2022 (11) TMI 1176 - HC - Income Tax

Validity of Income Tax Notice Upheld after NCLT Company Restoration

Ravinder Kumar Aggarwal Versus Income Tax Officer, Ward 20 (3) New Delhi

The court upheld the validity of the notice issued under Section 148 of the Income Tax Act, 1961, as the restoration of the company's name by the NCLT ... Reopening of assessment against company as struck off by the ROC from its register of companies - Later the name was restored - Section 248 of the Companies Act, 2013 - Respondent has filed its counter affidavit for restoration of the name of the Company in the register of companies, maintained by the ROC Delhi - HELD THAT:- The petitioner herein is the promoter and director of the Company and he has filed the present petition in his individual capacity -The Petitioner admits the Company stands restored by the order dated 25th September, 2019, passed by the NCLT. The defaulting Company has neither challenged the impugned Notice dated 28th March, 2019, nor the order dated 25th September, 2019, passed by the NCLT, which has therefore, attained finality in law. In our view, in these facts alone, the Petitioner herein has no locus standi to maintain the proceedings and even in alternative the present petition has become infructuous. Impugned notice was issued at a point in time, when the Company was struck off from the ROC, the subsequent order passed by the NCLT restoring the Company, will not have the effect of curing the defect issuance of notice to the non-existent entity - Section 252(3) of the Companies Act, 2013 expressly states that the Tribunal’s order directing restoration of a company will have the effect of placing the company in the same position as if the name of the company has not been struck off from the register of companies. In other words, with the restoration order passed by the NCLT, even on the date of the issuance of the impugned notice, the Company is deemed to be in existence. Section 250 of Companies Act of 2013 is a new provision and it declares that even where a Company is dissolved in consequence to it being struck off under Section 248, it shall be deemed to continue to be in existence for the purpose of discharging its liabilities. The said section recognizes the continuing liability of a struck off company, which is in addition to Section 248(7) of the Companies Act, 2013, In the present proceedings, the Company has admittedly been restored and as it has been observed above that statutorily upon restoration, the Company under Section 252(3) of the Companies Act, 2013, is deemed to not have been struck off from the register of companies at all. Accordingly, the impugned notice dated 28th March, 2019, is valid and not non-est on the grounds urged in the present petition. Decision as distinguishable in Shrikishen Dhoot & Others [1964 (11) TMI 38 - HIGH COURT OF ANDHRA PRADESH] has held that a suit is not maintainable against a company which was struck off from the register of companies. However, the Court in the said case has clarified that the existing liability of any director or member prior to the dissolution of the company will continue in spite of the dissolution. Also Sharvan Kumar Swarup [1994 (9) TMI 2 - SUPREME COURT] and Mrs. Suseela Sadanandan [1964 (10) TMI 6 - SUPREME COURT] Company was initially struck off by the Ministry of Corporate Affairs due to its default in filing its statutory return with the ROC and the Company was, therefore, struck off due to its own defaults. The NCLT upon realizing that the detriment caused to the interest of the Income Tax department due to the striking off, restored the Company to enable the Department to recover its dues. However, the conduct of the Petitioner in persisting with the present petition even after the Company has been restored and also his action in opposing the appeal before the NCLT for restoration evidences that the petitioner is abusing the process of law to obstruct the assessment proceedings. The resort to present petition by the Petitioner herein is therefore, not bona fide and is being done to avoid legal processes. We, accordingly, dismiss the present petition with costs. Issues Involved:1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.2. Impact of the restoration of the company's name by the National Company Law Tribunal (NCLT) on the notice issued.3. Locus standi of the petitioner to challenge the notice.4. Legal implications of a struck-off company's liabilities and subsequent restoration.Detailed Analysis:1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:The petitioner challenged the notice dated 28th March 2019, issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2012-13, claiming it was null and void since it was issued in the name of a company that had been struck off. The respondent argued that the company was active during the relevant assessment year and failed to file its income tax return, justifying the issuance of the notice.2. Impact of the Restoration of the Company's Name by the NCLT on the Notice Issued:The NCLT restored the company's name on 25th September 2019, under Section 252 of the Companies Act, 2013. The respondent contended that this restoration related back to the date of striking off, thus validating the notice. The court agreed, citing Section 252(3) of the Companies Act, 2013, which states that the restoration order places the company in the same position as if it had never been struck off.3. Locus Standi of the Petitioner to Challenge the Notice:The court noted that the petitioner, being the promoter and director of the company, filed the petition in his individual capacity. Since the company itself did not challenge the notice or the NCLT's restoration order, which has attained finality, the petitioner had no locus standi to maintain the proceedings. Consequently, the petition was deemed infructuous.4. Legal Implications of a Struck-off Company's Liabilities and Subsequent Restoration:The court referred to Section 250 of the Companies Act, 2013, which states that a dissolved company continues to exist for the purpose of discharging its liabilities. Additionally, Section 248(7) ensures the liability of directors and officers continues as if the company had not been dissolved. The court also cited the Supreme Court judgment in Commissioner of Income Tax, Jaipur v. Gopal Shri Scrips Private Limited, which upheld the continuing liabilities of a struck-off company under similar circumstances.Conclusion:The court concluded that the impugned notice dated 28th March 2019 was valid, as the restoration of the company by the NCLT related back to the date of striking off, making the company deemed to be in existence at the time of notice issuance. The petitioner had no locus standi to challenge the notice, and his actions were seen as an abuse of the legal process to obstruct assessment proceedings. The petition was dismissed with costs, and the petitioner was directed to deposit Rs. 50,000 with the Delhi High Court Legal Services Committee.