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TMI Blog2024 (9) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... gent 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency 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. - For the Assessee : Shri Gaurav Jain, Adv. And Shri Vibhu Gupta, Advocate For the Revenue : Shri Vijay B. Vasanta, CIT-DR ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the assessee against the final assessment order dated 20.06.2022 passed by Circle 3(1)(1), International Taxation, Delhi (hereinafter referred to as the Ld. AO) u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Heard and perused the record. On conclusion of hearing, Sh. Gaurav Jain, Advocate, appearing for Mr Boopendradas (Vikash) Sungker, former director of M/s Red Fort India Real Estate Humayun (hereinafter referred as erstwhile company) has provided a synopsis which has admitted basic facts giving rise to appeal and the contentions on point of law and facts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. 8. It is pertinent to mention here that Alena Cyprus had also filed its return of income in India for the AY 2018-19 wherein the long term capital gains of Rs. 80,86,75,225 arising from sale of shares to the assessee were declared exemption claimed under Article 13 of the India-Cyprus DTAA. The return filed by Alena Cyprus was duly processed and stood concluded vide intimation dated 12.04.2019 passed under section 143(1) of the Income Act, 1961 ('the Act ). 9. The return of income filed by the assessee was selected for complete scrutiny vide notice dated 23.09.2019 under section 143(2) of the Act. 10. Since the specific purpose of making investment in Prestige India was achieved, the assessee filed an application before the Financial Services Commission, Mauritius on 28.12.2020 (during the pendency of assessment proceedings) for dissolution and removal of the company from Register of Companies, Mauritius. The above fact was also intimated to the assessing officer vide reply dated 01.03.2021. 11. Subsequently, in compliance with Mauritius law, another application was filed by the assessee before the Registrar of Companies, Mauritius on 04.06.2021 for removing the name of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are as under: GOA No. 1 to 1.3: Final assessment order passed in the name of non-existent entity 20. It is submitted that the final assessment order passed in the name of non-existing entity is illegal, bad in law and without jurisdiction for the reasons elaborated hereunder: 21. The relevant provisions of Mauritius Companies Act, 2001 dealing with removal from register of Companies are reproduced hereunder: 308. Removal from register A company shall be removed from the register of companies when a notice, signed by the Registrar stating that the company is removed from the register, is registered under this Act. 309. Grounds for removal from register (1) Subject to the other provisions of this section, the Registrar shall remove a company from the register of companies where (a) the company is an amalgamating company, other than an amalgamated company, on the day on which the Registrar issues a certificate of amalgamation under section 249 of this Act; or (b) the Registrar is satisfied that - (i) the company has ceased to carry on business; and (ii) there is no other reason for the company to continue in existence; or (c) the company has been put into liquidation, and - (i) no liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal has been received, has complied with section 313. 310. Notice of intention to remove where company has ceased to carry on business (1) Before removing a company from the register under section 309(1) (b), the Registrar shall- (a) give notice to the company in accordance with subsection (2); (b) give notice of the matters set out in subsection (3) to any person who is entitled to a charge registered under section 127; and (c) give public notice of the matters set out in subsection (3). (2) The notice to be given under subsection (l)(a) shall- (a) state the section under, and the grounds on, which it is intended to remove the company from the register; and (b) state that, unless- (i) by the date specified in the notice, which shall not be less than 28 days after the date of the notice, the company satisfies the Registrar by notice in writing that it is still carrying on business or there is other reason for it to continue in existence; or (ii) the Registrar does not proceed to remove the company from the register under section 313, the company shall be removed from the register. (3) The notice to be given under subsection (1) (b) and (c) shall specify- (a) the name of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undischarged claim where- (i) the claim has been paid in full; (ii) the claim has been paid in part under a compromise entered into under Part XVII or by being otherwise compounded to the reasonable satisfaction of the creditor; (iii) the claim has been paid in full or in part by a receiver or a liquidator in the course of a completed receivership or liquidation; or (iv) a receiver or a liquidator has notified the creditor that the assets of the company are not sufficient to enable any payment to be made to the creditor; and (b) a claim by a shareholder or any other person against a company is not an undischarged claim unless - (i) payment has been made to the shareholder or that person in accordance with a right under the company's constitution or this Act to receive or share in the company's surplus assets; or (ii) a receiver or liquidator has notified the shareholder or that person that the company has no surplus assets. 22. On perusal of the aforesaid sections, it may be observed that section 309 of the Mauritius Companies Act, 2001 provides following grounds for removal of a company from the register: a) Company is amalgamated with another company; b) Registrar is sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unicated to the assessing officer vide reply dated 01.03.2021 filed during the course of assessment proceedings. The relevant extracts of the reply are reproduced hereunder: In this regard, the Assessee submits that on 28 December 2020 (copy enclosed as Annexure 11), it has filed an application before the Financial Services Commission, Mauritius for the purpose of removing it from the Registrar of Companies in Mauritius. Accordingly, it is in the process of being wound up. (Refer Pages 361 to 369 of the PB) 04.06.2021 The application was filed by the assessee before the Registrar of Companies, Mauritius on 04.06.2021 for removing the name of the company from register of companies as per section 309(1)(d) of the Mauritius Companies Act, 2001. Copy of application filed is enclosed at Pages 50 to 59 of the PB. Section 309(1)(d) All the other necessary compliances were made in accordance with Mauritius Companies Act, 2001 before the name of the assessee was removed from the register of companies in the following manner: 04.06.2021 Form 23 i.e. Application for removal of company from register duly filed by company (Page 51-52 of PB) with following disclosures: The company has ceased to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said procedure, nor the same has been pointed by the assessing officer in the assessment order. Had the assessing officer any dispute in the dissolution process, necessary recourse could have been adopted in terms of section 312 of the Mauritius Companies Act, 2001. 26. Accordingly, it is submitted, that since the assessee ceased to exist/became non-existent in the eyes of law as on 29.10.2021, no order could have been passed in the name of such non-existent entity after the said date. In view of the same, the impugned orders dated 03.06.2022 passed by the DRP as also the order dated 20.06.2022 passed under section 143(3)/144C in the name of the assessee/non-existent entity are illegal, bad in law and beyond jurisdiction, which deserves to be quashed on that ground itself, at the threshold. 27. Attention in this regard is invited to the provisions of section 4 of the Act which provides that the charge of tax is on the total income of a person for the previous year. The expression person has been defined in section 2(31) to include, inter alia, a company including a foreign company. 28. It will be kindly appreciated that under the Act, charge of income-tax is on the total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 143(2) was issued, the scheme of amalgamation had been approved on 29th January 2013 by the High Court of Delhi under the Companies Act 1956 with effect from 1 April 2012; e) Assessing officer assumed jurisdiction to make an assessment in pursuance of the notice under Section 143(2). The notice was issued in the name of the amalgamating company in spite of the fact that on 02.04.2013, the amalgamated company MSIL had addressed a communication to the assessing officer intimating the fact of amalgamation. f) Initiation of assessment proceedings against an entity which had ceased to exist was void ab initio. g) The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. h) Participation in the proceedings by MSIL in the circumstances cannot operate as an estoppel against law 33. Further, reliance is placed on the following decisions wherein it has been held that that an assessment framed in the name of a non-existent entity/ dead person would tantamount to jurisdictional defect, thus, making it void-ab-initio: - CIT v. Amarchand N. Shroff: 48 ITR 59 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vodafone India Services (P.) Ltd. vs. UOI: 361 ITR 531 held that process before the DRP is a continuation of the assessment proceedings as only thereafter would a final appealable assessment order be passed. - The Delhi High Court in the case of Alpine Electronics Asia Pte Ltd.: 341 ITR 247 held that where the assessee raised objection to service of notice under section 143(2) for the first time before the DRP, since the assessment proceedings were pending and not concluded, the said objection was not barred under section 292BB of the Act, which bars objection after the conclusion of assessment. 37. Reliance is placed on the following decisions, wherein it has been successively held that, assessment on a company dissolved as per the provisions of the (Indian) Companies Act, is an assessment on a non-existent entity, which is nullity in the eyes of law: 38. Specific reliance is placed on the decision of Delhi Bench of the Tribunal in the case of Impsat (P.) Ltd. vs. ITO: 91 ITD 354. In that case, the Board of directors applied to have the company s name struck off under section 560 of the Companies Act, 1956. Consequently, the name of the company was struck off by ROC on 18.09.2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand and dissolution of the company on the other. This has been brought out by the Supreme Court in Hari Prasad JayantilaI Co s case (supra). At page 798, Hon ble Justice Shah, speaking for the court observed: 16. The quoted observations show that dissolution is a stage subsequent to the winding up or liquidation, the end of the existence of the company. Till dissolution, the corporate existence continues. It follows, per contra, that once a company is dissolved, its corporate existence comes to an end. It is no longer in existence; it is dead. 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) show s the following extract from Halsbury s Laws of England, fourth edition, Vol. 7, para 1448, page 809 under the heading Effect of dissolution ................................................................ 18. At page 1930 of the same treatise, under the heading Property after dissolution , it has been stated that the property of the company after dissolution is bona vacantia and escheats to the State. There is also a reference to the judgment of the Supreme Court in Naren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove judgment, it was held at page 48 that a specific provision is necessary to make an order of assessment against a taxable entity which does not exist on the date of the assessment even though the said entity was in existence when the liability to tax arose . . 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 judgments of the Supreme Court in Amarchand N. Shroff s case (supra) and ITO v. Ram Prasad [1972] 86ITR 145. These are cases of an individual and a joint family respectively, but the ratio is that there can be no assessment on a dead person. Just as an individual ceases to exist on death and a joint Hindu family ceases to exist on being disrupted, a company ceases to exist on being dissolved under section 560 of the Companies Act. We have already noted the judgment of the Supreme Court in Hari Prasad Jayantilal s case (supra) as to the effect of dissolution and the treatise of A. Ramaiya on Company Law in this behalf. If the company is not in existence at the time of making the assessment, no order of assessment can be validly passed upon it under the Income-tax Act and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessing authority only against the assessee, who has filed a return under Section 139 of the Income Tax Act or in response to a notice issued under Subsection (1) of Section 142 of the Income Tax Act. The term assessee is defined in Subsection (7) of Section 2 of the Income Tax Act to mean that a person by whom any tax or any other sum of money is payable under the Income Tax Act and the term person used in Subsection (7) is defined in Subsection (31) of Section 2 of the Income Tax Act to include an individual, a Hindu undivided family, a company, a firm, an association of person or a body of individuals, whether incorporated or not, a local authority, and every artificial juridical person, not falling within any of the aforesaid clauses etc etc. 22. From a reading of Subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -off in the Register of Companies and the assessee- company is dissolved. Therefore, w.e.f 30th May, 2011, the assessee-company became non-existent and stood dissolved. The A.O. however, passed the assessment order on 29th December, 2011 i.e., after dissolution of the assessee-company. Therefore, there could not have been any valid assessment order passed against the assessee-company which was not in existence as on the day of passing of the assessment order because it had already been dissolved. The assessment in the case of non-existing entity is thus nullity. Therefore, A. O. had no jurisdiction to pass the order against the non-existing company. All the decisions relied upon by the Learned Counsel for the Assessee above, squarely apply to the facts and circumstances of the case. Even the judgment of the Hon ble Delhi High Court in the case of Spice Infotainment Ltd., vs. CIT (supra), has been confirmed by the Hon ble Supreme Court vide order dated 02 nd November, 2017 (supra). It may also be noted here that A.O. in the remand report has referred to certain correspondence between Revenue Department and the O/o. ROC through which certain information against the assessee company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding during the impugned order as well as material referred to before me. One of the main legal contention raised is, that the initiation of proceedings u/s 147 and consequently assessment order framed u/s 147/143(3) is void ab initio as the assessee company has ceased to exist since November, 2013 and therefore, any subsequent proceedings on such non existing company have no legal basis. On the perusal of material placed on record which is even borne out from the appellate order, specifically from pages 12 to 20, it is seen that Registrar of Company had issued a notice u/s 560(3) of the Companies Act on 27.6.2013, which was forwarded to the Chief Commissioner of Income Tax that the Company, M/s. Galaxy Technosys Private Limited will be struck off from the register and such company will be dissolved. Another notice/undertaking was sent vide intimation dated 9.11.2013 by Registrar of Company to the Income Tax Department, specifically intimating that Galaxy Technosys Private Ltd. has been struck off from the register and the said company is dissolved. Again this information was given to the AO during the course of the assessment proceedings by the assessee vide letter dated 21st Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egularity and procedural laps which could be cured u/s 292B. In the case before the Hon ble Court the issue pertains to notice u/s 148 addressed to the erstwhile company. However, it was not a case that where the assessment order was passed in the case of the non-existing entity. This distinction has been made clear by the Hon ble High Court in para 18 in the following manner:- 7. Thus, here in this case assessment framed by the AO on company which was non existing on the date of the passing of the order is not valid assessment which deserves to be quashed. 8. In the result appeal of the assessee is allowed. - Attention is also invited to the recent decision of the Mumbai Bench of the Tribunal in the case of ITO vs. M/s Silverline Trading Company Ltd.: ITA No. 2253 of 2023. In that case, the assessee-company was struck off from the Register of Companies as per the certificate dated 18.03.2011 issued by the MCA. However, despite this fact available, the learned Assessing Officer passed assessment orders dated 29.02.2016 in the name of non-existing entity. On appeal, the CIT(A) quashed the assessment orders passed in the name of non-existing entity. On Revenue s appeal before the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exist and also proceeded to pass the assessment order dated 20.05.2013 in the name of non-existing entity. On appeal, the CIT(A) quashed the reassessment order passed in the name of liquidated company. On further appeal, the Tribunal confirmed the order passed by CIT(A), the relevant extracts of the order of the Tribunal are as under: 5. We have heard the rival submissions and carefully considered the same along with the orders of the tax authorities below. We noted, it is a fact that assessment in this case was made on the assessee by issue of notice dated 29.03.2012. But, much before the date on initiation of the assessment proceedings, the assessee company had liquidated on 11.03.2009. We do not find any infirmity in the order of the CIT(A) in holding that the assessment framed as null and void in the name of the company which had already liquidated. Our aforesaid view is duly supported by the following decisions: . No contrary decision was brought to our knowledge by the learned DR, even though he has vehemently relied on the order of the Assessing Officer. We, therefore, confirm the order of the CIT(A) and quash the assessment framed by the Assessing Officer. 5. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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. 4.2 However, 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. 4.3 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. 4.4 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. 5. Based on aforesaid, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of business. The claim of counsel is that the said application was duly accompanied by a shareholders resolution dated 24th December, 2020, the global licence of the company and management account as at 24.12.2020, the copy of which is placed on the record at pages 44 to 49 of the paper book. The Revenue does not dispute that filing of this application was brought to the notice of the AO on 01.03.2021. 8. Then, on 04.06.2021 an application was filed by the assessee before the Registrar of Companies, Mauritius for removing the name of the company from the Register of companies as per section 309(1)(d) of the Mauritius Companies Act 2001. The copy of this application is on record at pages 50-59 of the paper book. On 04.06.2021 itself, Form No.23 which is application for removal of company was filed along with the following disclosures:- The company has ceased to carry on business, has discharged in full all its liabilities to all known creditors and has distributed its assets in accordance with its constitution/the Companies Act, 2001 Yes. The company has no surplus assets after paying its debts in full or in part and no creditor has applied to the Court under section 216 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was not informed of the further steps taken after 28.12.2020. In this context, when we consider the letter dated 28.12.2020 available at page 44 of the paper book, we find that it is addressed to Chief Executive, Financial Services Commission and is merely an intimation of the intention of the assessee to apply to the competent authority, Registrar of Companies, Mauritius for removal of the name of the company form the Register of Companies and, for that purpose, a no objection was sought from the Financial Services Commission. Thus, when on 01.03.2021 the AO was informed, actually no application was moved to the Registrar of Companies, Mauritius for getting struck off the name of the company from Register of Companies so as to expect the AO to have taken any recourse under the Act. 14. Further, we find that this application, to the Registrar of Companies, Mauritius for getting struck off the name of the company from Register of Companies was filed on 04.06.2021, in Form 23 and the copies of which are made available from pages 50-59 of the paper book. However, this fact of making application in Form 23 was not intimated to the AO at any time. 14.1 Then, we can see that the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jections raised before the DRP, there was no specific ground that the draft assessment has been passed against a non-existing entity. As Ld. Counsel was specifically confronted of this aspect, at time of hearing it was claimed by him that by letters dated 04.02.2022 and 11.02.2022, the DRP was informed of the dissolution of the company by way of removal from Register of Companies w.e.f. 29.10.2021. 17.1 Examining, the copies of these letters available at pages 61- 66 of the paper book, we can see that letter dated 04.02.2022, was issued by Price Waterhouse Co. LLP to the DRP about the fact that their client has gone into liquidation in Mauritius and subsequent to same Power of Attorney of the client signed by the client s director on 13.10.2021 has lapsed and as director signing the power of attorney does not have any authority, post liquidation of the client, Price Waterhouse Co. LLP withdraws the Power of Attorney filed before the DRP and request was made that the proceedings be abated as they have become infructuous. 18. It appears that thereafter, a notice u/s 144C(11) of the Act was issued to the erstwhile company for which Mr. Boopendradas (Vikash) Sungker had informed DRP, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sungker and he has not mentioned as to if he has signed and verified this appeal as a director of the assessee company. There is nothing on record to show that there was a resolution in favour of him to file the appeal and sign Form 36. In fact, if the earlier communication with DRP dated 11.02.2022 is considered correct and which also acts as estoppels against him, he himself admits that he had no locus standi to represent the assessee company any more. 23. To be more precise, there is not even a power of attorney in favour of counsels who are appearing, before Tribunal, for the erstwhile company, even by Mr. Boopendradas (Vikash) Sungker. 24. There is more to look into if Mr. Boopendradas (Vikash) Sungker, being former director has any locus standi to challenge the assessment order against the erstwhile company, on question of law or merits of addition. The definition of assessee , as given u/s 2(7) of the Act provides as follows:- Section 2(7). assessee means a person by whom any tax or any other sum of money is payable under this Act, and includes (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. (2) Where a private company is converted into a public company and the tax assessed in respect of any income of any previous year during which such company was a private company cannot be recovered, then, nothing contained in subsection (1) shall apply to any person who was a director of such private company in relation to any tax due in respect of any income of such private company assessable for any assessment year commencing before the 1st day of April, 1962. Explanation. For the purposes of this section, the expression tax due includes penalty, interest , fees or any other sum payable under the Act. 24.4 Thus based on aforesaid 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 liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appeal filed by the struck off Assessee Company or Appeal filed by the Revenue against the struck off Company are maintainable. Therefore by rejecting the contention of the Ld. DR, we hold that the present Appeal filed by the Assessee (struck-off company) is maintainable and the same has to be decided on merit. (ii). Since, we held that, the present Appeal is maintainable, the Counsel appearing on behalf of the Assessee Company has every locus to represent the Assessee in the present Appeal. (iii). Office is directed to list the appeal before the regular Bench for hearing on 07/09/2022. 27. The aforesaid decision categorically 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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