TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 830
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.... for the sake of convenience with this common order. 2.1 For the purpose of the present discussions, the case in ITA No. 146/Jodh/2023 is taken as a lead case. Based on the above arguments we have also seen that for these appeals grounds are similar, facts are similar, and arguments were similar and therefore, were heard together and are disposed by taking lead case facts, grounds, and arguments from the folder in ITA No. 146/Jodh/2023. 3. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 146/Jodh/2023 on the following grounds; "1. The ld. CIT(Appeals) has erred in sustaining the addition of Rs. 1202630/- being one third amount credited in the bank account of AKCL Exports Limited during the year as income of the appellant. The addition for credit in account of other assessee as income of the appellant is bad in law and bad on facts. 4. The fact as culled out from the records is that the assessee is one of the directors of M/s AKCL Exports Limited (in short "AKCL"), the company incorporated under Companies Act, 1956. The said company's name was struck off from the Registrar of Companies and was dissolved o....
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....at the directors who are operating account of dissolved company are responsible for explaining the nature and source of the deposits. The decisions relied upon by the assessee not accepted and based on that finding the ld. CIT(A) sustained the order of ld. AO. 6. Feeling dissatisfied with the above finding of ld. CIT(A), the assessee preferred the present appeal challenging the addition sustained by ld. CIT(A). In support of grounds so raised, the ld. AR of the assessee submitted that similar issue of the additions were dealt with by this bench in the case of Husband of the assessee Shri Kushal Chand Lodha vs. DCIT in ITA No. 258 to 262/Jodh/2023 dated 01.01.2024 wherein the bench has allowed the appeal of the assessee on similar facts vide paras 7 to 14 of that order and supply relied upon the order of the Bench. 7. Per contra, the ld. DR relied on the finding of the orders of the lower authorities. No contrary decision placed on record by the ld. DR but prayed that the bench may take judicious view in the matter considering the findings recorded in the orders of the lower authorities. 8. We have heard the rival contentions and perused the material placed on record. It is not d....
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....neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. (2) Where a private company is converted into a public company and the tax assessed in respect of any income of any previous year during which such company was a private company cannot be recovered, then, nothing contained in sub-section (1) shall apply to any person who was a director of such private company in relation to any tax due in respect of any income of such private company assessable for any assessment year commencing before the 1st day of April, 1962.] Explanation. -For the purposes of this section, the expression "tax due" includes penalty, interest, fees or any other sum payable under the Act." 9. We refer to the decision of the Hon'ble Supreme Court in case of CIT vs Gopal Scrips (P) Ltd (supra) whereby the decision of the Hon'ble Jurisdictional Rajasthan High Court was set-side wherein the appeal filed by the Revenue was dismissed by the Hon'ble High Court being infructious on account of name of the assessee company being struck off from the Register of Companies, as in the instant case, and it was held that by the Hon'ble Supreme Court that the appeal so filed by ....
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....ismissed the appeal on the ground that it has rendered infructuous because it was brought to its notice that the name of the company the respondent-assessee has been struck off from the Register of the Company under Section 560(5) of the Companies Act, 1956. 11. In other words, the High Court was of the view that since the respondent Company stands dissolved as a result of the order passed by the Registrar of the Companies under Section 560(5) of the Companies Act, the appeal filed against such Company which stands dissolved does not survive for its consideration on merits. 12. In our view, the High Court was wrong in dismissing the appeal as having rendered infructuous. 13. The High Court failed to notice Section 506(5) proviso (a) of the Companies Act and further failed to notice Chapter XV of the Income Tax Act which deals with "liability in special cases" and its clause (L) which deals with "discontinuance of business or dissolution". 14. The aforementioned two provisions, namely, one under the Companies Act and the other under the Income Tax Act specifically deal with the cases of the Companies, whose name has been struck off under Section 506(5) of the Companies A....
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....ction (9) of section 12.] He shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice. (2) Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five per cent. members in terms of paid-up share capital, file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner: Provided that in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application. The Section 248(2) will be invoked by the Company itself after extinguishing all its liabilities (including tax l....
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....of the company: Provided that notwithstanding the undertakings referred to in this sub- section, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies. (7) The liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved. (8) Nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies 9. When the Company is being struck off, there will be certain consequences. The Section 250 of the Companies Act deals with effect of Company notified as dissolved. Section 250 of the Companies Act. "250. Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to hav....
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....ssessee jointly with any other person and for the purposes of this sub- section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, to be equal. (iii) ............... .................. .................... (x).................. 12. Further, as per Section 179 of Income Tax Act, if the tax due from Private company in respect of any income of any previous year cannot be recovered, then every person who was a Director of the private Company at any time during the relevant previous year shall be jointly and severally liable for the payment of such taxes unless he proves that non-recovery cannot be attributed to any gross neglect misfeasance or breach of duty on his part in relation of the Company. Section 179 of Income tax Act reads as follows:- 179. (1) Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company cannot be recovered, then, every person who was a director of the private company a....
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....nue dismiss the Appeal as in-fructuous, one hand the appeal will be dismissed having become in-fructuous on the other hand, the Revenue Department will initiate proceedings under Section 179 of the Income Tax Act and that too without even adjudicating in the manner prescribed under Law on the 'quantum of actual tax due' or 'liability to pay tax', in such even great in justice will be caused, which cannot be permitted. 17. When the Revenue Department has not forgone the right to recover tax due or Written-off the demand on the ground of Company being struck off by the ROC, the right of the assessee to determine the tax liability in due process of law cannot be denied by dismissing the Appeal pending before us. 18. Further, in a case where the CIT(A) deletes the addition made by the A.O and if Revenue files Appeal before the Tribunal, even in a case where the Revenue is having a water tight case on merit, by dismissing the Appeal for having become in-fructuous will also result in non adjudication of the actual tax due by the assessee and the Revenue cannot recover the actual tax dues from the assessee. In such events, the Department of Revenue will be left with no remedy, which....
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....ed for our perusal a communication issued from the office of Registrar of Companies dated 07.04.2011 indicating that pursuant to subsection( 5) of Section 560 of the Companies Act, 1956 the name of Gopal Shri Scrips Pvt. Ltd., has been struck off from the register and the said company is dissolved. In the light of the communication placed for our perusal dated 07.04.2011, no purpose is going to be served in examining the substantial question of law which has been raised for consideration in the instant appeal and on account of these change in circumstances, the present appeal has become infructuous and accordingly stands dismissed. However, the appellant is still at liberty to file application if any occasion arises in future." 21. The said order of Hon'ble High Court of Judicature for Rajasthan dated 09/08/2016 in ITA No. 53/2000 has been challenged by the Revenue Department before the Hon'ble Supreme court of India in Civil Appeal No. 2922/2019 (CIT Jaipur Vs. M/s. Gopal Scrips Pvt. Ltd.). The Hon'ble Apex Court vide order dated 12/03/2019 held that, the High Court was wrong in dismissing the appeal as having rendered infructuous and further directed to decide the appeal af....
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....the Income tax Act uninfluenced by any observations made by us on merits. 22. The Hon'ble Supreme Court in the case of M/s. Gopal Scrips Pvt. Ltd (supra) while allowing the Civil Appeal of the Revenue, dealt and relied on Section 560(5) of the Companies Act, 1956 and held that the Appeal filed by the Revenue is maintainable. The identical provisions have been introduced in the Companies Act, 2013 in Sub-Section sub- Sections (6) and (7) of Section 248 of the Companies Act. Therefore, the ratio laid down in the case of Gopal Scrips Pvt. Ltd (supra) is squarely applicable to the issue in hand. 23. In the case of M/s. Gopal Scrips Pvt. Ltd (supra), the Department of Revenue was having grievance on the Order of the Hon'ble High Court of Judicature for Rajasthan in dismissing the Appeal (ITA) for having become in fructuous on the ground that the Assessee company was struck off. The Hon'ble Supreme Court has set aside the Order of the Hon'ble High Court of Judicature for Rajasthan and directed to decide the Appeal on merit. Ironically now the very same Department of revenue is seeking before us to dismiss the present Appeal as in- fructuous since the assessee company has been struc....
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....ave the necessary shelter so provided in section 179 of the Act. In this regard, useful reference can be drawn to the decision of Hon'ble Bombay High Court in case of Manjula D. Rita and Bhavya D. Rita Vs. PCIT(in Writ Petition No. 1672 of 2021 dt. 19/06/2023) wherein it was held as under: "7 In our view, not only this order dated 9th March 2020 but also the order passed on 7th May 2018 under Section 179 of the Act require to be quashed and set aside. Considering the order dated 7th May 2018, there is no ground made out in the order for even commencing proceedings under Section 179 of the Act. The relevant paragraphs are paragraph 4 and paragraph 7, which read as under : 4. For A.Y.2012-13, order was passed u/s 143(3) dt 30.03.2015 resulting demand of Rs. 8,66,76,960/- Demand notice u/s. 156 of the 1.T. Act had been served on the assessee company and the assessee company was supposed to pay the demand within 30 days of receipt of demand notice from the department. As the assessee company has failed to comply with the demand notice, accordingly recovery proceedings had been started by the department. However the Assessing Officer is unable to recover anything from the company, ....
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....o gross neglect, misfeasance or breach of duty on the part of such Director. 10 In this case, we also find that in view of non issuance of notice, the deceased has not been even given an opportunity to establish that the non recovery cannot be attributable to any of the three factors on his part, i.e., gross neglect or misfeasance or breach of duty. As held in Maganbhai Hansrajbhai Patel V/s. Assistant CIT 2 , the gross negligence etc. is to be viewed in the context of non recovery of tax dues of the company and not with respect to general functioning of the company. Once the Director after being given an opportunity places material on record to establish that non recovery cannot be attributed to gross negligence, misfeasance or breach of duty on his part, the Tax Recovery Officer is required to apply his mind and come to definite findings. 11 Without going into the merits on the correctness of the assessment order passed or whether the time was ripe to issue notice under Section 179 of the Act, we hereby quash and set aside the order dated 9 th March 2020 passed under Section 264 of the Act, so also the order dated 7 th May 2018 passed under Section 179 of the Act." 12. I....
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....Manan Lodha considered as unexplained and unsubstantiated and hence addition of Rs. 25,00,000/- was made as income from unexplained sources u/s 69A of the Act. 11. Aggrieved from the above addition, the assessee preferred an appeal raising the specific ground before ld. CIT(A) considering the evidence and arguments placed before ld. CIT(A). The ld. CIT(A) has directed to delete the said addition of Rs. 25,00,000/- and the relevant finding of ld. CIT(A) is as under:- "6.3 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the Assessment order of the Income tax act, 1961 for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- The AO made addition with regard to gift because the appellant failed to establish creditworthiness of Mr. Manan Lodha from whom the gift of Rs. 25,00,000/- is received. As per AO Mr. Manan Lodha filed return of income showing income of Rs. 41,505/-only during the year. No evidence submitted before the AO to prove that Mr. Manan Lodha was earning income abroad. During appellate proceedings also no evidence with ....
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....ed in the hands of appellant as it will amount to double addition of the same amount. The appellant is getting relief on this ground of appeal therefore, other issues raised by the appellant become only academic and therefore not decided. Therefore, the AO shall delete the addition of Rs. 25,00,000/- subject to verification that the same amount has been added in the hands of Mr. Manan Lodha and it is double addition in the hands of the appellant. [emphasis supplied by us] The ld. AR of the assessee submitted that the ld. CIT(A) directed to delete the addition after making the verification whereas when the assessee has submitted the identity, creditworthiness and genuine of the transaction no addition can be made u/s 69A of the Act by the ld. AO. In fact, the addition can also not be made u/s. 68 of the Act as the assessee has already established the identity credit worthiness and genuineness of the transactions and therefore, even the provision of section 68 cannot be applied in the present case. As regards the contention that no gift deed is provided so whether the transactions are in the nature of loan or gift in hands of the assessee as the assessee has supplied the relevant ....