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TMI Blog2023 (11) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. - HON BLE MR. JUSTICE SANJEEV KUMAR, and HON BLE MR. JUSTICE MOHAN LAL, JUDGE For the Appellant Through:- Mr. K.S.Johal, Sr. Advocate with Mr. Supreet Johal, Advocate Mr. Inderjeet Gupta, Advocate For the Respondent(s) Through:- Ms. Aruna Thakur, Advocate JUDGMENT SANJEEV KUMAR J. 1. This appeal under Section 260A of the Income Tax Act, 1961 [ the Act of 1961 ] is directed against order dated 30.01.2014 passed by the Income Tax Appellate Tribunal, Amritsar Bench [ the Tribunal ] in ITA No. 355(ASR)/2013(Assessment year 2004-05). Vide order dated 03.01.2015 instant appeal was admitted on the following substantial question of law:- Whether on the facts and circumstances of the case, the ITAT erred in law in not appreciating that the name of the appellant company had been struck off from the Register of the Companies by the Registrar and the aforesaid company was dissolved under provisions of Section 560 of the Companies Act, 1956, prior to the date of passing of the assessment order? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a solitary ground that the assessing authority could not have passed an assessment order against the Company, which, at the time of making of the assessment order, stood dissolved under the provisions of Section 560(5) of the Companies Act. 4. It is argued by Mr. K.S. Johal, learned senior counsel appearing for the appellant, that on the date of making assessment by the assessing authority the appellant-company had ceased to exist and stood dissolved under Section 560(5) of the Companies Act and a notification in this regard stood published in Government Gazette dated April 22 to April 28, 2006. He, however, fairly concedes that despite the notice with regard to striking off of the Company w.e.f. 31.03.2006 having been published on the date of making assessment, appellant could not bring this fact to the notice of the assessing authority at the time of making the assessment. He, however, submits that dissolution of the Company and striking off its name from the Register of the Companies in terms of Section 560 of the Companies Act was a fact, though, the evidence in respect thereto could not be brought to the notice of the authorities despite due diligence. He submits that since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in one month from the date thereof, a notice will be published in the Official Gazette with a view to striking the name of the company off the register. (3) If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved. (4) If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the liquidator, if any, a like notice as is provided in sub-section (3). (5) At the expiry of the time mentioned in the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure prescribed under Subsections (1) to (4) is followed and the time mentioned in the notice referred to in Subsections 3 or 4 expires, the Registrar may strike off the name of the company concerned from the Register of Companies. If it does so, it shall publish a notice thereof in the Official Gazette and on publication of the notice in the Official Gazette, the company shall stand dissolved. However, proviso to Subsection (5) of Section 560 further provides that notwithstanding dissolution of the company, liability of every director, manager or other officer who was exercising any power of management and of every member of the company shall continue and may be enforced as if the company had not been dissolved. Proviso (b) further provides that nothing provided in Subsection (5) in respect of dissolution of company whose name has been struck off from the Register, shall affect the power of the competent Court to wind up a company. 8. The provisions of Subsection (6), if read carefully, would indicate that if a company or any member or creditor of the company feels aggrieved by the decision of the Registrar to strike off registration of the company, it can move an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the assessee jointly with any other person and for the purposes of sub-section, the shares of the joint-holders in such account shall be presumed, until the contrary is proved, to be equal. (iii) A copy of the notice shall be forwarded to the assessee at his last address known to the Income-tax Officer, and in the case of a joint account to all the joint-holders at their last addresses known to the Income-tax Officer. (iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of his powers under section 222. 12. Section 179 of the Income Tax Act also assumes importance in the point we are discussing and stipulates that if the tax due from a private company in respect of any income of previous year become unrecoverable against the company for any reason, then every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. Section 179 of the Income Tax Act reads thus:- 179. Liability of directors of private company in liquidation. (1) [Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company] cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision parallel to and in pari materia with Section 250 of the Companies Act, 2013 in the Companies Act, 1956, as was applicable at the relevant point of time. 16. True it is that in terms of Section 250 of the Companies Act, 2013, where a company stands dissolved under Section 248 of the Companies Act, 2013 (which is in pari materia with Section 560 of the Companies Act, 1956) the certificate of incorporation issued to such company shall be deemed to have been cancelled except for the purpose of realizing the amount due to the company or for payment or discharge of the liability or obligation of the company. 17. It is equally true that after promulgation of the Companies Act, 2013 and in view of the specific provision made in Section 250 thereof, the dissolved company is by fiction of law conferred the juridical personality and may, therefore, be competent to challenge the assessment order, if any, passed against it when it stood dissolved by the Registrar under Section 248 of the Companies Act, 2013. In the absence of similar provision under the Companies Act, 1956 and in view of the discussion made herein above, we are of the considered opinion that in the instant case the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the liability for the tax due for the previous year assessed by the assessing authority against the company could be fastened on him should have been diligent enough to prosecute his appeal and bring true facts to the notice of the concerned authorities, however, we are also aware that when a company becomes defunct and its management goes haywire, there is nobody to take the responsibility of the affairs of the company. Even mice leave the ship when it is sinking. It is in these circumstances, perhaps, the director of the company could not lay his hand on the Official Gazette and was under a bona fide impression that the application for striking off the company from the Register of the Companies and effecting dissolution by publication was still pending before the Registrar of Companies. 21. Be that as it may, now it has come to light that on the date the assessment order was passed, the appellant-company stood dissolved under Section 560(5) of the Companies Act and, therefore, could not have been assessed. In terms of Section 143 of the Income Tax Act, assessment can be made by the assessing authority only against the assessee, who has filed a return under Section 139 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant observations of the ITAT Delhi Bench in Impsat (P) Ltd. v. Income Tax Officer are also worth taking note of and are, thus, set out below:- 17. A reference to page 1901 of A. Ramaiya s commentary on the Companies Act, 1956 (12th Edition) by Hon ble Justice Y.V. Chandrachud (former Chief Justice of India) shows the following extract from Halsbury s Laws of England, fourth ediction, Vol.7, para 1448, page 809 under the heading Effecting of dissolution . The dissolution puts an end to the existence of the company. Unless and until it has been set aside, it prevents any proceedings being taken against promoters, directors or officers of the company to recover money or property due or belonging to it or to prove a debt due from it. When the company is dissolved, the liquidator s statutory duty towards the creditors and contributories is gone; but, if he has committed a breach of his duty to any creditor by distributing the assets without complying with the requirements of the Companies Act, 1948, he is liable in damages to him. .. . 21. That takes us to the next question regarding the validity of an assessment on a non-existent person. It is a nullity. Reference may be made to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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