The New Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) dismissed the appeal challenging the validity of the assessment order passed on a struck-off company. This decision was made due to the appeal lacked locus standi.
Red Fort India Real Estate Humayun (assessee) was incorporated on 16.07.2007 as a Company limited by shares under the Mauritius Companies Act, 2001 for investing in Prestige Projects Pvt Ltd (India) and invested Rs. 1.12 crores in equity shares of Prestige India during the financial year 2008-09. The Red Fort India Real Estate Humayun subsidiary (Alena Cyprus) also invested in Prestige India.
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In AY 2018-19, Red Fort Mauritius sold its shares and subsidiary shares in Prestige India to an Indian buyer, both claimed capital gains exemptions under the India-Mauritius Double Taxation Avoidance Agreement (DTAA). After fulfilling the purpose, the Red Fort Mauritius applied for dissolution with the Financial Services Commission, Mauritius, on December 28, 2020. The company’s name was officially struck off the Mauritius Register of Companies on October 29, 2021.
During the dissolution period, the assessment of the Red Fort Mauritius was selected for scrutiny. The Indian tax authorities proceeded with a draft assessment order on September 30, 2021. After receiving the draft assessment order, Red Fort Mauritius filed objections with the Dispute Resolution Panel (DRP). However, the company was dissolved and ceased to exist as of October 29, 2021.
The DRP issued directions on June 3, 2022, confirming the draft order. Consequently, the assessing officer passed a final assessment order on June 20, 2022, in the name of the non-existent entity. The Former Director of the assessee-company (appellate) appealed the final order before the New Delhi Bench of ITAT, arguing that the orders were void since they were issued against a non-existent entity.
The two-member bench comprising B.R.R. Kumar (Accountant Member) and Anubhav Sharma (Judicial Member) observed all the submissions. The tribunal pointed out that before considering the grounds, it should first address the maintainability of the appellant’s appeal and the validity of the assessment order passed against the Non-existent Entity.
The tribunal noted that the draft assessment order was passed when the company was still in existence, and the final order was issued after the company was struck off. The tribunal observed that the assessee had already acknowledged that he had the authority to act as a director after the company’s dissolution.
The tribunal pointed out that the appeal lacked proper authorization or a valid power of attorney, making the appeal questionable. The tribunal noted that the income tax return was filed by the now-dissolved company (Red Fort Mauritius), and the tax demand was payable by the company. Therefore, the former director had no personal liability for the tax demand.
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The Tribunal referred to cases with similar issues, such as ACIT vs. M/s Zeus Impex Pvt. Ltd. and Dwarka Portfolio (P) Ltd. vs. ACIT, where the appeals filed by or against struck-off companies were considered maintainable. The Tribunal acknowledged that appeals for tax recovery may be maintainable under certain circumstances.
The tribunal noted that the Former Director lacked the locus standi to file an appeal on behalf of the dissolved company. Therefore, the appeal of the assessee were not maintainable and was dismissed.
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