Company name struck off by ROC cannot justify dismissing tax appeal without deciding on merits

ITAT Kolkata allowed the appeal and restored the matter to CIT(A) for decision on merits. The CIT(A) had dismissed the appeal ex-parte regarding unexplained cash credit addition solely because the assessee company's name was struck off by ROC and PAN was surrendered. ITAT held that striking off company name from ROC records cannot be grounds for dismissing appeal without deciding on merits, following precedent in Dwarka Portfolio case. The first appellate authority was directed to decide the issue on substantive grounds rather than procedural technicalities.

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Issues Involved:
1. Whether the order of the Ld. CIT(A) dismissing the appeal on the ground that the assessee company was struck off is valid.
2. Whether the appeal should have been decided on merits despite the company being struck off.

Summary:

Issue 1: Validity of Ld. CIT(A)'s Dismissal of Appeal

The only issue raised by the assessee was that the Ld. CIT(A) dismissed the appeal on the ground that the assessee was struck off from the ROC records and had surrendered its PAN, hence, no longer in existence. The AO had added Rs. 25,00,000/- as unexplained cash credit after reopening the assessment u/s 147 of the Act. The Ld. CIT(A) dismissed the appeal ex-parte without deciding it on merits, which was challenged by the assessee.

Issue 2: Necessity of Deciding the Appeal on Merits

The Tribunal found that the dismissal of the appeal by the Ld. CIT(A) was incorrect as it should have been decided on merits. The Tribunal referred to the decision of the Co-ordinate Bench of Delhi in the case of M/s Dwarka Portfolio Pvt. Ltd. vs. ACIT, which held that an appeal cannot be dismissed solely because the assessee's name was struck off by the Registrar of Companies. The Tribunal emphasized that even if a company is struck off, it is still necessary to adjudicate the tax liability to avoid jeopardizing the rights of the directors and ensuring the realization of dues and discharge of liabilities.

Legal Principles and Cases Cited:

The Tribunal discussed the provisions under Sections 248 and 250 of the Companies Act, 2013, and Section 179 of the Income Tax Act, 1961, which deal with the striking off of companies and the consequent liabilities. The Tribunal also referred to the Supreme Court's decision in Pr. Commissioner of Income Tax Vs. Mahagun Realtors Pvt. Ltd. and the Rajasthan High Court's decision in Commissioner of Income Tax Vs. Gopal Shri Scrips Pvt. Ltd., both emphasizing the need to adjudicate tax liabilities even if the company is struck off.

Conclusion:

The Tribunal concluded that the appeal filed by the struck-off assessee company is maintainable and should be decided on merits. The case was restored to the file of the Ld. CIT(A) with the direction to decide the issue on merits.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 30th November, 2023.

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