2024 (5) TMI 1469 - AT - Income Tax

Validity of Assessment orders passed against a non-existent company - company master data and company information showing strike off against the company status on the record of MCA - HELD THAT - From the record, it appears that the assessee-company has been used as a conduit to provide large scale accommodation entries and availed the voluntary strike off from the record of the Master Data of MCA and has thus ceased to exist. The proceedings can be initiated against the assessee-company only when recourse to the revival of the company is taken by the Revenue in accordance with law, substantially affected by such action of the assessee. Paradoxically, the appeal before the Tribunal arises from the first appellate order passed u/s 250 of the Act which, in turn, is based upon incompetent appeal memo signed by a former Director. It is not shown as to how such former director has derived authority in law to pursue appeal before CIT(A) on behalf of a struck off company. The entire first appellate proceedings is thus vitiated and rendered non-est. The captioned appeals before Tribunal arising from the first appellate order passed thus appear to be without sanctity of law and outside the realm of adjudication. In view of such glaring deficiencies, no useful purpose would be served by continuing with the present proceedings in the present form. No useful purpose will be served in keeping the captioned appeals pending either. Therefore, the right course, to our mind, will be to consign the present appeals and the Cross objections to the records. Both the sides shall be at liberty to revive the appeals at opportune time as and when the circumstances may warrant. We dismiss the captioned appeals of the Revenue arising from defective and incompetent appeal placed before the CIT(A) in limine.

Summary

Issues:
1. Assessment orders passed against a non-existent company.
2. Validity of assessment based on strike off of company from MCA records.
3. Allegations of company being a conduit for accommodation entries.
4. Competence of former director to file appeals.
5. Lack of jurisdiction due to non-existence of company.
6. Competence of former director to file cross objections.
7. Dismissal of appeals and cross objections.

Analysis:

Issue 1: Assessment orders passed against a non-existent company
The appellant argued that the company's name was struck off from the Register of Members by the Ministry of Corporate Affairs, leading to its dissolution. They contended that no adverse action could be taken against a non-existent company, and the assessment order was passed ex parte due to the company's non-existence.

Issue 2: Validity of assessment based on strike off of company from MCA records
The appellant highlighted that the company's strike off was in accordance with Section 560(5) of the Companies Act, 1956. They emphasized that this fact was presented before the CIT(A), indicating that the Assessing Officer (AO) should not have taken action against a dissolved company.

Issue 3: Allegations of company being a conduit for accommodation entries
The appellant argued that the company acted as a conduit for providing accommodation entries, citing precedents where ITAT held that additions made on a protective basis were not justified. They asserted that the company's role was limited to charging a commission for these transactions.

Issue 4: Competence of former director to file appeals
The Revenue contended that the company was involved in providing accommodation entries and that the former director lacked authority to verify the appeal. They suggested that the tax liability related to these entries could not be evaded by claiming the company was a conduit.

Issue 5: Lack of jurisdiction due to non-existence of company
The Tribunal noted that the assessment order was based on a non-existent company and that no intimation was given to the AO regarding the strike off. The Tribunal found deficiencies in the first appellate proceedings, stating that the former director had no legal standing to pursue the appeal.

Issue 6: Competence of former director to file cross objections
The Tribunal dismissed the competence of the former director to file cross objections, as the company had ceased to exist. They emphasized that the entire first appellate process was flawed due to the lack of authority of the former director.

Issue 7: Dismissal of appeals and cross objections
Given the deficiencies and lack of legal standing, the Tribunal dismissed the appeals of the Revenue and the cross objections of the assessee. Both parties were granted liberty to revive their appeals if circumstances warranted.

This judgment highlights the importance of legal standing and jurisdiction in tax assessments, emphasizing that actions against non-existent entities are legally untenable. The decision underscores the need for proper representation and compliance with legal procedures in tax matters.