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2024 (9) TMI 639 - AT - Income TaxOrder passed in the name of such non-existent entity - remedies of the AO against the property in cases of representative assessee - responsibility of director of the dissolved company - assessment order passed against earstwhile company, whose name stands struck off from register of companies - HELD THAT - We find that the provision of section 159 of the Act is with regard to legal representatives of the assessee in case of a natural person who dies and same is not applicable as erstwhile company is not natural person. Then, section 160 of the Act, is with regard to determination of representative assessee for various class of assessee including the non-residents and then section 161 provides for the liability of representative assessee as per section and Section 162 of the Act is providing for the rights of the representative of the assessee to recover the tax paid. Then section 163 of the Act defines for the purpose of this Act, who can be considered as agent for Non- Resident Indian and Section 166 of the Act provides for direct assessment in case of assessee on whose behalf representative assessee have been appointed or for whose benefit income therein referred to is receivable. None of these provisions came to help the AO in regard to erstwhile company. We further find that the remedies of the AO against the property in cases of representative assessee under section 167 of the Act have no application in case before us and do not come for assistance of the AO, where, a foreign company opts for voluntarily closure of business and getting name struck off with ROC. We note that section 170 of the Act is applicable in cases wherever there is a succession of business otherwise than on death and in cases where the person succeeding continues to carry on the business or profession which too is not the case here. Relevant here is the section 176(1) of the Act, which provides for the assessment in case of discontinued business and the section is meant for those circumstances where any business or profession is discontinued during the assessment year and subsection (1) of section 176 provides that the income of the period from the expiry of the previous year for that assessment year upto the date of such discontinuance may, at the discretion of the AO, be charged to tax in the assessment year. Section 178 of the Act, provides for company in liquidation, which is not the case here, as there was voluntary dissolution of company followed by request to ROC for striking off name of the company. Thus as per section 179 of the Act, we are of considered view that it is only when the AO, proceeds against the former director for making a recovery of tax payable by the erstwhile company, the former director will he aggrieved with the recovery. But that too will not place the former director in the cradle of assessee , as only limited right given to former director is to deny the liability by proving that the non-recovery of tax demand cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. However, the merits of assessment order cannot be assailed by an appeal u/s section 246(1) providing for appeal before CIT(A) or under section 253 of the Act, which, provides for appeal to this Tribunal, since it is assessee who can challenge the merits of assessment order passed u/s 143(3) of the Act. Thus, based on the aforesaid discussion, the only conclusions that can be drawn is that the very filing and subsistence of the appeal before this Tribunal on behalf of the erstwhile company, through or by director of the dissolved company./Mr. Boopendradas (Vikash) Sungker becomes questionable and answered against him. Orders against non-existent entities - The second issue before us is also somehow covered against the erstwhile company and in this context, the issue has been considered by the coordinate Bench at Delhi in the case of Dwarka Portfolio (P) Ltd. 2022 (5) TMI 1385 - ITAT DELHI wherein one of us, i.e., the ld. Accountant Member was also on the Bench and it was held that the appeal filed on behalf of the company whose name is struck off is maintainable thus hold holds that the certificate of incorporation issued to the assessee company cannot be treated as cancelled for the purpose of realizing the amount due to the company and for payment and discharge of the liability or obligations of the company. Though in that case assessment order was not passed against a company whose name was struck off, and name was struck off at stage of pendency of appeal before the Tribunal, however, the ratio of the order of the coordinate Bench substantiates our conclusion that as for the purpose of tax liability the provisions of the Act concerning the amalgamated corporate entities or which are liquidated, are not applicable, as different consequences follow under law, in case of the company whose name is struck off on discontinuance of business.
Issues Involved:
1. Maintainability of the appeal on behalf of the erstwhile company by Mr. Boopendradas (Vikash) Sungker. 2. Validity of the assessment order passed against the non-existent entity. Detailed Analysis: Issue 1: Maintainability of the Appeal Relevant Provisions and Arguments: - The appeal was filed by Mr. Boopendradas (Vikash) Sungker, former director of the dissolved company. - Section 159 of the Income Tax Act pertains to legal representatives of deceased individuals and is not applicable to dissolved companies. - Section 160 defines "representative assessee" and Section 161 outlines their liability, neither of which apply here. - Section 173 allows for recovery of tax from non-resident assets, and Section 179 provides for director liability in case of private companies, but only when tax recovery is pursued by the AO. Court's Findings: - The appeal was filed by a person who had no standing to represent the dissolved company. - Mr. Boopendradas (Vikash) Sungker admitted in a letter dated 11.02.2022 that he had no authority to respond to notices as he no longer served as a director. - The court referenced several cases, including ACIT vs. M/s Zeus Impex Pvt. Ltd., where appeals filed by former directors of dissolved companies were deemed not maintainable. Conclusion: - The appeal filed by Mr. Boopendradas (Vikash) Sungker is not maintainable as he had no locus standi to represent the dissolved company. Issue 2: Validity of the Assessment Order Relevant Provisions and Arguments: - The company was dissolved and its name struck off the register on 29.10.2021. - The draft assessment order was issued on 30.09.2021, when the company was still in existence. - The final assessment order dated 20.06.2022 was issued after the company ceased to exist. - The court considered whether the assessment order against a non-existent entity is void. Court's Findings: - The court cited various judgments, including PCIT vs. Maruti Suzuki India Ltd., which held that assessment orders against non-existent entities are void ab initio. - The court noted that the AO was informed of the dissolution process but not of the final removal of the company's name from the register. - The court distinguished this case from others involving amalgamation or liquidation, where a successor entity exists. Conclusion: - The assessment order passed against the non-existent entity is invalid. - The court emphasized that the AO was not informed of the final dissolution and removal of the company's name from the register, which could have allowed the AO to take appropriate action under the Act. Final Decision: - The appeal is dismissed due to lack of maintainability. - The assessment order is deemed invalid as it was passed against a non-existent entity.
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