VIVEK TANDON (ERSTWHILE DIRECTOR OF JAY CEE INFRASTRUCTURE LTD.) vs. INCOME TAX OFFICER, WARD 13(3) DELHI & ANR.

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W.P.(C)/1564/2023HC DelhiDLHC01003658202309 April 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA2 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court held that the challenge to the initiation of proceedings under Section 148 of the Income Tax Act, 1961, could not be sustained. The Court referred to the Supreme Court's decision in Commissioner of Income Tax, Jaipur vs. Gopal Shri Scrips Private Limited [(2020) 7 SCC 654]. In that judgment, the Supreme Court clarified that the High Court was wrong in dismissing an appeal as infructuous merely because the company's name was struck off. The Supreme Court emphasized that Section 560(5) proviso (a) of the Companies Act, 1956, and Chapter XV of the Income Tax Act, 1961, specifically deal with the liability of companies whose names have been struck off. These provisions outline how such liabilities are to be dealt with. Therefore, the existence of such provisions means that proceedings against a struck-off company are not automatically void. The High Court found itself unable to sustain the petitioner's challenge in light of this precedent. The operative direction was that the writ petition fails and shall stand dismissed, without prejudice to the rights and contentions of the parties on merits, which were kept reserved.

What were the facts?

The petitioner, Vivek Tandon, formerly a director of Jay Cee Infrastructure Ltd., challenged the initiation of proceedings under Section 148 of the Income Tax Act, 1961. The basis of the challenge was that the company, Jay Cee Infrastructure Ltd., had been struck off the Register of Companies under Section 560(5) of the Companies Act, 1956. The Income Tax Officer, Ward 13(3), Delhi, and another respondent were the authorities against whom the writ petition was filed. The assessment years are not specified. The procedural history involves the petitioner filing a writ petition before the Delhi High Court to quash the reassessment proceedings.

What were the issues?

1. Whether proceedings under Section 148 of the Income Tax Act, 1961, can be validly initiated against a company that has been struck off the Register of Companies under Section 560(5) of the Companies Act, 1956? (Question of law) The assessee (petitioner) argued that once a company is struck off, it ceases to exist, and therefore, no proceedings, including those under Section 148 of the Income Tax Act, can be continued against it. The revenue (respondents) contended that the Supreme Court's decision in Commissioner of Income Tax, Jaipur vs. Gopal Shri Scrips Private Limited [(2020) 7 SCC 654] provides a mechanism to deal with the liability of companies whose names have been struck off, implying that proceedings are not automatically rendered infructuous.

Which sections of the Income-tax Act were involved?

Section 148

AI-generated summary — verify with the full judgment below

$~31 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1564/2023 VIVEK TANDON (ERSTWHILE DIRECTOR OF JAY CEE INFRASTRUCTURE LTD.)

..... Petitioner Through: Mr. Amol Sinha and Mr. Rahul Kolhar, Advs.

Versus

INCOME TAX OFFICER, WARD 13(3) DELHI & ANR. ..... Respondents Through: Mr. Abhishek Maratha, SSC along with Mr. Parth Semwal, JSC and Ms. Nupur Sharma, Adv.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV

O R D E R %

09.04.2024

1.

The writ petitioner has impugned the initiation of proceedings under Section 148 of the Income Tax Act, 1961 [‘Act’] on the ground that proceedings has been initiated against the company which had been struck off from the Register of the Company under Section 560(5) of the Companies Act, 1956. 2. We note that while dealing with the right of the respondents to continue proceedings in respect of companies which may have come to be struck off from the Register, the Supreme Court in Commissioner of Income Tax, Jaipur vs. Gopal Shri Scrips Private Limited [(2020) 7 SCC 654] had held as follows: - “8. Mere perusal of the impugned order quoted supra would go to show that the High Court dismissed the appeal on the ground that it This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/04/2024 at 12:11:43

has rendered infructuous because it was brought to its notice that the name of the company the respondent assessee has been struck off from the Register of the Company under Section 560(5) of the Companies Act, 1956. 9. In other words, the High Court was of the view that since the respondent Company stands dissolved as a result of the order passed by the Registrar of the Companies under Section 560(5) of the Companies Act, the appeal filed against such Company which stands dissolved does not survive for its consideration on merits. 10. In our view, the High Court was wrong in dismissing the appeal as having rendered infructuous. The High Court failed to notice Section 506(5) proviso (a) of the Companies Act and further failed to notice Chapter XV of the Income Tax Act which deals with "liability in special cases" and its clause (L) which deals with "discontinuance of business or dissolution". The aforementioned two provisions, namely, one under the Companies Act and the other under the Income Tax Act specifically deal with the cases of the Companies, whose name has been struck off under Section 506 (5) of the Companies Act. These provisions provide as to how and in what manner the liability against such Company arising under the Companies Act and under the Income Tax Act is required to be dealt with. Since the High Court did not decide the appeal keeping in view the aforementioned two relevant provisions, the impugned order is not legally sustainable and has to be set aside.” 3. In view of the aforesaid conclusions, we find ourselves unable to sustain the challenge as raised. 4. The writ petition consequently fails and shall stand dismissed. This order, however, shall be without prejudice to the rights and contention of respective parties on merits which are kept reserved.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. APRIL 09, 2024 RW

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/04/2024 at 12:11:43

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