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2023 (11) TMI 812 - HC - Income TaxValidity of Assessment order against the Company dissolved u/s 560(5) of the Companies Act - appellant-company was struck off from the Register of Companies and stood dissolved - HELD THAT - From a reading of Sub-section (7) along with Subsection 31 of Section 2 of the Income Tax Act, it becomes abundantly clear that the assessee to be assessed for income tax under Section 143 of the Income Tax Act must be a person in existence. Indisputably, a company is a juridical person but the moment it is struck off from the Register of Companies and is dissolved, it ceases to exist. Making of an assessment order against a non-existent company would be like passing a decree by a civil court against a dead person. Such order of assessment made against a non-existent entity would be nullity and would not give rise to any right or liability under such assessment order. Thus Once a company is dissolved under Section 560(5) of the Companies Act, it ceases to exist and, therefore, no order of assessment could be validly passed against it under the Income Tax Act and if it is passed, it would be a nullity.
Issues Involved:
1. Whether the ITAT erred in law by not appreciating that the appellant company had been dissolved before the assessment order was passed. 2. Whether an assessment order can be validly passed against a non-existent company. Summary: Issue 1: Dissolution of the Appellant Company The appellant company filed a Nil return of income for the assessment year 2004-05 and applied for striking off its name from the Register of Companies under Section 560 of the Companies Act, 1956. The company was dissolved as per the notice published in the Government Gazette from April 22 to April 28, 2006. Despite this, the assessing authority completed the assessment under Section 143(3) of the Income Tax Act, 1961 on 21.12.2006, adding Rs. 1,00,75,000/- to the company's income. The appellant's appeals to the Commissioner of Income Tax (Appeals) and the Tribunal were dismissed. The appellant argued that the assessment order was invalid as the company had already been dissolved. Issue 2: Validity of Assessment Against a Non-Existent Company The court examined Section 560 of the Companies Act, which outlines the procedure for striking off a company and its dissolution. It was noted that once a company is dissolved, it ceases to exist and cannot be assessed. The court also referred to Section 226(3) and Section 179 of the Income Tax Act, which allow recovery of tax dues from directors or persons holding money for the dissolved company. The court concluded that the assessment order against a non-existent company is a nullity, akin to passing a decree against a dead person. The court cited the Delhi High Court's judgment in Commissioner of Income Tax v. Vived Marketing Servicing Pvt. Ltd., which held that an assessment order against a dissolved company is invalid. Conclusion: The court held that the appellant company, having been dissolved under Section 560(5) of the Companies Act, could not be assessed. The assessment order dated 21.12.2006, the Commissioner of Income Tax (Appeals) order dated 01.04.2013, and the Tribunal's order dated 30.01.2014 were set aside. The court emphasized that directors of a dissolved company may challenge such orders if they are liable for the company's dues.
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