NOTICE UNDER SECTION 148 OF INCOME TAX ACT, 1961 AGAINST A STRUCK OF COMPANY

[DR.MARIAPPAN GOVINDARAJAN]

Removal of name of a company

Section 248 of the Companies Act, 2013 (‘Act’ for short) provides that where the Registrar has reasonable cause to believe that-

• a company has failed to commence its business within one year of its incorporation; or
• a company is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455; or
• the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within 180 of its incorporation under sub-section (1) of section 10A; or
• the company is not carrying on any business or operations, as revealed after the physical verification carried out under section 12(9) of the Act,

he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of 30 days from the date of the notice.

A notice issued under sub-section (1) shall be published in the prescribed manner and also in the Official Gazette for the information of the general public.   At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved.

The Registrar, before passing an order, shall satisfy himself that sufficient provision has been made for the realization of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain necessary undertakings from the managing director, director or other persons in charge of the management of the company.   The assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies.

The liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved, shall continue and may be enforced as if the company had not been dissolved.

Effect of struck off

Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

Liability of the Company

Despite the company is struck off the Directors/officers are not relieved from the liabilities and the same shall continue.  They are accountable for non compliance of any of the provisions of any law for the time being in force.  For example the Income Tax Department may issue show cause notice for non filing of the return for a specific AY before struck off.  Even the Department may file appeal before the Tribunal for its restoration with the intention to initiate action against the defaulter and recover the income tax due.

Restoration of the company

Section 252 of the Act provides that any person aggrieved by an order of the Registrar, notifying a company as dissolved under section 248, may file an appeal to the Tribunal within a period of 3 years from the date of the order of the Registrar. If the Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies.  Before passing any order under this section, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned. 

If a company, or any member or creditor or workman thereof feels aggrieved by the company having its name struck off from the register of companies, the Tribunal on an application made by the company, member, creditor or workman before the expiry of 20 years from the publication in the Official Gazette of the notice may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies. The Tribunal may, by the order, give such other directions and make such provisions as deemed just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the register of companies.

In RAVINDER KUMAR AGGARWAL VERSUS INCOME TAX OFFICER, WARD 20 (3) NEW DELHI - 2022 (11) TMI 1176 - DELHI HIGH COURT, the petitioner is the director of RKA International Private Limited.  Due to the defaults made by the Company under the provisions of the Act, the Ministry of Corporate Affairs through the office of Register of Companies (‘RoC’ for short)  initiated proceedings against the petitioner company.   The Company was struck off by the RoC, Delhi and Haryana, from its register of companies, under Section 248 of the Act on 30.06. 2017. 

The Income Tax Department filed an appeal before the National Company Law Tribunal (‘Tribunal’ for short) for the restoration of the company by Registrar of Companies.   The Tribunal directed the RoC to restore the name of the Respondent Company in the Register and also proceed to take such other and further penal action against the respondents in accordance with the statutory provisions.

The Income Tax Department issued a notice dated 28.03.2019, issued under Section 148 of the Income Tax Act, for Assessment Year (‘AY’) 2012-13.  The said notice was challenged by the petitioner before the High Court.  The petitioner contended that the notice issued by the Department was null and void since it has been issued in the name of the struck off company.  The petitioner further submitted-

• The order of the Tribunal, restoring name of the Company in the register of companies on 25.09.2019 is to no effect because as on 28.03.2019, when the impugned notice was issued, the Company was admittedly struck off and the subsequent order restoring the Company would not cure the defect of issuance of impugned notice in the name of non-existent Company, on the date of issue.

The Department contended the following before the High Court-

• The Tribunal vide their order dated 25.09.2019 allowed the petition filed by the Department under Section 252 of the Act, for restoration of the name of the Company in the register of companies, maintained by the RoC, Delhi.
• Since the Company now stands restored, the present writ petition which is premised on the sole ground that the impugned notice was issued in the name of a struck off Company, does not survive anymore and the entire petition has become infructuous.
• Though the Company was struck off with effect from 07.06. 2017, the said Company was active during AY 2012-13 .
• The company failed to file its income tax return for the said assessment year and therefore, it is a fit case for issuance of notice under Section 148 of the Act.
• There is an escaped assessment to the tune of Rs.10,09,00,000/- for AY 2012-13 and the Company is also liable to pay a tax demand of Rs.3,11,14,000/- for the AY 2011-12.
• The Income Tax Department had filed an appeal for the restoration of the Company on 14.09. 2018 i.e., prior to issuance of impugned notice for the concerned assessment year.
•  The restoration relates back to the date of striking off and the impugned notice does not suffer from any infirmity.

The High Court considered the submissions put forth by the parties to the appeal.  The High Court observed that the Petitioner admitted that the Company stands restored by the order dated 25.09.2019, passed by the Tribunal. The defaulting Company has neither challenged the impugned Notice dated 28.03.2019, nor did the order date 25.09.2019, passed by the Tribunal, which has therefore, attained finality in law.  Therefore the petitioner has no locus standi to maintain the proceedings and even in alternative the present petition has become infructuous.

The High Court analyzed the provisions of the Act in relation to strike off the companies.  The High Court observed that Section 252(3) of the Act expressly states that the Tribunal’s order directing restoration of a company will have the effect of placing the company in the same position as if the name of the company has not been struck off from the register of companies. In other words, with the restoration order dated 25.09.2019 passed by the Tribunal, even on the date of the issuance of the impugned notice, the Company is deemed to be in existence. Section 250 declares that even where a Company is dissolved in consequence to it being struck off under Section 248, it shall be deemed to continue to be in existence for the purpose of discharging its liabilities. 

The Company has admittedly been restored and as it has been observed above that statutorily upon restoration, the Company under Section 252(3) of the Companies Act, 2013, is deemed to not have been struck off from the register of companies at all. Accordingly, the impugned notice dated 28.03.2019, is valid and not non-est on the grounds urged in the present petition.   The High Court further observed that the Petitioner is therefore, not bona fide and is being done to avoid legal processes.  The High Court dismissed the appeal and imposed cost Rs.50,000/-.