2022 (3) TMI 1613 - HC - Income Tax

Failure of the liquidator to reply to the intimation for assessment - petitioner company is under liquidation and that there is no dispute that no notice was issued to the petitioner by the respondent after there was a transfer to liquidator under Section 127 - as submitted petitioner company is under liquidation and eventually wound up and there is no threat of any recovery proceedings - HELD THAT - All through the period during the course of assessment even prior to the above order passed on 15.3.2021 by the National Company Law Tribunal for liquidating the petitioner the petitioner was represented by the liquidator in the capacity of an IRP and later as an RP. The petitioner company is located in Union Territory of Puducherry whereas the liquidator is operating from Chennai. Though it would have been ideal on the part of the liquidator to give a suitable intimation to the respondent Income Tax Department even prior to order of the liquidation that the petitioner company was represented by the liquidator in the capacity of an IRP and later as an RP the fact remains that there was some failure on the part of the liquidator. The liquidator has given only postfacto intimated after the assessment order dated 25.6.2021 came to be passed by the respondent. Since the assets of the petitioner company is to be distributed among the creditors in terms of the provisions of the Companies Act 2013 it would be unfair to deny legitimate dues that may be payable to the secured and unsecured creditors if indeed tax due from the petitioner was much lesser. Therefore to meet the ends of justice we quash the impugned order and remit the case back to the respondent to pass a fresh assessment order preferably with in a period of 90 days from the date of receipt of a copy of this order. The petitioner represented by its liquidator shall file necessary reply to the notices and intimations in a period of 30 days. The impugned order stands quashed by this order and it shall be treated as a corrigendum to the show cause notice if any issued earlier to the petitioner. All issues on merits are left to be canvassed before the respondent.

Summary

Issues:
1. Failure of the liquidator to reply to the intimation for assessment.
2. Dispute regarding the release of assets under liquidation.
3. Compliance with notice requirements under the Income Tax Act.
4. Application of Section 178 of the Income Tax Act.
5. Quashing of the impugned order and remitting the case back to the respondent.

Detailed Analysis:

1. The petitioner company, under liquidation, was represented by a liquidator appointed by the National Company Law Tribunal (NCLT). The liquidator, initially an Interim Resolution Professional (IRP) and later a Resolution Professional (RP), failed to respond to an intimation from the Assistant Commissioner of Income Tax regarding finalizing the assessment. The petitioner argued that the notice was received at the registered office in Puducherry, but the liquidator, based in Chennai, was unaware due to lack of staff at the office.

2. The dispute centered on the release of assets of the company under liquidation. The petitioner sought another opportunity to convince the respondent for appropriate orders. The respondent defended the assessment order, citing compliance with Section 282 of the Income Tax Act in sending notices based on PAN numbers and provided email IDs.

3. The respondent suggested the petitioner could appeal to the Commissioner of Income Tax appeals and argued that the impugned order should not be interfered with as the company was under liquidation with no threat of recovery proceedings. The respondent also referred to a Supreme Court decision in support of their position.

4. Section 178 of the Income Tax Act outlines the obligations of a liquidator of a company under liquidation, including giving notice of appointment and setting aside funds for tax liabilities. The court noted the failure of the liquidator to provide timely intimation to the Income Tax Department, leading to post-facto communication after the assessment order was passed.

5. The court, considering the circumstances and to ensure justice, decided to quash the impugned order and remit the case back to the respondent for a fresh assessment within 90 days. The petitioner, through the liquidator, was directed to respond to notices within 30 days. The court allowed all issues on merits to be raised before the respondent, concluding the writ petition in favor of the petitioner with no costs.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive understanding of the court's decision and the legal principles involved.