Tribunal orders fresh assessment after appeal, emphasizing fairness and hearing rights.

The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to conduct a fresh assessment after granting the Assessee a hearing opportunity. The Tribunal noted the need for verifying the Assessee's claim of having a strong case on merits. The original assessment order was set aside to ensure fairness, with notices to be served on former directors or the Assessee's representative for the reassessment. The order was pronounced on 10th August 2022.

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Issues Involved:
1. Validity of notice under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) to issue notice and pass an assessment order for a non-existent entity.
3. Applicability of Section 179 of the Income Tax Act regarding the liability of directors.
4. Merits of the assessment and additions made by the AO.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 148 of the Income Tax Act, 1961:

The Assessee argued that the notice under Section 148 issued on 27-03-2018 was invalid as it was issued to a non-existent entity. The company had been struck off from the register of companies by the ROC on 07-06-2017. The AO was aware of this fact, as indicated by the returned notices with postal remarks "No such Firm." Despite this, the AO proceeded with the assessment, which the Assessee claimed was beyond jurisdiction and without a valid 'reason to believe.'

2. Jurisdiction of the AO to Issue Notice and Pass an Assessment Order for a Non-Existent Entity:

The First Appellate Authority (FAA) upheld the AO's actions, stating that the AO had sufficient basis to believe that income had escaped assessment due to the absence of a return for AY 2011-12 and non-compliance with notices. The FAA also noted that the striking off of the company's name did not preclude the revenue from proceeding with the assessment as long as the PAN was active. The FAA referenced Section 179 of the Act, which holds directors liable for tax dues of a private company in liquidation unless they prove non-recovery was not due to their neglect or breach of duty.

3. Applicability of Section 179 of the Income Tax Act:

The FAA emphasized that the striking off the company's name did not absolve the directors of their responsibility under Section 179. This section holds directors jointly and severally liable for the company's tax dues unless they can prove that non-recovery was not due to their gross neglect, misfeasance, or breach of duty. The FAA argued that the assessment could proceed against the directors as representatives of the dissolved company.

4. Merits of the Assessment and Additions Made by the AO:

The Assessee contended that the AO's additions, including the interest income and cash deposit, were unjustified. The FAA, however, noted that the AO had analyzed and bifurcated the interest component, adding only the amount pertinent to AY 2011-12. The FAA also justified the AO's actions based on the information available in AIR and the non-filing of returns by the Assessee.

Conclusion and Tribunal's Decision:

The Tribunal considered the arguments and found that the AO had approached the NCLT for the restoration of the company's name to complete the assessment, which was getting time-barred. The Tribunal noted that if the company's name were restored, it would have a retrospective effect, but the stringent limitation period under the Act would still apply. Therefore, the assessment order could not be void ab initio as it was a preemptive measure.

However, the Tribunal acknowledged the Assessee's claim of having a good case on merits, which required verification of facts. To ensure justice, the Tribunal set aside the impugned assessment order and directed the AO to pass a fresh assessment order after giving the Assessee an opportunity for a hearing. Notices were to be served on the former directors or the Assessee's authorized representative.

Order Pronounced:

The appeal was allowed for statistical purposes, and the AO was instructed to reassess the case after providing the Assessee with an opportunity for a hearing. The order was pronounced in the open court on 10th August 2022.

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