2022 (11) TMI 1176 - HC - Income Tax

Validity of Income Tax Notice Upheld after NCLT Company Restoration

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 ... Validity of notice issued to struck-off company - Restoration under Section 252(3) of the Companies Act, 2013 - Effect of restoration order placing company in same position as if not struck off - Continuing liability of struck-off company - Locus standi of director to impugn notice issued to companyRestoration under Section 252(3) of the Companies Act, 2013 - Validity of notice issued to struck-off company - Effect of restoration order placing company in same position as if not struck off - Continuing liability of struck-off company - Impugned notice dated 28th March, 2019 issued under Section 148 of the Income Tax Act in the name of the company is not invalid merely because the company had earlier been struck off, on account of the subsequent NCLT restoration order. - HELD THAT: - The Tribunal's restoration order under Section 252(3) has the statutory effect of placing the company and all persons in the same position as if the name of the company had not been struck off; consequently, the company is deemed to have been in existence even on the date the notice was issued. Section 250 and the corresponding proviso to the earlier provision establish that liabilities of a struck-off company continue and may be enforced. The Supreme Court's decision in Gopal Shri Scrips (as considered) supports that proceedings against a struck-off company cannot be nullified simply because it was struck off; where restoration is ordered, the defect is cured and the notice is valid. On these statutory and precedential bases the Court held the impugned notice for AY 2012-13 to be valid and not non-est on the ground of prior striking off. [Paras 11, 12, 13, 16, 17]The notice dated 28th March, 2019 is valid because the NCLT restoration operates to deem the company as not struck off and the liabilities/proceedings continue.Locus standi of director to impugn notice issued to company - Validity of notice issued to struck-off company - Petition filed by the director in his individual capacity challenging the notice in the name of the company is not maintainable and is infructuous once the company has been restored. - HELD THAT: - The petitioner, a promoter and director, challenged the notice issued to the company though the company itself has not challenged the notice or the NCLT restoration order, which has attained finality. In these circumstances the petitioner lacks locus to maintain the petition in his individual capacity and, alternatively, the petition has become infructuous. Further, the petitioner's conduct in opposing restoration before the NCLT and persisting with this petition after restoration evidences misuse of process. The Court accordingly dismissed the petition, vacated interim relief and imposed costs. [Paras 9, 19, 20, 21]The petition is dismissed as not maintainable/infructuous; interim orders are vacated and costs awarded to the Court.Final Conclusion: The writ petition challenging the notice dated 28th March, 2019 is dismissed. The NCLT restoration of the company cures the alleged defect of issuance to a struck-off entity and the petitioner, in his individual capacity, lacks locus; interim relief is vacated and costs are imposed. 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.