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Issues involved: Challenge to correctness of CIT(A)'s order regarding amalgamation of assessee company with another company and treatment of unsecured loans as undisclosed income.
Issue 1: Amalgamation of assessee company The Assessing Officer challenged the CIT(A)'s order regarding the effective date of amalgamation of the assessee company with another company. The AO contended that the amalgamation was effective from a subsequent date, not retrospectively from 01.04.2008 as claimed by the assessee. The AO made a best judgment assessment u/s 144 of the I.T. Act due to the assessee's failure to file a return. The AO added unsecured loans received by the assessee in the previous year as undisclosed income for the current year, as the genuineness of these loans was not substantiated. Penalty proceedings were also initiated under u/s 271(1)(c) of the I.T. Act. The CIT(A) annulled the assessment, stating that the company ceased to exist from 01.04.2008 due to the amalgamation. The CIT(A) relied on the order of amalgamation passed by the Bombay High Court, which specified the appointed date as 01.04.2008, and held that the company could not be a taxable entity post the amalgamation. The ITAT upheld the CIT(A)'s decision, emphasizing that once a company is amalgamated, it ceases to have legal existence and cannot be assessed to tax. Issue 2: Treatment of unsecured loans The Assessing Officer treated unsecured loans received by the assessee as undisclosed income u/s 68 of the I.T. Act for the current year, similar to the treatment in the previous year. The AO added the amount of the unsecured loans to the assessee's income and initiated penalty proceedings. The CIT(A) annulled the assessment based on the legal fact that the company ceased to exist post-amalgamation. The ITAT dismissed the appeal, highlighting that the effective date of merger was 1st April, 2008, as per the Bombay High Court's judgment, and reiterated that a company loses its legal existence post-amalgamation. The ITAT criticized the frivolous nature of the appeal and upheld the CIT(A)'s decision. In conclusion, the ITAT upheld the CIT(A)'s decision regarding the amalgamation of the assessee company and the treatment of unsecured loans, emphasizing the legal principle that a company ceases to exist post-amalgamation and cannot be assessed to tax.
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