notes and holds that whether 42. Before concluding, this Court notes and holds that whether 42. Before concluding, this Court notes and holds that whether corporate death of an entity up corporate death of an entity upon amalgamation per se on amalgamation per se invalidates invalidates invalidates an an an assessment assessment assessment order order order ordinarily ordinarily ordinarily cannot cannot cannot be be be determined on a bare application of determined on a bare application of Section 481 Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but Companies Act, 1956 (and its equivalent in the 2013 Act), but Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend would depend on the terms of the amalgamation and the facts on the terms of the amalgamation and the facts of each case. of each case.
In view of the foregoing discussion and having regard to the 43. In view of the foregoing discussion and having regard to the 43. In view of the foregoing discussion and having regard to the facts of this case, this court is of the considered view, that the facts of this case, this court is of the considered view, that the facts of this case, this court is of the considered view, that the impugned order of the High Court cannot be sustained; it is se impugned order of the High Court cannot be sustained; it is se impugned order of the High Court cannot be sustained; it is set aside. Since the appeal of the revenue against the order of the aside. Since the appeal of the revenue against the order of the aside. Since the appeal of the revenue against the order of the CIT was not heard on merits, the matter is restored to the file of CIT was not heard on merits, the matter is restored to the file of CIT was not heard on merits, the matter is restored to the file of ITAT, which shall proceed to hear the parties on the merits of ITAT, which shall proceed to hear the parties on the merits of ITAT, which shall proceed to hear the parties on the merits of the appeal- as well as the cross objections, on issues, othe as well as the cross objections, on issues, other than the nullity of the assessment order, on merits. The appeal than the nullity of the assessment order, on merits. The appeal than the nullity of the assessment order, on merits. The appeal is allowed, in the above terms, without order on costs. is allowed, in the above terms, without order on costs. is allowed, in the above terms, without order on costs.”
5.2 In view of the above discussion, respectfully following the In view of the above discussion, respectfully following the In view of the above discussion, respectfully following the aforesaid decision of Hon’ble Supreme Court in the case of aforesaid decision of Hon’ble Supreme Court in the case of aforesaid decision of Hon’ble Supreme Court in the case of Mahagun Realtors (supra) (supra), we are of the considered view that the , we are of the considered view that the M/s Dreamz Dwellers LLP 14 ITA No. 2394/M/2018 assessment order passed by the Assessing Officer is valid in eyes of assessment order passed by the Assessing Officer is valid in eyes of assessment order passed by the Assessing Officer is valid in eyes of law and accordingly, the ground nos. 1 to 3 of the appeal filed by law and accordingly, the ground nos. 1 to 3 of the appeal filed by law and accordingly, the ground nos. 1 to 3 of the appeal filed by the Revenue are allowed. are allowed.
6. The ground no. 4 of the appeal relates to the issue of addition The ground no. 4 of the appeal relates to the issue of addition The ground no. 4 of the appeal relates to the issue of addition of Rs. 122,87,70,000/ 122,87,70,000/- made u/s. 56(2)(vii)(b) of the Act not been made u/s. 56(2)(vii)(b) of the Act not been decided by the Ld. CIT(A) on merits of the case. In this regard, since CIT(A) on merits of the case. In this regard, since CIT(A) on merits of the case. In this regard, since we have held that the assessment order passed u/s. 143 we have held that the assessment order passed u/s. 143 we have held that the assessment order passed u/s. 143(3) as valid, it is necessary that the issue of addition made u/s. 56(2)(vii)(b) of it is necessary that the issue of addition made u/s. 56(2)(vii)(b) of it is necessary that the issue of addition made u/s. 56(2)(vii)(b) of the Act by the Assessing Officer be dealt with on merits by the the Act by the Assessing Officer be dealt with on merits by the the Act by the Assessing Officer be dealt with on merits by the Ld. CIT(A). Accordingly, we set aside this ground of appeal and restore CIT(A). Accordingly, we set aside this ground of appeal and restore CIT(A). Accordingly, we set aside this ground of appeal and restore the matter back to the file of the matter back to the file of Ld. CIT(A) to decide the same on IT(A) to decide the same on merits of the case. It is needless to mention that adequate merits of the case. It is needless to mention that adequate merits of the case. It is needless to mention that adequate opportunity of being heard be granted to the assessee opportunity of being heard be granted to the assessee opportunity of being heard be granted to the assessee to file his submissions and relevant details or documents in the matter. submissions and relevant details or documents in the matter. submissions and relevant details or documents in the matter.
Accordingly, this ground of appeal of the Accordingly, this ground of appeal of the revenue is allowed for revenue is allowed for statistical purposes.
In the result, the appeal of the revenue is allowed In the result, the appeal of the revenue is allowed In the result, the appeal of the revenue is allowed for statistical purposes.
M/s Dreamz Dwellers LLP 15 ITA No. 2394/M/2018
Order pronounced under Rule 34(4) of Order pronounced under Rule 34(4) of the ITAT Rules, the ITAT Rules, 1963 on 30/11/2022. /2022.