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Income Tax Appellate Tribunal, DELHI BENCH ‘H’ : NEW DELHI
Before: DR. B.R.R.KUMAR & SH. ANUBHAV SHARMA
The appeal has been filed by the Assessee against order dated 14.05.2019 in appeal no 10304/ 2018-19 in assessment year 2011-12 passed by Commissioner of Income Tax (Appeals)-9, New Delhi (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in regard to Zoetic Infrastructure & Construction P. ltd. 2 the appeal before it arising out of assessment order dated 08/12/2018 u/s 147/144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ITO, Ward 27(4), New Delhi (hereinafter referred to as the Assessing Officer ‘AO’).
The facts in brief are the appellant company did not file return of income for AY 2011-12. The AO noted from the information contained in AIR/ 26AS that interest of Rs. 39554/- was received by the assessee from Vijay Bank and that there was cash deposit of Rs. 500000/- in the bank account. Based on these information, the AO recorded reasons and with the approval of competent authority issued notice dated 27.03.2018 u/s 148. Those notices were sent by speed post as well as through E-mail address neelaishtiwari@qmail.com asking the assessee to E-file the return of income within 30 days of receipt of this notice. However, physical notice was received back un-served whereas notice sent through e- mail remained none complied. The AO issued further notices which also remained un-served. The AO downloaded relevant details from the MCA website and notice u/s 142(1) alongwith show cause u/s 144 of the Act was issued and sent to the assessee through its two directors at their residential address for compliance on 16.10.2018. These notices and show cause were also sent by e mail on 10.10.2018 for compliance on 16.10.2018. However, no compliance was made. In the given circumstances, the AO proceeded and completed the assessment proceeding by passing the order u/s 144 of the Act. In the impugned order the AO has noted, that out of interest of Rs. 39554/-, only Rs. 4480/- pertained to the AY 2011-12 which was added to the total income. Similarly, there being no explanation with respect to cash deposit of Rs. 500000/-, the AO made addition of the same as well.
Zoetic Infrastructure & Construction P. ltd. 3
The assessee has claimed notice U/S 148 was issued on 27-03-2018 to the appellant company which was received back unserved. The Ld. Assessing officer was very well aware that the appellant does not exists because the name of the company was struck off from register of the company by ROC on 7/06/2017. That according to the Assessment order Para 3, further notice dated 21-08-2018 was received back with postal remarks "No such Firm". That the Ld. AO was only trying to do paper work, even though he was knowing well that the appellant company was not in existence. Because the appellant company is not in existence, therefore, no notice can be served on the non existence company.
The Ld. CIT(A) observed that the gist of the submission of the appellant is that the impugned assessment order is beyond the jurisdiction of the AO in as much as notice u/s 148 was issued in the name of an entity which was struck off from register of companies w.e.f 07.06.2017 and that notice issued in the name of none existence entity is bad in law. It is also claim of the appellant that there was no sufficient reason to initiate the proceeding u/s 148 of the Act.
Ld. CIT(A) held that “3.3 Careful considered facts of the case and submission of the appellant. Carefully perusal of the documents filed before me and the facts mentioned in the impugned assessment order provides that the proceedings were initiated based on information available in AIR and the AO did notice that the appellant did not file its return of income for AY 2010-11 and thus this was a sufficient basis to form reason to believe that income escaped assessment. Further, the AO has also applied its mind in as much as the interest component has been analyzed and bifurcated with the remarks that only Rs.4480/- was pertaining to the AY 2011-12.
Zoetic Infrastructure & Construction P. ltd. 4 3.4 It is the case of the AO that it has formed reason to believe based on factor i.e absence of return of income for AY 2011-12 and further, failure of Appellant to comply with e-mailed and show cause. It is also not a case that Appellant has merged with new entity and therefore, proceedings could have been made in the hand of new entity. Rather, it is a case of striking off of the name of Appellant for register of company and therefore, the Appellant and its directors are responsible for income tax demand in terms of provision u/s 179 of the Act which provides as under:
Liability of directors of private company in liquidation.
— 179. —[(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 liable for the payment of such tax unless he proves that the nonrecovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. 3.5 Even if, the appellant’s name was struck off the register of company cannot preclude the revenue to proceed till the PAN is in existence and that the appellant failed to respond to the notice issued and served through e-mail by the AO which left no other option but to proceed with the assessment.”
The Assessee is in appeal raising following grounds :- “A. Because, on the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has grossly erred in upholding the approval of issue of notice u/s 148 of Act on 27-03-2018 , which was beyond jurisdiction, being without any valid 'reason to believe' and/or satisfaction of Ld. AO or of superior authority, to conduct roving enquiries against the appellant [Name of the appellant was struck off by the MCA on 07-06-2017] merely on the basis of a deposit of cash of Rs. 5,00,000/- [ which was share money and secured loan of newly formed company] in the bank account and earning of bank interest of Rs. 4458/-] as per Act min. 1,00,000/- was the limit] after 5 years of assessment year. B. Because, on the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has grossly erred in Zoetic Infrastructure & Construction P. ltd. 5
upholding the validity of mandatory notice u/s 148 [As per assessment order it was dated 27.03.18 and was dispatched on 29- 03-2018] which was not admittedly served being the entity was not in existence [Name of the appellant was struck off on 07-06-2017 by the MCA]. As per assessment order the Notice was served by email but the appellant has no email ID and never intimated any email ID to serve such notice. Further the AO did not sent any notice on the claimed email ID also. c. Because, on the facts and in the circumstances of the case and in law, the Ld.CIT (Appeals) has erred in upholding the assessment proceeding U/S 147/144 of the LT. Act 1961 carried out by AO, particularly when the Assessee was not in existence. D. Because, on the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in upholding The Learned A. O. went beyond his jurisdiction knowing well in advance, even before framing assessment U/S 147/ 144 of the I.T. Act that the assessee is not in existence and he cannot frame assessment. E. Because, on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in upholding the assessment order dated 08-12-2018 because it is invalid and without jurisdiction, as the name of the appellant company was struck off from the Register of Companies, Delhi on 07-06-2017 i.e. much before the date of assessment order. F. The appellant company craves to consider each of the above grounds of appeal without prejudice to each other and carves leave to add, delete or modify all or any of the above grounds of appeal.”
7. Heard and perused the record.
8. On behalf of the assessee it was submitted that the company was incorporated on 05.07.2010 with the initial share of Rs. 1,00,000/- and unsecured loan of Rs. 4,00,000/- however, the company failed to get any orders therefore, incurred loss in financial year 2010-11. The Directors being new to business were not aware of necessary compliances and failed to file annual returns of the appellant company to registrar of Companies (ROC), therefore directors were disqualified on 01.11.2016 and then the name of company was struck off on 07.06.2017 from the register of the company maintained by ROC. It was submitted that no notice u/s 148 was Zoetic Infrastructure & Construction P. ltd. 6 received by the company and that Ld. AO when realized that name of company has been struck off and company stand dissolve initiated proceedings u/s 252(1) r.w.s. 252(3) of the Companies Act, 2013 for restoration of name of the company. Ld. Counsel relied the copy of petition available on page no. 12 to 27 of the paper book to contend that it was pleaded before Hon’ble NCLT that the restoration is being sought as the assessment was getting time barred on 31.12.2018. It was submitted that this itself shows the ld. AO was also of view and aware that proceedings are being carried against the non-existing entity and no assessment can be framed. It was submitted that in spite of the pendency of petition before Hon’ble NCLT, the Ld. AO passed an order of assessment against the assessee company which was not in existence. It was submitted that Ld. CIT(A) relied judgment dated 12.03.2019 of Hon’ble Supreme Court of India in CIT vs. Gopal Shree Scrips Pvt. Ltd. Civil Appeal no. 2922 of 2019 decided on 12.03.2019 however, the facts in that case were distinguishable as in that case the assessment order was framed before year 1999 and the name of company was struck off by Registrar of companies vide order dated 07.04.2011. It was submitted that in that case when the assessment was framed the said company was in existence while in present case there was no legal entity in existence. It was submitted that by judgment dated 25.07.2019 in the matter of PCIT vs. Maruti Suzuki India Ltd 107 Taxmann.com 375, Hon’ble Supreme Court has again held that assessment cannot be framed on non-existing company. It was submitted these judgments recognize the principle that there should be certainty in tax litigation so that the business decisions can be made in expectations of consistency, uniformity and certainty. Ld. Counsel relied the judgment of Hon’ble Madras High Court in CIT vs. Express Newspapers Limited, 40
Zoetic Infrastructure & Construction P. ltd. 7 ITR 38, 57 and Hon’ble Delhi Tribunal order in Hewlett Packard India (P) Ltd. vs. ACIT (ITA No. 4016/Del/2005). It was submitted that Hon’ble Jurisdictional High Court in the case Spice Entertainment Ltd. vs. CIT 247 CTR 500 (Del) has also held that proceedings and assessment order against non-existing person is not procedural defect and mere participation by the appellant would be of no effect as there is no estoppel against law.
6.1. On the other hand Ld. Sr. DR submitted that as the PAN of the company was active so Ld. AO was justified in proceeding with assessment.
Giving thoughtful consideration to the matter on record and the submissions raised it can be observed that on 29.03.2018 notice u/s 148 of the Act for assessment year 2011-12 was issued for reassessment proceedings and prior to that based upon the information through NMS/ITD software certain transactions requiring inquiry were discovered and notice u/s 133(6) of the Act were issued to the banking companies. The copy of petition filed u/s 252(1) r.w.s. 252(3) of the Companies Act show that the Ld. Assessing Officer approached the NCLT in November, 2018 for restoration of the name of company because the proceedings of assessment of income of assessee company were pending and getting time barred by limitation on 31.12.2018 as per the provisions of section 153(2) of the Act . It appears that during pendency of the petition before the NCLT the impugned assessment order was passed. The copy of petition with the receipt placed on record, by the assessee shows that on 04.12.2018 notices were issued to Neelaish Tiwari, one of the directors of the company.
Zoetic Infrastructure & Construction P. ltd. 8
After taking into consideration the judgments relied by Ld. Counsel for the assessee, the Bench is of firm opinion that the same are not applicable on the present facts and circumstances. The judgments relied are in regard to companies which were dissolved pursuant to the orders of Hon’ble High Courts in Company Petition or the assessee had become non- existing entity, due to amalgamation of the company. However, here is the case where admittedly the name of directors of the assessee company were disqualified by ROC u/s 164(2) of the Companies Act with effect from 01.11.2016 till 31.10.2021 leading to struck off of the name of company from Register of Companies and consequential dissolution with effect from 07.06.2017 vide order dated 30.06.2017. The same was in pursuant of powers under sub section 5 of section 248 of the Companies Act r.w.r. 3 and 9 of the Companies (removal of names of companies from Register of Companies) Rules, 2016. This dissolution after struck off the name of company by Register of Companies has to be distinguished with dissolution pursuant to orders of Hon’ble High Court or amalgamation of the Companies.
The ld. AO had approached the NCLT for restoration of the name of company as the reassessment proceedings were pending before him which were getting time barred on 31.12.2018. The restoration of name of the company will have a retrospective effect as if name of company was never struck off, however the stringent law of limitation under the Act would have debarred the Ld. AO from passing re-assessment order after 31.12.2018. Even if the petition u/s 252(1) r.w.s. 252(3) of the Companies Act was allowed and the name of company was restored, as if, it was never struck off, that would not have revived the limitation for re-assessment which had Zoetic Infrastructure & Construction P. ltd. 9 started to run and would have ended on 31.12.2018. Therefore, the impugned assessment order cannot be said to be void ab initio having been passed on a non-existing entity. Like protective assessments, the preemptive assessments made against companies whose name have been stuck off by Registrar of Companies, for the statutory defaults under the Companies Act, are valid and cannot be set aside on Jurisdictional defect. More so when revival application is sub judice. So there is no substance in the grounds raised.
However, as the Ld. Counsel for assessee claims that the assessee has good case on merits but same require verification of facts and assessee was ex-parte in assessment proceedings. The ends of justice will be served by letting assessee appear before Ld. AO and justify its claim to the satisfaction of Ld. AO.
Accordingly, the appeal is allowed for statistical purposes. Impugned assessment order is set aside with a direction that the ld. AO shall pass a fresh assessment orders after giving opportunity of hearing to the assessee. As assessee company is under dissolution, the notice shall be served on the former Directors personally or Authorized Representative of Assessee appearing before the Tribunal.
Order pronounced in the open court on 10th August, 2022.