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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 ..... provisions of Section 560 of the Companies Act, 1956, prior to the date of passing of the assessment order? 2. The aforesaid substantial question of law has arisen in the background of following factual matrix: The appellant-Company filed a Nil return of income for the assessment year 2004-05 with the Income Tax Officer Ward No. 2 (2), Jammu. The Return of Income also contained a note stating therein that the appellant-Company had filed an application on 19.03.2004 before the Registrar of Companies under Section 560 of the Companies Act, 1956 ["the Companies Act"] for striking off the name of the Company from the Register of the companies under Simplified Exit Scheme. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 ["the Income Tax Act"] vide order of the Assessing Authority dated 21.12.2006. The Assessing Authority made an addition of Rs. 1,00,75,000/- being the amount of unsecured loans received by the Company during the earlier years and was credited to the Capital Reserve during the previous year. Feeling aggrieved, the appellant- Company filed an appeal before the Commissioner of Income Tax (Appeals), Jammu (headquarters Amritsar) against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect thereto could not be brought to the notice of the authorities despite due diligence. He submits that since the company was defunct and, therefore, the directors, who had lost interest in the affairs of the company, could not notice the gazette notification dated 22nd-28th April, 2006. He, however, submits that in view of the evidence, which is now available with the appellant-company, the matter needs to be remanded back to the assessing authority for taking appropriate view in the matter. 5. Per contra, Ms. Aruna Thakur, learned counsel appearing for the respondent, argues that the fact that the company stood formally dissolved under Section 560(5) of the Companies Act was not brought to the notice of the income tax authorities including the Tribunal by the appellant and, therefore, the appellant-company cannot be heard to make a grievance that the aforesaid aspect was not considered by the authorities. She submits that the only argument that was raised by the appellant before the income tax authorities was that the company had become defunct and, therefore, could not be subjected to assessment under Section 143(3) of the Income Tax Act. 5. Having heard learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 referred to in subsection (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, 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 : Provided that - (a) the liability, if any, of every director, manager or other officer who was exercising any power or management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved ; and (b) nothing in this sub-section shall affect the power of the 2 [Tribunal] to wind up a company the name of which has been struck off the register. (6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Tribunal, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 before the Court before the expiry of twenty years from the publication in the Official Gazette of the notice under Subsection (5) and if the Court is satisfied that the company was, at the time of striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, it may order the name of the company to be restored to the register. The Court may also order such directions and make such provision as may be seem 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. 9. In terms of Subsection (7), once a certified copy of the order passed under Subsection (6) is delivered to the Registrar of Companies for registration, the dissolved company shall be deemed to have continued in existence as if its name had not been struck off. 10. On careful circumspection of Section 560 of the Companies Act, we clearly find that striking off company from the Register of Companies and its res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. (v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice. (vi) Where a person to whom a notice under this subsection is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Income-tax Officer to the extent of his own liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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 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. (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 sub-section (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." 13. From a reading of the aforesaid provisions together, it clearly comes out that notwithstanding dissolution of a struck off company in terms of Subsection (5) of Section 560 of the Income Tax Act, liability of any person who holds or may subsequently hold money for and on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solved 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 company was given fictional juridical personality only for the purpose of laying challenge before the Court to the order of the Registrar striking it off from the Register and effecting its dissolution upon publication of the notice in the Official Gazette and no more. The directors of the company who under some circumstances may be held liable to pay the dues owned by the company to the department are competent in law to take proceedings against the assessment order passed against a dissolved company, if they feel aggrieved. 18. We are, thus, of the view that all the proceedings by the company before the Commissioner, Income Tax (Appeals) and the Tribunal were not maintainable in law. Similarly, instant appeal by the company is not maintainable. The company having ceased to exist was not competent to challenge the assessment order, though, the director may have. Since the company all along is represented by the director, as such, in the ..... X 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 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 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. 22. 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 juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istributing 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 judgments of the Supreme Court in Amarchand N. Shroff's case (supra) and ITA v. Ram Prasad [1972] 86 ITR 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 one is passed, it must be a nullity." 24. We, thus, answer the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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