Assessment orders against dissolved companies under Section 560(5) Companies Act 1986 are nullities and unsustainable

ITAT Mumbai held that assessment orders passed against a company struck off under Section 560(5) of the Companies Act, 1986 are nullities and unsustainable. The assessee company was dissolved on 18th March, 2011 per MCA certificate under the Easy Exit Scheme, 2010. Following coordinate bench precedents and J&K and Ladakh HC ruling, the tribunal confirmed that once a company ceases to exist through dissolution, no valid assessment order can be passed against it under the Income Tax Act. The CIT(A)'s quashing of assessment orders was upheld. Appeal decided against revenue.

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Issues Involved:
1. Validity of assessment orders passed against a dissolved company.
2. Applicability of the decision in Skylight Hospitality LLP vs. ACIT.
3. Reliance on previous judgments and coordinate bench decisions.

Summary:

Validity of Assessment Orders Passed Against a Dissolved Company:
The appeals (ITA No. 2234/Mum/2023 and ITA No. 2253/Mum/2023) were filed by the Income Tax Officer against the appellate orders that quashed the assessment orders for the assessment years 2008-09 and 2009-10. The appellate authority held that the assessment orders were invalid as they were issued in the name of "Silverline Trading Company Ltd.," which had been dissolved on 18th March 2011, as per the certificate issued by the Registrar of Companies under Section 560(5) of the Companies Act, 1956. The tribunal found that the company ceased to exist from the date of its dissolution, rendering any assessment order against it a nullity. This position was supported by the Hon'ble Jammu and Kashmir and Ladakh High Court in the case of M/S. RAINAWARI FINANCE & INVESTMENT COMPANY PVT. LTD. VERSUS INCOME TAX OFFICER, JAMMU, where it was categorically held that no valid assessment order could be passed against a dissolved company.

Applicability of the Decision in Skylight Hospitality LLP vs. ACIT:
The tribunal distinguished the case of Skylight Hospitality LLP vs. ACIT, stating that it involved the conversion of a private limited company to a limited liability partnership, not the dissolution of a company. Thus, the decision in Skylight Hospitality was not applicable to the present case.

Reliance on Previous Judgments and Coordinate Bench Decisions:
The tribunal relied on the coordinate bench decisions in the assessee's own case for earlier years (A.Y. 2011-12 and A.Y. 2007-08) where similar assessment orders were quashed. Additionally, the tribunal referred to the decision of the Hon'ble Delhi High Court in CIT vs. Vivid Marketing Services Pvt. Ltd., which supported the view that an assessment order against a non-existent entity is a nullity.

Conclusion:
The tribunal upheld the orders of the CIT (A) for both assessment years, affirming that the assessment orders passed in the name of the dissolved company were unsustainable. Consequently, both appeals filed by the learned Assessing Officer were dismissed.

Order Pronounced:
The order was pronounced in the open court on 08.12.2023.

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