TMI Blog2023 (12) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... URT] wherein it has been categorically held that once a company is dissolved under 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 so passed, it would be a nullity. Thus assessment orders passed in the name of non existing company are not sustainable and correctly quashed by ld CIT (A). Decided against revenue. - Shri Prashant Maharishi, AM And Shri Rahul Chaudhary, JM For the Assessee : Shri Gaurav Kabra, AR For the Revenue : Shri Ajudiya Manish, DR ORDER PER BENCH: 01. ITA No. 2234/Mum/2023 is filed for A.Y. 2008-09 and ITA No.2253/Mum/2023 for A.Y. 2009-10, filed by the income tax officer, 2(3)(1), Mumbai, against the appellate order passed by the National Faceless Appeal Centre, Delhi for both these assessment years separately on 20th April, 2023, wherein the appeal filed by the assessee against the assessment orders dated 29th February, 2016, passed under Section 147 read with section 144 of the Income-tax Act, 1961 (the Act) by the income tax officer, Ward 2(3), Mumbai are allowed for the reason that the assessment order is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh court held as under :- 5. Having heard learned counsel for the parties and perused the material on record, on facts, we find that the appellant-company was struck off from the Register of Companies and stood dissolved from the date of publication of a notice in The Gazette of India issued for 22nd to 28th April, 2006. 6. Indisputably, the order of assessment against the appellant-company was made on 21.12.2006. The status of the appellant-company on the date of making assessment was that the appellant-company stood struck off from the Register of Companies and dissolved w.e.f. the publication of notice in the Official Gazette. For the sake of clarity, we set out Section 560 of the Companies Act herein below:- 560. Power of Registrar to strike defunct company off register.--- (1) Where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation. (2) If the Registrar does not within one month of sending the letter receive any answer thereto, he shall, within fourteen days after the expiry of the month, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register ; and the Tribunal may, by the order, give such directions and make such provisions as 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. (7) Upon a certified copy of the order under sub-section (6) being delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off. (8) A letter or notice to be sent under this section to a company may be addressed to the company at its registered office, or if no office has been registered, to the care of some director, manager or other officer of the company, or if there is no director, manager or officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y find that striking off company from the Register of Companies and its resultant dissolution under Subsection (5), remains under suspended animation and by having recourse to Subsections (6) (7), it can be resuscitated back to life and continued as if its name had not been struck off. It is, thus, evident that for the purpose of challenging the action of the Registrar striking off registration of the company and effecting its dissolution by publication in the Official Gazette, the company is conferred a juridical personality and may in its own name file an application before the Court for setting aside the order passed by the Registrar under Subsection (5) of Section 560 of the Companies Act. 11. Similarly, under Section 226(3) of the Income Tax Act, it is clearly provided that if there is any tax due from the struck off company, same can be recovered from any person who holds or may subsequently hold money for or on account of the assessee company. Section 226(3) of the Income Tax Act is also relevant for the purpose of discussion we have undertaken and the same is reproduced herein below:- 226. Other modes of recovery (1) . (2) . (3) (i) The Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the Income-tax Officer to the extent of his own liability to the assessee on the date of the notice, or to the extent of the assessee's liability for any sum due under this Act, whichever is less. (vii) The Income-tax Officer may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend the time for making any payment in pursuance of such notice. (viii) The Income-tax Officer shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the assessee to the extent of the amount so paid. (ix) Any person discharging any liability to the assessee after receipt of a notice under this sub-section shall be personally liable to the Income-tax Officer to the extent of his own liability to the assessee so discharged or to the extent of the assessee's liability for any sum due under this Act, whichever is less. (x) If the person to whom a notice under this subsection is sent fails to make payment in pursuance thereof to the Income-tax Officer, he shall be deemed to be an assessee in default in respect of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who holds or may subsequently hold money for and on account of the assessee company or a director of the private company in respect whereof any tax is due in respect of any income of the previous year, as is provided under Section 226(3) and Section 179 of the Income Tax Act, still remains and such person or director shall have the locus standi to challenge the assessment order, if any, passed by the assessing officer against such struck off and dissolved company in respect of any income of the previous year. 14. The aforesaid discussion would lead us to a conclusion that in the instant case any director of the company could have filed an appeal challenging the assessment order on the ground that the liability arising out of the impugned assessment order, under the circumstances pointed out in Section 179 of the Income Tax Act, could be fastened upon him. Interestingly, all proceedings, in the first appeal before the Commissioner Income Tax (Appeals) and second appeal before the Tribunal were filed in the name of the company suing through its director Jeane Fernades. 15. We are not in agreement with the argument of Mr. K.S. Johal, learned senior counsel that in terms of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the company all along is represented by the director, as such, in the larger interest of doing justice and putting an early quietus on the matter, we hold that all proceedings taken in the name of the company shall be treated to be the proceedings by the director of the company. 19. The discussion so far made by us would now lead us to the determination of the substantial question of law framed in this appeal. Although, it is not in dispute that the appellant company never brought the notification published in Government Gazette issued in respect of the company under Section 560(5) of the Companies Act to the notice of the assessing authority, Commissioner of Income Tax (Appeals) and the Tribunal and, as such, all the three authorities aforesaid committed no illegality in law in coming to the conclusion that merely because the company is defunct, the assessing authority cannot be restrained from passing the assessment order against it. The authorities have concurrently held that there is distinction between the company which is rendered defunct because of stoppage of operations of the company and the company which is formally struck off and dissolved in terms of Subsection (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 non-existent company would be like passing a decree by a civil court against a dead person. Such order of assessment made against a non-existent entity would be nullity and would not give rise to any right or liability under such assessment order. The view we have taken is supported by a judgment of the High Court of Delhi dated 17.09.2009 passed in ITA No. 273/2009 titled Commissioner of Income Tax v. Vived Marketing Servicing Pvt. Ltd. One paragraph judgment rendered by the Delhi High Court has upheld the decision of ITAT in Impsat Pvt. Ltd. v. ITO 276 ITR 136 (AT). One paragraph judgment reads thus:- When the Assessing officer passed the order of assessment against the respondent company, it had already been dissolved and struck off the register of the Registrar of companies under Section 560 of the Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any assessment order passed against the company whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a nullity. 24. We, thus, answer the question by holding that once a company is dissolved under 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. Having answered the aforesaid question, we allow the appeal and set aside the order of assessment dated 21.12.2006, order of the Commissioner of Income Tax (Appeals), Jammu dated 01.04.2013 and the order of the Tribunal dated 30.01.2014. 05. Coming to the decision of the Hon'ble Delhi High Court in case of Skylight Hospitality Ltd, the issue was that the private limited was converted to limited liability partnership under the limited liability partnership Act, 2008 and that was not the case of dissolution of the company. Therefore, that decision does not apply to the facts of this case. 06. Therefore respectfully following decision of coordinate benches in assessee s own case as well as the decision of Honourable J K High court, Both the assessment orders passed in the name of non existing company are not sustainable and correctly quashed by ld CIT (A). Thus, orders of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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