Income Tax Assessment against Company Dissolved and Struck Off u/s 560(5) of Companies Act Held Invalid: ITAT [Read Order]
The Tribunal observed that since the company had ceased to exist on the date of issuing the notice, the AO should have first sought its revival.
Income Tax Assessment - Company Dissolved - Struck Off - Companies Act - ITAT - Taxscan
Income Tax Assessment - Company Dissolved - Struck Off - Companies Act - ITAT - Taxscan
The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) held that an income tax assessment made against a company dissolved and struck off under Section 560(5) of the Companies Act,2013 was invalid.
Dazzle Developers P. Ltd.,appellant-assessee stated that the Assessing Officer (AO ) issued a notice under Section 148 for AY 2012-13 on 31.03.2019. The company informed the AO on 08.04.2019 that it had been dissolved and its name struck off from the Companies Register w.e.f. 31.01.2018, and submitted the dissolution order.
Despite this, the AO completed the assessment under Sections 144 and 147 on 08.12.2019, making an addition of Rs. 30,00,000 under Section 68. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal, leading to the present appeal before the tribunal.
The assessee counsel submitted that the company ceased to exist once its name was struck off by the Registrar of Companies, so no assessment could be made in its name. He argued that any assessment was invalid and relied on Delhi and Madras High Court decisions.
He added that if the AO wanted to proceed, the proper route was to approach the NCLT under Section 252 of the Companies Act, 2013, and noted the company had not been revived, submitting a status report from the Ministry of Corporate Affairs.
The department counsel relied on the CIT(A)’s findings and requested dismissal of the appeal.
A single member bench of Vikas Awasthy (Judicial Member) heard both sides and examined the orders of the authorities below. The assessee had challenged the validity of the notice issued under Section 148 and the consequent assessment.
The AO issued the notice on 31.03.2019, and the assessee filed objections on 08.04.2019, informing that the company’s name had been struck off by the Registrar of Companies and the company was dissolved w.e.f. 31.01.2018, enclosing a copy of the dissolution order.
The appellate tribunal noted that once the company ceased to exist, the AO should have taken steps to revive it before proceeding with assessment. It relied on the decisions in Rainwari Finance & Investment Company P. Ltd., CIT vs. Vived Marketing Services P. Ltd., and Pandian Anbalagan vs. ITO, which held that no valid assessment could be made against a dissolved company and the proper course was to approach the National Company Law Tribunal (NCLT) for revival before initiating proceedings.
In view of the undisputed fact that the company had already ceased to exist when the notice was issued, the tribunal held that the assessment dated 08.12.2019 was without jurisdiction and quashed it.
Accordingly the appeal of the assessee was allowed.
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