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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA
filed by the assessee and filed by the Revenue are cross appeals and are directed against the order dated 11.12.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2013-14.
13.12.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2014-15. For the sake of convenience, these appeals were heard together and are being disposed of by this common order.
& 341/PUN/2025 for assessment year 2013-14.
Facts of the case, in brief, are that the assessee is a company engaged in business of promoter and developer. It filed its return of income on 30.09.2013 declaring total income of Rs.1,13,80,777/-. The case was selected under CASS. Notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) were issued and served on the assessee in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details.
3. The Assessing Officer observed from the details furnished in respect of advances received from the customers against sale of flats / office space that the assessee has shown liability of advances against the bookings in respect of completed as well as ongoing projects. According to the Assessing Officer, showing of liability in respect of ongoing projects is found to be reasonable. However, there should not be any reason for appearing of such liability in respect of projects completed. Rejecting the various explanations given by the assessee, the Assessing Officer made disallowance of Rs.26,90,56,640/- in respect of advances received in respect of various projects treating the same as unexplained liabilities, the details of which are as under: 1) Project Business Court - Rs. 48,04,757/- 2) Project Cerebrum (3) - Rs.26,25,57,362/- 3) Kumar City - Rs. 15,00,000/- 4) Sophrania - Rs. 1,94,521/- Rs.26,90,56,640/- Total -
4. The Assessing Officer also made addition of Rs.49,40,351/- u/s 36(1)(iii) and made disallowance of Rs.10,74,599/- u/s 32 of the Act. Thus, the Assessing Officer determined the total income of the assessee at Rs.28,64,52,370/-.
5. Before the Ld. CIT(A) / NFAC the assessee apart from challenging the additions on merit, challenged the validity of assessment on the ground that the assessment has been framed on a non-existing entity.
6. So far as the validity of assessment in respect of a non-existing entity is concerned, the Ld. CIT(A) / NFAC dismissed the grounds raised by the assessee holding that the assessee had not undertaken the procedure of registration in e- filing portal of the department. According to the Ld. CIT(A) / NFAC the assessee has omitted to register the successor in the e-filing portal of the income tax department. Since in the present case the assessee had filed the letter informing the fact of amalgamation he held that the claim of the assessee is not acceptable.
7. So far as the decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki Ltd. reported in 416 ITR 613 (SC) is concerned, he noted that the said decision is not applicable to the facts of the assessee. In that case the issuance of jurisdiction notice u/s 143(2) to the amalgamating company SPIL was undertaken on 26.09.2013 subsequent to the approval granted by the Hon’ble Delhi High Court for the Scheme of amalgamation on 29.01.2013 w.e.f. 01.04.2012. In short, the notice u/s 143(2) was issued in the month of September 2013 while the scheme of amalgamation was approved ahead of this month in January 2013 itself. Therefore, the Hon'ble Apex Court held that when the notice u/s 143(2) was issued on a non-existing dead entity, the order of assessment thereafter passed in the name of the non-existing company is illegal. However, in the instant case, the scheme of amalgamation was approved by the Hon'ble Bombay High Court on 30.10.2015, while the notice u/s 143(2) was issued much ahead of the said grant of approval for scheme of amalgamation on 02.09.2014 itself. Therefore, the said decision is not applicable to the facts of the present case. He further held that even if it were to be assumed that order needs to be passed in the hands of the amalgamated company only and not in the hands of amalgamating company, the assessee has to appreciate that there is an impossibility of performance on part of the Assessing Officer to pass the assessment order in the hands of the transferee or successor company, when the procedure to be adopted to record the succession is omitted to be undertaken by the assessee in the e-filing portal of the Income-tax Department. Distinguishing the various decisions cited before him including the decision of Hon’ble Supreme Court in the case of PCIT vs. Maruti Suzuki Ltd. (supra), the Ld. CIT(A) / NFAC rejected the grounds raised by the assessee challenging the validity of assessment.
8. Similarly, the Ld. CIT(A) / NFAC upheld the addition of Rs.49,40,351/- made by the Assessing Officer on account of disallowance u/s 36(1)(iii) and the disallowance of depreciation of Rs.10,74,599/-. However, since the assessee is not in appeal before us on these two issues, we are not concerned with the same.
So far as the addition of trade advances from customers of Rs.26,90,56,640/- is concerned, the Ld. CIT(A) / NFAC gave part relief to the assessee by observing as under: “6.6 Addition of trade advances from customers of Rs.26,90,56,640/-: 6.6.1 The appellant had received certain advances from customers, in respect of the project "CEREBRUM(B3)” which was identified to be Rs.26,25,57,362/-. The AO found that though it is held in "Advance from Customer Account", the same was not credited to the sales account and therefore, according to the AO, these amounts remain unexplained. Based on the discussion in para 6.3 to 6.5, a sum of Rs.26,25,57,362/- was added to the total income relating to the project CEREBRUM(B3). Based on the similar finding, values that pertains to the projects Business Court, Sophronia and Kumar City of Rs.48,04,757/-,
Rs.1,94,521/- and Rs.15,00,000/- totaling Rs.64,99,278/- were also added arriving at total addition of Rs.26,90,56,640/-. 6.6.2 The appellant objected this addition to total income and submitted elaborate details and documents clarify that the source for the same as out of advance from customer was explained for the purpose of Income-tax. Together with the covering letter dated 30 10.2023, a paper book comprising of 423 pages were submitted and the same were carefully examined. 6.6.3 Subsequently, a notice u/s 250 was issued on 20.10.2024, in Item No.8, the appellant was requested to provide the copy of the ledger folio of the customers appearing in the list of trade payables covering the period from 01.04.2012 to 31.03.2016, together with the tabulation in the form of Flow Chart, to substantiate that the advances received from the customers, were subsequently squared up against the sale of flats registered in their favor. 6.6.4 In the paper book submitted on 30.10.2023, proof of having received the funds through banking channels from a set of customers were provided and from the document provided, it was comprehendible that the same relates to advances received from customers in respect of the projects identified by the AO. 6.6.5 First and foremost, in respect of project CEREBRUM(B3), by the detailing provided in page nos. 161 to 169 of the paper book, the appellant was able to impress that the value adopted by the AO to be Rs.26,25,57,362/- and the actual value being advance from customer of CEREBRUM(B3) as on 31.03.2023 is only Rs.21,32,83,561/-. The tabulation provided in page no. 161of the paper book is captured and provided below:
6.6.6 From the tabulation provided in the preceding paragraph, the relief is restricted to the project CEREBRUM(B3) only. The appellant itself admits that in respect of the other three projects -Business Court, Sophronia and Kumar City, the advances received from customers and due as on 31.03.2013 is of Rs.50,54,757/-, Rs.2,39,303/- and Rs.1,13,74,000/- totaling Rs.1,66,68,060/-.
Therefore, if the advances claimed to be received in respect of these four projects is not proven to be genuine, the addition has to be restricted to Rs.22,99,51,621/- as against the addition made of Rs.26,25,57,362/-. Accordingly, the appellant is found eligible for a straight relief of Rs.3,26,05,741/-. 6.6.7 In the documents provided, the appellant was able to impress that the receipt of advances in respect to these projects, were through banking channels and the corresponding revenue was recognized in the subsequent year. The tabulation to such effect Page No. 324 of paper book, deeds of sale and ledger folios of the customers were provided in support of the claim that the source of receipt is properly explained for the purpose of Income-tax. 6.7 Revenue Recognition: 6.7.1 The appellant is a builder and has self-certified that it is following "PCM- Percentage of Completion Method” to recognize revenue. In the tabulation provided in Page 324 of the paper book, it was detailed that the advances were also considered as revenue in the subsequent years and therefore, the question of making an addition does not arise. 6.7.2 As stated earlier, the transactions are received from customers only who are identifiable. Moreover, even if the advances were unexplained with regard to its sources, the entire balance as on 31.03.2013 cannot be added and only such sums of money received during the FY 2012-13 has to be added. However, this discussion has become rather academic, since the principle of revenue recognition adopted in respect of the receipts of these four projects has not been appropriately undertaken. 6.7.3 While it is seen that the contention of the AO with regards to its sources is not acceptable, neither the appellant was able to assertively impress that the finding of the AO in para 6.5 of the said order which reads as under: "6.5 It can alternatively be held that "advance from customer" a/c was credited on sale but corresponding entry in advances against booking was remained to be passed. This also means that advance against booking to the extent of these amounts remains unexplained." 6.7.4 Therefore, the aspect as to whether the appellant was correct in postponing the revenue to the subsequent years needed verification. The necessity to undertake this process was accentuated by the entries exhibited in the tabulation contained in page no. 52 of the paper book. For ease of reference the tabulation is captured and provided below:
6.7.5 From the values exhibited in the fifth column which reveals the percentage of completion as on 31.03.2013, it is affirmed by the appellant that the projects CEREBRUM(B3), Kumar City, Sofronia and Business Court are all completed entirely and the percentage of completion as stated in the said table is 100%. 6.7.6 Obviously, when the projects are cent percent complete, there is no principle by which the revenue recognition can be postponed. Accordingly, the balance sheet cannot exhibit, both the items being "Advance from customers" and "Closing work in progress” in respect of these four projects. It was under such circumstances, a notice u/s 250 was issued on 26.11.2024 and the relevant content of the annexure to the said notice is captured and provided below.
As per the WIP statement as on March 2013, the project "CEREBRUM B3" is complete and as per column 5 of the said statement 100% of the project is complete. Therefore, the question of receiving of advance in respect of this property does not arise. Even if it were received, in excess of the revenue already recognized in the yester years, the same should be automatically converted into revenue for the year and added to the taxable income for the A.Y. 2013-14 since as per your own statement, the project "CEREBRUM B3" is 100% complete. Therefore, it may have to be presumed that, either the AO is right in treating the advance claimed to be received from customers and shown as trade payables as on 31.03.2013 of Rs.21,32,83,679/- or as an alternative if proven to be genuine, the same has to be offered to tax as the income for the A.Y 2013-14, when it relates to a project already complete. Therefore, the question of deferring the revenue over a next many years as tabulated in page no 324 of the paper book, does not arise as the same is against the principle of recognizing revenue in construction business Clarity?
2. Though, the addition made is a sum of Rs.26.25,57,362/-, which is the liability in respect of the project "CEREBRUM-B3", the particulars provided are restricted to Rs.21,27,97,590/- only Kindly provide a similar data in respect of the balance sum of Rs.4,97,59,772/-.
3. Though, the notice u/s 250 dated 22.10.2024, in item no. 8 was specific, requiring the appellant to provide the copy of ledger folio of customers appearing in the list of bill payables, which got translated into the addition of Rs.26,90,56,640/-, the relevant documents in the form of ledger folio from start to end of the transactions has not been submitted, customer wise. Kindly provide the same.
4. Since, the concept of taxation is likely to deviate from the principle of taxation adopted in the assessment order treating the trade payables in respect of project "CEREBRUM-B3" as unexplained credit u/s 68, to the concept of taxation on revenue recognition as expressed in item no. 1 above, this notice may be treated as a notice in terms of section 251(1)(a) of the Act, for the reason that addition u/s 68 can be made only in respect of credits infused during the year while the entire trade payables, irrespective year of receipt, relating to the projects which are 100% complete will get taxable, if a satisfactory explanation is not provided to the issue raised in item 1 above." 6.7.7 The appellant sought adjournment to provide the said details and the same was accorded by another notice dated 06.12.2024. requiring the appellant to submit the details on or before 11.12.2024. Though, the information sought by the earlier notice dated 26.11.2024 was simple and readily available in the possession of the Department, the appellant had sought further time and in order to remain justified, the time for submission further extended by a week. 6.7.8 Subsequently, in the letter dated 10.12.2024, it was clarified by the appellant that the project is exempted u/s 80-IA and the income was offered based on stated work completion. There were some pending issues of construction which can be seen in balance sheet (WIP-Cost Incurred). Income was recognized in subsequent years. As income was exempted u/s 80-IA, there is no ulterior motive to defer the tax. 6.7.9 The reply provided by the appellant were carefully considered. The said reply, fails to address the principal bone of contention being the issue as to whether the revenue recognition can be postponed in respect of a completed project. While the clarification is silent on this aspect, it construes that the appellant accepts that this method of revenue recognition is not in order. 6.7.10 On the eligibility of deduction u/s 80-IA(4)(iii), if it were a genuine claim, the revenue should be recognized in respect of this completed project and the appellant ought to have submitted Audit Report in Form No. 10CCB. Moreover, substantial portion of the revenue recognition as per the statement provided by the appellant is postponed and recognized in A.Y. 2014-15. This assessment year is also subject to adjudication separately and on verification of the records for that year. the claim of deduction u/s 80-IA(4)(1)(a) & (b) of Rs.6,18,49,661/- in respect of an eligible project, the start of date of which is 24.03.2014. 6.7.11 If the revenue from these four projects were eligible for deduction u/s 80-IA(4)(iii), the appellant would have automatically claimed this deduction in the ensuing year. Therefore, it is proven that the claim of deduction u/s 80- IA(4)(iii), as an alternate is not available. 6.7.12 At this juncture, it is found pertinent to bring on record that the migration of the principle and method of taxation, which is being adopted in this appellate order, as compared to the assessment order, on the aspect of taxing the impugned portion u/s 28 as against section 68 adopted by the AO, which was ordained by the notice u/s 250 dated 16.11.2024 by resorting to the provisions of section 251(1)(a), has not been challenged by the appellant in the reply submitted on 10.12.2024. Moreover, the shifting cannot be classified as a conflicting approach, while the AO has also touched upon this issue in para 6.5 of the impugned Assessment Order. Therefore, the issue of taxation of the relevant sum is decided on its merit, to be as under. 6.7.13 As per the information provided in page no. 52 of the paper book, there is no dispute that the 100% of the four projects were concluded. Obviously, there is no method or principle to postpone revenue in respect of these four projects and the treatment given to the receipts as advances from customers is grossly incorrect. Therefore, the income for the A.Y. 2013-14 has to be enhanced by a value of Rs.22,99,51,621/-. 6.7.14 At the same time, when the method of postponement of receipt is found to be inappropriate, the corollary is also true and applicable by which, the balance sheet cannot exhibit the value of closing work in progress in respect of these four projects as on 31.03.2013. The tabulation which is also provided in page no. 53 of the same paper book is also exhibited below:
6.7.15 Therefore, when the advances received from the customers in respect of these four projects is treated as revenue for the year, the corresponding closing WIP as on 31.03.2013 should get automatically set off from such income, as effectively by this process the expenditure in respect of the receipts forming part of the closing WIP has to be shifted from this nomenclature and recognized as revenue for the year and thus the closing WIP as on 31.03.2013 would get deficient by Rs.14,85,24,400/-, Therefore, the income for the year has to be reduced by Rs.14,85,24,400/-. Accordingly, the addition to total income gets restricted to Rs.8,14,27,221/-. 6.7.16 Though the addition is made on the finding that the source of advances received from customers is not explained, as stated earlier, the appellant had failed to address the qualification provided by the AO in para 6.5 of the said order. Hence, as a matter of abundant caution, exercising the powers conferred u/s 251(1)(a) of the Act, in the notice u/s 250 dated 26.11.2024, the appellant was apprised about the likely deviation from the principle of taxation adopted in the assessment order, despite a clear finding in it in para 6.5 of the said order into the concept and principle of revenue recognition as detailed in the preceding sub- paras. 6.7.17 Therefore, the error in the title of the addition made is corrected consequent to the said notice and accordingly when the principle adopted in this order to bring to tax a sum of Rs.8,14,27,221/-under the head Profits and Gains from Business u/s 28, is found to be unsurmountable, the JAO is directed to substitute the addition of Rs.26,90,56,640/- by this value of Rs.8,14,27,221/- and bring it to tax u/s 28 of the Act. 6.7.18 As a result, the Ground of Appeal No. 3 is partly allowed. 6.7.19 At the same time, the AO is appraised that while income recognized in the subsequent year is advanced and recognized as income in the year under consideration, as a natural outcome, such income offered in the subsequent years, would have to be reversed. However, while doing so the AO has to be careful and simultaneously reverse the quantum of WIP, treated as expenditure in those years that pertains to these projects. To sum-up, the reversal of the revenue in the subsequent years as result of this principle enforced as above should not exceed the quantum of Rs.8,14,27,211/-.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee as well as the Revenue are in appeal by raising the following grounds:
Grounds raised by the assessee in 1] The learned CIT(A) erred in holding that the asst. order passed in the name of a non existent entity was valid without appreciating that in the course of asst. proceeding, the assessee had duly informed the learned A.O. regarding the amalgamation of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. and hence, the asst. order passed was null and void. 2] The learned CIT(A) erred in holding that the assessee company had not registered itself as a successor to Kumar Housing Corporation Pvt. Ltd. on the e-filing portal of the Income Tax Department and therefore, since there was failure on the part of the assessee, the asst. order passed by the learned A.O. was valid in law. 3] The learned CIT(A) erred in holding that mere intimation by the assessee regarding the amalgamation without registering itself as a successor on the e-filing portal resulted in non compliance on the part of the assessee and therefore, the asst. order passed in the name of Kumar Housing Corporation Pvt. Ltd. was valid in law. 4] The learned CIT(A) erred in not appreciating that there was no such procedure of registering the assessee as a successor on the e-filing portal and hence, there was no reason to hold that there was non compliance on the part of the assessee and accordingly, the asst. order passed in the name of non-existent entity was bad in law and the same should have been declared null and void. 5] The learned CIT(A) erred in holding that filing of intimation letter along with the copy of High Court order sanctioning the amalgamation was a dumb document without appreciating that the assessee had duly informed the learned A.O. regarding the amalgamation of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. and hence, the asst. order passed by the learned A.O. is invalid in law. 6] The learned CIT(A) erred in enhancing the revenue of the assessee company by an amount of Rs.22,99,51,621/- an after allowing the deduction of a closing WIP erred in making an addition of Rs.8,14,27,221/- in the hands of the assessee company. 7] The learned CIT(A) erred in holding that the assessee company had postponed the revenue of Rs.22,99,51,621/- in respect of the following projects and as per the regular method of accounting followed by the assessee company, the said revenue was taxable in the year under consideration- Sr. No. Name of the Project Revenue Rs.
1. Sophronia 2,39,303/- 2. Kumar City 1,13,74,000/- 3. Business Court 50,54,757/- 4. Cerebrum B3 21,32,83,561/- Total- 22,99,51,621
8] The learned CIT(A) erred in not appreciating that there was no postponement of income and the amounts received from the prospective buyers were offered to tax in the subsequent years as per the method of accounting regularly followed by the appellant and therefore, there was no reason to tax the income of Rs.8,14,27,221/- in respect of the advances received from customers to the tune of Rs.22,99,51,621/-. 9] The learned CIT(A) erred in making the said addition without appreciating that he had no jurisdiction to prepone the income offered to tax in the subsequent years and hence, the addition made of Rs. 8,14,27,221/- may kindly be deleted. 10] Without prejudice to the above grounds, the assessee submits that the learned CIT(A) erred in not allowing the deduction u/s 80IA in respect of the profits worked out by him in respect of the project Cerebrum on the ground that the deduction u/s 80IA was not available to the assessee. 11] The learned CIT(A) failed to appreciate that the assessee company had claimed deduction u/s 80IA in respect of the project Cerebrum since A.Ys. 2006-07 onwards and the same was also allowed by Hon'ble ITAT and hence, the deduction u/s. 80IA should have been allowed in respect of the income in respect of the said project which has been preponed to the year under consideration. 12] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
Grounds raised by the Revenue in a. Whether on facts and circumstances of the case, the CIT(A)/NFAC was justified in restricting the addition amount from Rs.26,90,56,640/- to Rs.22,99,51,621/- without verifying evidence(s) in respect of advance received from customers and without rebutting the conclusion drawn by the AO? b. Whether on facts and circumstances of the case, the CIT(A)/NFAC was justified in further restricting addition amount from Rs.22,99,51,621/- to 8,14,27,221/- without examining the correctness of the WIP shown by the assessee and without rebutting the conclusion drawn by the AO? c. The order of Ld. CIT(A) may be vacated on this issue discussed alive and that of the AO be restored. d. The appellant craves to leave, add, amend, alter any of the above Questions of Law at the time of hearing of appeal.
The first issue raised by the assessee in the grounds of appeal relate to the order of the Ld. CIT(A) / NFAC rejecting the claim of validity of assessment framed on a non-existing company.
12. The Ld. Counsel for the assessee submitted that the assessee had filed a letter informing the fact of amalgamation to the Assessing Officer. The Ld. Counsel for the assessee referring to the provisions of section 170A which were introduced w.e.f. 01.04.2022 submitted that the said section provides that in case of a business re-organization which has taken place on the basis of the order of Hon’ble High Court or the Tribunal or an adjudicating authority and the successor has already filed the return u/s 139(1) prior to the said order, the successor shall file modified return in Form No.ITR-A within a period of six months from the end of the month in which the order was issued. Therefore, after insertion of section 170A w.e.f. 01.04.2022, the assessee as a successor has to file a modified return. However, prior to this amendment, there was no provision enabling such filing of a modified return and therefore, the objection of the Ld. CIT(A) is totally misplaced. He accordingly submitted that since the assessment order was passed in the name of a non-existent entity, therefore, the same is non-est and bad in law and therefore, is void-ab-initio. The Assessing Officer was not justified in passing the assessment order in the name of a non-existent company and the Ld. CIT(A) / NFAC was not justified in rejecting the grounds raised by the assessee. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions:
i) PCIT v. Maruti Suzuki India Ltd (2019) 416 ITR 613 (SC) ii) Kuber India Systems Ltd. 168 taxmann.com 200 (Bom) iii) Alok Knit Exports Ltd. 446 ITR 748 (Bom) iv) City Corporation Ltd. 171 taxmann.com 301 (Bom) v) Capgemini Technology Services India Ltd. 173 taxmann.com 616 (Pune.)
13. So far as the merit of the case is concerned, the Ld. Counsel for the assessee submitted that the Assessing Officer in the impugned assessment year has made an addition of Rs.26,90,56,640/- u/s 68 of the IT Act, 1961 in respect of advances received from the customers which were shown as liabilities. He submitted that though the Ld. CIT(A) / NFAC held that the correct amount of advances received is Rs.22.99 crore, however, he held that the assessee should have offered the said amount as sales in the year under consideration and there is no justification to postpone the income to the subsequent year. Thereafter, he allowed the relevant cost pertaining to the said amount and has finally restricted the addition to Rs.8,14,27,221/-.
The Ld. Counsel for the assessee referring to various pages of the paper book submitted that the assessee has offered the said advances in the subsequent years and therefore, there is no reason to make any addition in the year under consideration. Without prejudice to the above, the Ld. Counsel for the assessee referring to page 90 of the paper book submitted that out of Rs.22.99 crore the major amount is relating to project Cerebrum amounting to Rs.21.32 crore. He submitted that the said project is eligible for deduction u/s 80IA and even if, the addition is made in the year under consideration, the deduction u/s 80IA should be granted. He submitted that the Ld. CIT(A) / NFAC rejected the contention of the assessee on the ground that the starting date of the project mentioned in Form 10CCB for assessment year 2014-15 was 24.03.2014 and therefore, the assessee is not entitled to deduction u/s 80IA. Referring to pages 131 to 171 of the paper book, he submitted that the project Cerebrum was started on 02.12.2005 and the deduction u/s 80IA has been allowed in the earlier years i.e. assessment years 2007-08, 2008-09, 2010-11 & 2011-12. He submitted that even for assessment year 2014-15, the assessee had made the claim of deduction u/s 80IA which has been allowed by the Assessing Officer. Referring to the order of the Ld. CIT(A) / NFAC, he submitted that according to him the assessee has mentioned the date of commencement in Form 10CCB for assessment year 2014-15 as 24.03.2014 and therefore, he rejected the claim of the assessee. Referring to page 118 of the Paper Book, the Ld. Counsel for the assessee drew the attention of the Bench to Form No.10CCB for assessment year 2014-15 and submitted that the date of commencement is mentioned as 02.12.2005, therefore, the findings of the Ld. CIT(A) / NFAC that the date of commencement is 24.03.2014 is factually incorrect. He submitted that even if the addition is made on the basis of the order of the Ld. CIT(A) / NFAC, the deduction u/s 80IA should be granted. He submitted that the assessee has filed 10CCB for assessment year 2013-14 on the basis of the revenue preponed by the Ld. CIT(A) / NFAC. He accordingly submitted that the appeal filed by the assessee on this issue be allowed the grounds raised by the Revenue be dismissed.
15. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A) / NFAC on this issue. He submitted that when the Assessing Officer cannot register the successorship in the system, the order of assessment and even the appeal order continues to be passed in the name and PAN of the amalgamating company and cannot be passed in the name of amalgamated company. So far as various decisions relied on by the Ld. Counsel for the assessee are concerned, he submitted that those decisions are distinguishable and not applicable to the facts of the present case especially when there cannot be any malafide intention on the part of the Assessing Officer to purposefully pass the order in the hands of the amalgamating company instead in the name of amalgamated company after amalgamation. He further submitted that the notice u/s 143(2) was issued on 02.09.2014 which is much ahead of the approval of the scheme of amalgamation on 30.10.2015. He accordingly heavily relied on the order of the Ld. CIT(A) / NFAC on this issue.
16. So far as the part relief granted by the Ld. CIT(A) / NFAC is concerned, he submitted that the Ld. CIT(A) / NFAC without verifying the evidences in respect of the advances received from the customers and without rebutting the conclusion drawn by the Assessing Officer restricted the addition to Rs.8,14,27,221/- which is not correct. He accordingly submitted that the order of the Assessing Officer on this issue be restored.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the assessee vide letter dated 17.12.2015 received by the office of the Assessing Officer on 22.12.2015 has intimated the merger of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. along with the copy of Hon’ble Bombay High Court order approving the scheme of amalgamation on 30.10.2015. We find the Ld. CIT(A) / NFAC observed that although the assessee has filed a copy of the Hon’ble High Court order along with covering letter intimating about the merger, however, the said letter is a dumb document before the income tax department and cannot be taken cognizance of the same since the jurisdictional Assessing Officer is incapacitated to register the modification in the income tax portal as it can only be altered by the assessee and not by the Assessing Officer. According to him, when the Assessing Officer cannot register in the system, the order of assessment and even the appeal order would continue to be passed in the name and PAN of the assessee being the amalgamating company and cannot be passed in the name of amalgamated company as the essential procedure has not been accomplished by the appellant.
18. We do not find any merit in the logic of the Ld. CIT(A) / NFAC on this issue. We find the provisions of section 170A which were introduced by the Finance Act, 2022 w.e.f. 01.04.2022 read as under: “Effect of order of tribunal or court in respect of business reorganisation
170A. Notwithstanding anything to the contrary contained in section 139, in a case of business reorganisation, where prior to the date of order of a High Court or tribunal or an Adjudicating Authority as defined in clause (1) of section 5 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter referred to as order in respect of business reorganisation), as the case may be, any return of income has been furnished by the successor under the provisions of section 139 for any assessment year relevant to the previous year to which such order applies, such successor shall furnish, within a period of six months from the end of the month in which the order was issued, a modified return in such form and manner, as may be prescribed91, in accordance with and limited to the said order.
Explanation.—In this section, the expressions— (i) "business reorganisation" means the reorganisation of business involving the amalgamation or demerger or merger of business of one or more persons; (ii) "successor" means all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation.”
19. We, therefore, find merit in the arguments of the Ld. Counsel for the assessee that after insertion of section 170A w.e.f. 01.04.2022 the assessee, as a successor, has to file a modified return and prior to this amendment, there was no provision enabling such filing of a modified return. Therefore, the objection of the Ld. CIT(A) / NFAC that the assessee has not registered the successorship on the income tax portal in our opinion is misplaced.
20. We find somewhat similar issue had come up before the Hon’ble Bombay High Court in the case of City Corporation Ltd. vs. ACIT (2025) 171 taxmann.com 301 (Bom). We find in that case also City Corporation Ltd. which is engaged in constructing and developing infrastructure facilities got merged with its wholly owned subsidiary “Amanora Future Tower Pvt. Ltd." (AFTPL) with effect from 01 April 2018. By communication dated 27.04.2020 the Petitioner informed the Income Tax Authority of the merger effective from 01.04.2018. On 31.03.2023 the Assessing Officer issued a notice u/s 148 of the Act to AFTPL seeking to reopen the case after obtaining due approval from the PCCIT to issue this notice to AFTPL which is now merged with City Corporation Ltd. The petitioner, therefore, challenged the validity of notice issued on a non-existing company. The Hon’ble High Court relying on the decision of Hon’ble Supreme Court in the case of PCIT Vs. Maruti Suzuki Ltd. dated 25.07.2019 reported in [2019] 107 taxmann.com 375 (SC) and various other decisions quashed the said notice on the ground that the notice issued to a non-existing company or entity despite the respondent has knowledge of its non-existence. The relevant observations of the Hon’ble High Court read as under: “1. Heard learned counsel for the parties.
2. Rule in each of these Petitions. The rule is made returnable immediately at the request of and with the consent of learned counsel for the parties.
The learned counsel for the parties agree that all these Petitions can be disposed by a common order since they involve substantially common issues of law and fact. The learned counsel also agree that Writ Petition No.6076 of 2023 be treated as lead Petition.
Writ Petition No.6076 of 2023 concerns Assessment Year 2013-14. The remaining Writ Petitions are concerned with Assessment Years 2014-15, 2016-17, 2017-18, 2018-19 and 2019-20 respectively.
All these Petitions are instituted by "City Corporation Limited" [CCL], which is engaged in constructing and developing infrastructure facilities. In terms of the NCLT's order dated 27 April 2020, the CCL got merged with its wholly owned subsidiary "Amanora Future Tower Pvt. Ltd." (AFTPL), with effect from 01 April 2018.
By communication dated 27 April 2020, the Petitioner informed the Income Tax Authority of the merger effective 01 April 2018. This intimation dated 27 August 2020 is at Exhibit-B (page 34 of the paper book in Writ Petition No.6076 of 2023). This intimation bears the stamp and endorsement of receipt from the office of the Deputy Commissioner of Income Tax, Circle 1(1), Pune. In the return filed on behalf of the Respondents, no dispute is raised about receiving this intimation on 27 August 2020.
On 31 March 2023, the Assistant Commissioner of Income Tax, Circle 1(1), Pune, issued a notice dated 31 March 2013 under Section 148 of the Income Tax Act, 1961 ("impugned notice") to AFTPL seeking to reopen the case in PAN: AAKCA3074H. The Assistant Commissioner obtained approval from the Principal Chief Commission of Income Tax to issue this notice to "Amanora Future Towers Private Limited (now merged with City Corporation Limited)".
The Petitioner thereupon instituted the present Petitions, questioning the impugned notice dated 31 March 2023, inter alia, on the ground that, post- merger, AFTPL was a non-existing entity. Therefore, no notice under Section 148 of the Income Tax Act, 1961 (IT Act, 1961) could have been issued to AFTPL. 9. Mr. Walve, the learned counsel for the Petitioner, has relied on Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki India Ltd.1; Uber India Systems (P.) Ltd. vs Assistant Commissioner of Income2; and Alok Knit Exports Ltd. vs Deputy Commissioner of Income-tax, Circle 6(1)(1), Mumbai3; in support of the contention that the notice issued to a non-existing entity post-merger was a substantive illegality and not some procedural violation. Accordingly, he urged that the impugned notices be quashed and set aside. 10. Mr. Suresh Kumar, the learned counsel for the Respondents, submitted that issuing notices in the name of AFTPL was not illegal. He also submitted that the Principal Commissioner of Income Tax specifically approved the issuance of such notices. 11. Mr. Suresh Kumar submitted that the material on record shows that the notice was meant to be served upon the Petitioner. However, due to certain technical glitches, the utility system generated a notice in the name of AFTPL. He said the facts in the present case were like those in Skylight Hospitality LLP vs Asstt. CIT4. He submitted that, in this case, the Delhi High Court upheld a notice issued to the company that had already merged. Mr. Suresh Kumar Accordingly urged that these Petitions may be dismissed. 12. Rival contentions now fall for our determination. 13. In all these Petitions, the merger between City Corporation Limited and Amanora Future Towers Private Limited, which was effective from 01 April 2018, is not disputed. This merger was based on the NCLT's order dated 27 April 2020. 14. There is also no dispute about the Petitioner, vide a communication received by the Income Tax Department on 27 August 2020 informing about the merger effective 01 April 2018. The communication, along with an endorsement from the office of the Deputy Commissioner of Income-tax, Circle 1(1), Pune, is placed on record at Exhibit-b (page 34 of the paper book in Writ Petition No.6076 of 2023), as also in the connected Petitions. In the affidavit in reply filed, no dispute was raised about the department not receiving the intimation on 27 August 2020 or about the department being unaware of the merger. Still, the impugned notices dated 31 March 2023 under Section 148 of the IT Act, 1961 were issued only in the name of "Amanora Future Towers Private Limited"
The contents of the impugned notice dated 31 March 2023 at Exhibit 'C' page 35 in Writ Petition No. 6076 of 2023 are transcribed below for the convenience of reference: - "EXHIBIT-C GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1), PUNE To AMANORA FUTURE TOWERS PRIVATE LIMITED 917/19A CITY CHAMBERS, F.C. ROAD PUNE PUNE 411004, Maharashtra India PAN : AAKCA3074H A.Y : 2013-14 Dated : 31/03/2023 DIN & Notice No: ITBA/AST/S/148_1/20 22- 23/1051822997(1) Notice under section 148 of the Income-tax Act, 1961 Sir/Madam/ M/s. I have information that a search was initiated under section 132 of the Act in your case or in the case of the person in respect of which you are the assessable under the Act on the date 15/02/2023. This notice is being issued after obtaining the prior approval of the PCCIT, PUNE accorded on date vide Reference No. 100000038654133.
2. I, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for the Assessment Year 2013- 14 and I, hereby, require you to furnish, within 30 days from the service of this notice, a return in the prescribed form for the Assessment Year 2013-14. GANESH SHAMRAO RAKH CIRCLE 1(1), PUNE"
The impugned notices in the connected Petitions are also similar, the crucial factor being that all such notices were issued to and in the name of 'Amanora Future Towers Private Limited' 17. As of the date of the issue of the impugned notices, the noticee 'Amanora Future Towers Private Limited' could not have been regarded as a 'person' under Section 2(31) of the IT Act. In fact, that was a non-existent entity. In Maruti Suzuki (supra) the Hon'ble Supreme Court has held that notice issued in the name of a non-existent company is a substantive illegality and not merely a procedural violation of the nature adverted to in Section 292B of the IT Act.
In Maruti Suzuki (supra), the Hon'ble Supreme Court noted that the merged company had no independent existence after the merger. The Court noted that even though the Assessing Officer was informed of the merged company having ceased to exist due to the approved merger scheme, the jurisdictional notice was issued only in its name. The Court held that the basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the merged entity ceases to exist upon the approved merger scheme. Participation in the proceedings by the petitioner company into which the merged company had merged or amalgamated could not operate as an estoppel against the law.
In Ubber India Systems (supra), the Coordinate Bench held that where by virtue of an order passed by the NCLT, the assessee company stood amalgamated with the petitioner, notice issued under Section 148A(b) and Section 148 to the assessee, which was a non-existent company was illegal, invalid and non-est. Similarly, in Alok Knit Exports Ltd (supra), another Coordinate Bench where the Assessing Officer had committed a fundamental error by issuing notice under Section 148 of the IT Act in the name of an entity which had ceased to exist because of it having merged with the petitioner company, the stand of the Assessing Officer that this was only an error which could be corrected under Section 292B could not be sustained.
Mr Suresh Kumar, however, relied upon the explanation in paragraphs 4.2 and 4.3 of the affidavit filed by Dr. Ganesh S. Rakh, Joint Commissioner of Income Tax (OSD), in these Petitions. To appreciate the contention, Paragraphs 4.2 and 4.3 are transcribed below for the convenience of reference: - "4.2. With reference to the contents of Para No. 3 A of the Writ Petition, notice issued u/s. 148 of the Income-tax Act, 1961 (hereinafter referred as 'the Act') dated 31/03/2023 issued by the Respondent No. 1 in the case of the petitioner for A.Υ. 2013-14. I deny that the notice issued by respondent No. 1 is bad-in-law, illegal or unlawful as the same is issued on to a non- existing company which is merged with Amanora Future Tower Private Limited. The petitioner grounds that the notices were issued on non-existent entity. In this regard, it is to submit that the seized material is for assessment years prior to merger of Amanora Future Towers Private Limited (PAN:AAKCA3074H) into City Corporation Limited (PAN:AACCC2820K) i.e. the seized material is showing the transaction in the name of Amanora Future Towers Private Limited (referred hereinafter as 'AFTPL'), the information is related to Amanora Future Towers Private Limited and same were reflected on the PAN of Amanora Future Towers Private Limited on insight portal. The insight portal shows and highlights/flags information as per the PAN and Name of the Party. A search action was conducted on 15/02/2023 on the City Group. The conducting DDIT(Inv.) who is holding the incriminating documents for the years prior to the merger of AFTPL into CCL, uploaded the information on the PAN of AFTPL. But while taking the approval from the competent authorities (Respondent No.2) as per the provisions of Sec. 148, 148A, 149, 151 of the Act, the name of both the entities i.e. AFTPL and CCL along with the respective PANs were duly quoted. The Copy of the approval of the competent authority is shared with the assessee as well with the Notice u/s 148 of the Act. In short, the notice u/s 148 was issued on the PAN of non- existent entity as the information was reflected/ flagged on that PAN on the insight portal. There is not a single field on this notice which is editable. So the Notice was generated on the PAN of AFTPL. But assessee was simultaneously communicated that all the approvals are taken in the name of- 'M/s Amanora Future Towers Pvt. Ltd. (Now Merged with M/s City Corporation Ltd.)'. So, considering the above facts and after verifying that Amanora Future Towers Private Limited was merged with City Corporation Limited, the approval was taken from competent authority in the name of Amanora Future Towers Private Limited (PAN:AAKCA3074H) which merged in City Corporation Limited (PAN:AACCC2820K). A copy of the same approval is attached herewith for kind reference as Exhibit-R1. The same copy was also shared with petitioner wp.6076-2023 & ors.docx alongwith notices issued u/s. 148 of the Act. All the internal procedure has been communicated with the name of resultant entity. However, due to non-linking of amalgamating entity's PAN to amalgamated entity's PAN, and non-availability of modification option in the 148 notice before issuance, notice u/s 148 was generated through system in the name of Amanora Future Towers Private Limited. As such, the approval was taken in the name of existing entity thus; the notice should have been issued in the name of resultant entity. Thus, Hon'ble Court is requested to direct petitioner to treat the notice as good as in the name of existent entity. 4.3. With reference to the contents of Para No. 3 B of the Writ Petition, the Petitioner states that the Respondent was well aware of the fact that Amanora Future Tower Private Limited was merged with the Petitioner's company i.e. City Corporation Limited. To that, I reiterate my comments in the earlier paragraphs of this reply and agree that the amalgamation of the company was brought to notice of the Department. I say that the notice was issued on the non-existing company due to technical glitch in the system wherein no field in the notice u/s 148 of the Act is editable."
21. The averments in the above paragraphs support the Petitioner's case. In paragraph 4.3, there is a clear admission that the amalgamation of the company was brought to the notice of the Department. The only explanation is that " notice was issued on the non-existing company due to technical glitch in the system wherein no field in the notice u/s 148 of the Act is editable."
In paragraph 4.2, the approval obtained from the Principal Commissioner for the issue of impugned notices is emphasised. The affidavit states that files were moved proposing notices in the names of both entities, AFTPL and the Petitioner (CCL). There was a reference to seizure proceedings, the two PAN numbers, and the lack of an editable field on this notice. Therefore, it was submitted that the notice was generated on AFTPL's PAN.
In short, the averments in paragraphs 4.2 and 4.3 of the affidavit purport to apportion the blame on the department's utility system. Based upon this, the fundamental error is sought to be passed off as a mere technical glitch. Finally, the concluding sentence of paragraph 4.2 of the affidavit urges this Court: "Thus, Hon'ble Court is requested to direct petitioner to treat the notice as good as in the name of existent entity. "
Based on the above averments and the arguments, we are afraid we cannot condone the fundamental error in issuing the impugned notices against a non- existing company despite full knowledge of the merger. The impugned notices, which are non-est cannot be treated as "good" as urged on behalf of the Respondents. In Maruti Suzuki (supra), the Hon'ble Supreme Court has held that issuing notice in the name of a non-existing company is a substantive illegality and not a mere procedural violation of the nature adverted to in Section 292B of the IT Act.
Mr Suresh Kumar's contention about the facts in the present case being akin to those in Skylight Hospitality LLP (supra) cannot be accepted. Except for submitting that the facts are similar or comparable, nothing was shown to us based upon which such a submission could be entertained, much less sustained. In any event, the Hon'ble Supreme Court, in the case of Maruti Suzuki (supra), considered the Delhi High Court's decision in Skylight Hospitality LLP (supra) and held that the same was delivered "in the peculiar facts of wp.6076-2023 & ors.docx the case". In fact, even the Delhi High Court had clarified that the decision was in the case's peculiar facts.
In that case, there was substantial and affirmative material and evidence on record to show that issuing the notice in the name of the dissolved company was only a mistake. The Court held that the Special Leave Petition filed by the Skylight Hospitality LLP (supra) against the judgment of the Delhi High Court rejecting its challenge was dismissed in the peculiar facts of the case, which weighed with the Court in concluding that there was merely a clerical mistake within meaning of Section 292B. The Hon'ble Supreme Court held that in Maruti Suzuki (supra) the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer, was issued to a non-existent company. The assessment order was issued against the amalgamating company. "This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B".
The argument now sought to be raised by Mr Suresh Kumar based on Skylight Hospitality LLP (supra) was considered and rejected by the Gujarat High Court in Anokhi Realty (P) Ltd. Vs. Income-tax Officer (2023) 153 taxmann.com 275 (Gujarat) 2023 150 taxmann.com 178 (Gujarat). In Adani Wilmar Ltd. Vs. Assistant Commissioner of Income-tax6, another Division Bench of the Gujarat High Court rejected the Revenue's argument based on lack of inter-departmental coordination or non-application of mind when materials relating to amalgamation were already available with the department. The Court held that based upon such grounds, notices could not have been issued to a non-existent company.
28. The Delhi High Court, in the case of Principal Commissioner of Income Tax - 7, Delhi Vs. Vedanta Limited 7 rejected a contention very similar to that raised by Mr Suresh Kumar, relying on Skylight Hospitality LLP (supra). The Delhi High Court noted that the decision of the Supreme Court in Maruti Suzuki (supra), while enunciating the legal position concerning an order being framed in the name of a non- existent entity, had unequivocally held as being a fatal flaw which could neither be corrected nor rectified. It had held explicitly that such an order cannot be salvaged by taking recourse to Section 292B of the IT Act. The Court also noticed the peculiar facts obtained in Skylight Hospitality LLP (supra), which alone had led to the Supreme Court upholding the assessment made, albeit in the name of an entity that had ceased to exist.
Accordingly, after considering the above facts and circumstances and the law, we are satisfied that the impugned notices deserved to be quashed and set aside. We do so by making the rule absolute in these petitions.
Before we conclude, we need to clarify that nothing in this order would preclude the respondents from issuing a fresh notice to CCL for reassessment, should the law otherwise permit it, and if the circumstances justify it. We have quashed the impugned notices only because they were issued to a non- existing company or entity despite the respondents' knowledge of its non-existence. All contentions in this regard are left open because we have not addressed them in this order.”
Since in the instant case the assessment order has been passed on a non- existing company despite being informed by the assessee to the Assessing Officer of such merger, therefore, respectfully following the decision of jurisdictional High Court in the case of City Corporation Ltd. (supra) which in turn has relied on the decision of Hon’ble Supreme Court in the case of PCIT Vs. Maruti Suzuki Ltd. (supra), we hold that the order passed by the Assessing Officer on a non-existing company is void ab initio. The first issue raised by the assessee in the grounds of appeal is accordingly allowed.
22. Even otherwise also, it is an admitted fact that the assessee has offered to tax such advances received in the subsequent years, therefore, taxing the same in the impugned assessment year in our opinion will amount to double addition.
23. We further find merit in the contention of the Ld. Counsel for the assessee that the assessee is entitled to claim deduction u/s 80IA on the addition of Rs.22.99 crores on account of bringing the advances received on account of project Cerebrum to tax during this year. We find the Assessing Officer in the instant case made addition of Rs.26,90,56,640/- in respect of advances received from customers as income u/s 68 of the Act. We find the Ld. CIT(A) / NFAC held that the correct amount is Rs.22.99 crore and the Revenue could not bring any evidence disproving the correct figure given by the Ld. CIT(A) / NFAC. We find that out of total amount of Rs.22.99 crore an amount of Rs.21.32 crore relates to the project Cerebrum, the details of which are available at page 90 of the paper book and which read as under:
24. There is no dispute to the fact that the assessee was enjoying the benefit of deduction u/s 80IA of the Act in respect of the project Cerebrum from assessment years 2007-08, 2008-09, 2010-11 and 2011-12 by the orders of the Tribunal, copies of which are placed at pages 133 to 171 of the paper book. We find the Tribunal vide 1463/PUN/2014, 1165/PUN/2015 & 1170/PUN/2015, order dated 23.11.2017 for assessment years 2010-11 and 2011- 12, following the order of the Tribunal for assessment years 2007-08 and 2008-09 vide 1271 & 1272/PUN/2013, order dated 12.08.2016 has allowed the claim of deduction u/s 80IA of the Act and the appeal filed by the Revenue has been dismissed for both the years. The relevant observations of the Tribunal from para 12 onwards read as under: “12. Now, coming to the appeals filed by the Revenue, wherein in both the appeals, the Revenue has raised similar grounds of appeal i.e. against the order of CIT(A) in allowing the claim of deduction under section 80IA(4)(iii) of the Act, on the ground that the project of assessee was not notified by the Government for claiming the aforesaid deduction.
The learned Authorized Representative for the assessee in this regard pointed out that the Tribunal in assessment years 2007-08 and 2008-09 has deliberated upon the issue vide paras 11 to 13. Further, the Tribunal in assessment year 2009-10 in and 1291/PUN/2013, relying on earlier order, vide order dated 12.07.2017 has held as under:- “11. Now, coming to the grounds of appeal raised by the Revenue, wherein the Revenue is first aggrieved by the order of CIT(A) in allowing the deduction under section 80IA(4)(iii) of the Act. The Tribunal had considered various aspects of the claim of assessee and had noted the factual aspects and had relied on earlier decision of the Pune Bench of Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT in to 1415/PN/2013, relating to assessment years 2003-04, 2005-06 & 2007-08 to 2009-10 and in ITA Nos.1478 to 1483/PN/2013, relating to assessment years 2004-05 to 2009-10, order dated 20.02.2015. The Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT (supra) noted that the disallowance was made in assessment year 2007-08 as industrial park was not complete as on 31.03.2007 as the completion certificate was obtained by the assessee from local authority on 09.05.2007 and also the industrial park did not fulfill the criteria of locating minimum number of 30 industrial units. The Tribunal while deciding the appeal of assessee vide para 6.6 at page 18 of the order noted the findings of the Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT (supra) and reproduced the same at pages 19 to 21 of the order and observed as under:- “…. In the present case the project of the assessee was initially approved under IPS 2002 on 15-02-2005. The assessee had claimed deduction u/s. 80IA(4)(iii) in assessment year 2006-07 which was allowed to the assessee. The assessee could not complete the project within the time frame specified in IPS 2002 i.e. 31-03-2006. The assessee applied for notification of the project under IPS 2008. The project was notified by CBDT on 09-07-2010. After notification of the project under IPS 2008, the eligibility of deduction has to be seen with respect to the new scheme. Thus, in view of the facts of the case and the observations of the Co- ordinate Bench of the Tribunal we find no merit in the contentions of the ld. DR that the assessee is not eligible to claim deduction u/s. 80IA(4)(iii) in assessment years under appeal.”
Further, second objection of the Revenue of not establishing 30 units was also considered by the Tribunal in assessee’s own case and following the ratio laid down by the Tribunal in M/s. Kolte Patil Developers Ltd. Vs. DCIT (supra) vide para 6.7 reference was made to the said decision at pages 22 to 25 of the order and held as under:- “… The order of the Tribunal in the case of M/s. Kolte Patil Developers Ltd. Vs. Dy. Commissioner of Income Tax (supra) further strengthens the case of assessee in allowing the deduction u/s. 80IA(4)(iii) of the Act. Accordingly, the ground of appeal
raised by Department against allowing deduction u/s. 80IA(4)(iii) to the assessee is dismissed.”
13. We are making reliance on the said decision of Tribunal in assessee’s own case but for the sake of brevity, only relevant paras are being reproduced as against complete factual and legal aspects noted by the Tribunal and referred to in the said order. Following the same parity of reasoning, we uphold the order of CIT(A) in allowing the claim of deduction under section 80IA(4)(iii) of the Act.”
14. The issue arising in the present appeals filed by the Revenue is identical to the issue before the Tribunal in earlier years and following the same parity of reasoning, we find no merit in the grounds of appeal raised by the Revenue. The assessee is entitled to claim the deduction under section 80IA(4)(iii) of the Act. Accordingly, we dismiss the grounds of appeal raised by the Revenue.”
25. We further find the assessee’s claim of deduction u/s 80IA for assessment year 2014-15 has been allowed by the Assessing Officer. We find the Ld. CIT(A) / NFAC in his findings basically rejected the claim of the assessee on the ground that the starting date of the project mentioned in Form 10CCB for assessment year 2014-15 was 24.03.2014 and therefore, the assessee is not entitled to deduction u/s 80IA. However, a perusal of Form 10CCB for assessment year 2014-15, copy of which is placed at pages 118 to 123 shows that the date of commencement of operation / activity by the undertaking or enterprise is 02.12.2005. The relevant part of Form No.10CCB reads as under:
26. Therefore, the findings of the Ld. CIT(A) / NFAC on this issue is factually incorrect. Therefore, the assessee in our opinion is entitled to claim deduction u/s 80IA for the incme of Rs.21.32 crores out of amount of Rs.22.99 crore. Once it is held that the assessee is entitled to deduction u/s 80IA and there is also no dispute the fact that the assessee has offered the advances received to tax in subsequent years, therefore, the order of the Ld. CIT(A) / NFAC partly sustaining the addition made by the Assessing Officer in our opinion is not justified. We, therefore, set aside the order of the Ld. CIT(A) / NFAC and the grounds raised by the assessee are allowed. Consequently, the appeal filed by the Revenue is dismissed.
Grounds raised by the assessee are as under: 27. 1] The learned CIT(A) erred in holding that the asst. order passed in the name of a non existent entity was valid without appreciating that in the course of asst. proceeding, the assessee had duly informed the learned A.O. regarding the amalgamation of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. and hence, the asst. order passed was null and void. 2] The learned CIT(A) erred in holding that the assessee company had not registered itself as a successor to Kumar Housing Corporation Pvt. Ltd. on the e-filing portal of the Income Tax Department and therefore, since there was failure on the part of the assessee, the asst. order passed by the learned A.O. was valid in law. 3] The learned CIT(A) erred in holding that mere intimation by the assessee regarding the amalgamation without registering itself as a successor on the e-filing portal resulted in non compliance on the part of the assessee and therefore, the asst. order passed in the name of Kumar Housing Corporation Pvt. Ltd. was valid in law.
4] The learned CIT(A) erred in not appreciating that there was no such procedure of registering the assessee as a successor on the e-filing portal and hence, there was no reason to hold that there was non compliance on the part of the assessee and accordingly, the asst. order passed in the name of non-existent entity was bad in law and the same should have been declared null and void. 5] The learned CIT(A) erred in holding that filing of intimation letter along with the copy of High Court order sanctioning the amalgamation was a dumb document without appreciating that the assessee had duly informed the learned A.O. regarding the amalgamation of Kumar Housing Corporation Pvt. Ltd. with Kumar Urban Development Pvt. Ltd. and hence, the asst, order passed by the learned A.O. is invalid in law. 6] The learned CIT(A) erred in confirming an addition of Rs.3,87,15,056/-in respect of sundry creditors on the ground that the said sundry creditors had ceased to exist as on 31.03.2014 and therefore, the said amount was taxable u/s 41(1) of the Act. 7] The learned CIT(A) erred in not appreciating that the sundry creditors totaling to Rs.3,87,15,056/- were not written back by the assessee company in its books as on 31.03.2014 and therefore, question of taxing the said amount u/s 41(1) in the hands of the assessee simply did not arise. 8] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal
The first issue raised by the assessee in the grounds of appeal is relating to the validity of assessment on a non-existing company. We have already decided the issue while adjudicating the appeal of the assessee for assessment year 2013-14 and have held that the assessment proceedings are null and void being passed on a non-existing company. Following similar reasonings, we hold that since the assessment order is passed in the name of a non-existing entity despite the assessee informed the fact to the Assessing Officer, therefore, the same is also quashed.
29. Even otherwise on merit also we find the Assessing Officer made addition of Rs.5,37,23,879/- being the sundry creditors as on 31.03.2014 on the ground that the transactions have been dormant for more than 3 years and the assessee failed to obtain confirmations from the above sundry creditors. We find in appeal the Ld. CIT(A) / NFAC relying on the decision of Hon’ble Madras High Court in the case of West Asia Exports and Imports Pvt. Ltd. vs. ACIT (2019) 104 taxmann.com 170 (Mad) upheld the action of the Assessing Officer. However, he directed the Assessing Officer to restrict the same to Rs.3,87,15,056/-. He further held that the assessee is free to approach the JAO and get the amount written back in assessment years 2018-19, 2019-20 and 2020-21 of Rs.49,33,641/-, Rs.69,95,555/- and Rs.1,31,64,066/- respectively, reversed in those years, if it so desires, consequent to giving appeal effect since the above sums cannot be brought to tax twice. The Revenue is not in appeal before the Tribunal against the relief granted by the Ld. CIT(A) / NFAC.
30. So far as the additions sustained by the Ld. CIT(A) / NFAC on account of those creditors lying for a long time and no confirmations were filed are concerned, we find Hon’ble Delhi High Court in the case of CIT vs. Jain Exports (P.) Ltd. (2013) 35 taxmann.com 540 (Del) following the decision of Hon’ble Supreme Court in the case of CIT vs. Sugauli Sugar Works (P.) Ltd. (1999) 236 ITR 518 (SC) has held that credit amount outstanding for several years cannot be held as cessation of trading liability on the ground that the assessee could not prove genuineness of transaction where the assessee had acknowledged its liability successively over several years.
31. We find the Hon’ble Bombay High Court in the case of PCIT vs. Batliboi Environmental Engineering Ltd. (2022) 141 taxmann.com 245 (Bom) following the above decision has held that merely because liability was barred by time, it did not cease to be a debt and, thus, where assessee had many creditors whose payments were outstanding for more than three years and some transactions were eight to nine years old, Assessing Officer erred in treating amount due to creditors as assessee's income and added under section 41(1). In view of the binding decision of the jurisdictional High Court cited (supra), the order of the Ld. CIT(A)/ NFAC in our opinion is not correct. Thus, even on merit also, the grounds raised by the assessee have to be allowed.
In the result, both the appeals filed by the assessee are allowed and the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 18th August, 2025.