2016 (7) TMI 969 - HC - Income Tax

Reopning of assessment - dissolution/strike off of the petitioner company - Held that - The respondent called for documentary evidence in connection with the dissolution of M/s.AGS, names and addresses of the directors at the time of filing of application for dissolution/strike off and also copy of the notice dated 24.2.2014 claimed to have been sent to the Chief Commissioner of Income Tax. In such circumstances, it is appropriate for the petitioner to produce the documents before the respondent. The fact of the dissolution/strike off is to be examined by the respondent and the present attempt on the part of the petitioner is to interdict a legal proceedings at the instance of the respondent even at the threshold. The impugned notice dated 10.6.2016 seeks certain clarifications from the petitioner and admittedly, such clarifications relate to the assessment year 2009-10, which is prior to the dissolution/strike off. Therefore, the petitioner should appear before the respondent and clarify all issues, on which, clarifications have been sought and produce documentary evidence called for.

Summary

Issues:
- Validity of notice issued under Section 147 of the Income Tax Act, 1961 to a dissolved company.
- Jurisdiction of the respondent to proceed with re-assessment post dissolution.
- Compliance with notice under Section 148 of the Act by a non-existent company.
- Legal implications of dissolution/strike off under Section 560(3) of the Companies Act, 1956 on re-assessment proceedings.
- Applicability of Section 560(5)(a) and (b) of the Companies Act, 1956 on the assessment year 2009-10.
- Threat of assessment under Section 144 of the Act and penal proceedings under Section 271(1)(b).
- Challenge to the impugned orders as being illegal and without jurisdiction.
- Interpretation of the Bombay High Court's interim order on assessment of a non-existent entity.
- Right of the petitioner to raise issues and seek clarifications before re-assessment proceedings under Section 144.
- Court's discretion on interfering with the impugned proceedings and directions to the petitioner.

Analysis:
1. The petitioner challenged a notice issued under Section 147 of the Income Tax Act, 1961 to a dissolved company, M/s.AGS, on the grounds of its non-existence post dissolution. The respondent sought to re-assess the income for the assessment year 2009-10, directing the company to submit a return. The petitioner contended that the notice to a non-existent entity is invalid, citing the dissolution under Section 560(3) of the Companies Act, 1956.

2. Following the petitioner's response, the respondent requested clarifications on the impact of dissolution/strike off on re-assessment proceedings. The petitioner was directed to provide documentary evidence related to the dissolution, directors' details, and a copy of the notice sent to the Chief Commissioner of Income Tax. Non-compliance was warned to lead to assessment under Section 144 and penal proceedings under Section 271(1)(b).

3. The petitioner argued that the impugned orders were illegal as they were issued to a dissolved company, emphasizing lack of jurisdiction post-dissolution. The respondent's threat of assessment under Section 144 was deemed unfeasible due to the notice being directed at a non-existent entity.

4. The Court opined that the respondent's notice seeking clarifications cannot be challenged under Article 226, directing the petitioner to produce relevant documents. The petitioner's reliance on a Bombay High Court interim order on a similar matter was noted, emphasizing the need for clarifications and documentary evidence.

5. The Court concluded that the petitioner should appear before the respondent, clarify all issues, and produce necessary documents. The re-assessment proceedings were to be kept in abeyance until the respondent considers the clarifications and issues a speaking order. The petitioner was granted an opportunity to present facts before a decision is made, with a directive to the respondent to communicate the decision within 15 days of the hearing's conclusion.