Notice Under Section 148 Of Income Tax Act Against A Struck-Off Company Valid, In View Of Subsequent Order Of NCLT Restoring The Company: Delhi High Court

The bench of Justices Manmohan and Manmeet Pritam Singh Arora noted that the continuing liability of a struck-off Company envisaged under Section 250, is in addition to Section 248(7) of the Companies Act, which provides that the liability of every director or manager of a company dissolved as a result of being struck off, shall continue and may be enforced as if the company had not been dissolved.

The petitioner- Ravinder Kumar Aggarwal, is the director of RKA International Pvt. Ltd. Due to the defaults committed by the Company, certain proceedings were initiated by the Ministry of Corporate Affairs through the office of the Registrar of Companies (ROC), and the Company was struck off by the ROC from its register of companies, under Section 248 of the Companies Act, 2013.

Thereafter, a notice under Section 148 of the Income Tax Act, 1961 was issued against the Company, against which the assessee filed a writ petition before the Delhi High Court.

The assessee- Ravinder Kumar Aggarwal, submitted before the High Court that the said notice issued under Section 148 of the Income Tax Act was null and void since it was issued in the name of a struck off company.

The revenue department averred that the Company was active during the relevant assessment year in which it had failed to file its income tax return and that an amount had escaped assessment for the said assessment year. Therefore, it contended that it was a fit case for issuance of notice under Section 148.

The department added that after the notice under Section 148 was issued, the National Company Law Tribunal (NCLT) passed an order allowing the petition filed by the Income Tax Department under Section 252 of the Companies Act, 2013, thereby restoring the name of the Company in the register of companies.

To this, the assessee submitted that the date on which the notice under Section 148 was issued, the Company's name was struck off from the registrar of companies. The assessee argued that the subsequent order passed by the NCLT restoring the name of the Company, would not cure the defect of issuance of notice under Section 148 in the name of a non-existent Company.

The revenue department argued that the Income Tax Department had filed an appeal for restoration of the Company's name prior to the issuance of the notice under Section 148. It averred that the restoration related back to the date of striking off and thus, the notice did not suffer from any infirmity.

The Court noted that the said Company had not challenged the notice issued under Section 148, nor had it filed an appeal against the order passed by the NCLT, therefore, the same had attained finality.

Referring to Section 252(3) of the Companies Act, 2013, the Court observed that the order passed by the Tribunal, directing restoration of a company, will have the effect of placing the company in the same position as if the name of the company had not been struck off from the register of companies.

Thus, it ruled that in view of the restoration order passed by NCLT, on the date of issuance of the Section 148 notice, the Company would be deemed to be in existence.

The bench further noted that Section 250 of the Companies Act recognizes the continuing liability of a struck off company. It added that in view of Section 250 of the Companies Act, even where a Company is dissolved in consequence of being struck off under Section 248, it shall be deemed to continue to be in existence for the purpose of discharging its liabilities.

The Court added that the continuing liability of a Company envisaged under Section 250 is in addition to Section 248(7) of the Companies Act. Section 248(7) of the Companies Act provides that the liability of every director, manager or other officer who was exercising any power of management, and of every member, of the company dissolved in consequence of being struck off under Section 248, shall continue and may be enforced as if the company had not been dissolved.

While noting that the repealed Section 560 of the Companies Act, 1956 corresponded to Section 248 of the Companies Act, 2013, the Court referred to the decision of the Supreme Court in Commissioner of Income Tax, Jaipur versus Gopal Shri Scrips Private Limited, (2019).

In the Gopal Shri Scrips (2019), the Supreme Court, after referring to proviso (a) of Section 560(5) of the Companies Act, 1956 and Chapter XV of the Income Tax Act, 1961, had held that the High Court was wrong in dismissing the appeal filed by the Income Tax Department against a struck off Company on the ground that the appeal was not maintainable since the Company stood dissolved.

The High Court observed that in Gopal Shri Scrips (2019), despite the fact that there was no order passed restoring the Company and that the Company remained non-existent, the Supreme Court had held that the High Court was wrong in dismissing the appeal. The Apex Court had thus remanded the matter back to the High Court to decide the appeal on merits.

The Court took into account that the Andhra Pradesh High Court in Shrikishen Dhoot & Others versus S. D. Kamlapurkur & Ors. (1964) has reiterated that the existing liability of any director or member prior to the dissolution of the company will continue in spite of the dissolution.

"In the present proceedings, the Company has admittedly been restored and as it has been observed above that statutorily upon restoration, the Company under Section 252(3) of the Companies Act, 2013, is deemed to not have been struck off from the register of companies at all. Accordingly, the impugned notice dated 28th March, 2019, is valid and not non-est on the grounds urged in the present petition", the Court said.

The bench ruled that the petitioner by filing the writ petition, even after the Company had been restored, was abusing the process of law to obstruct the assessment proceedings. It added that the writ petition was not bona fide and that the petitioner was seeking to avoid the legal process.

"It would be relevant to note that the Company was initially struck off by the Ministry of Corporate Affairs due to its default in filing its statutory return with the ROC and the Company was, therefore, struck off due to its own defaults. The NCLT upon realizing that the detriment caused to the interest of the Income Tax department due to the striking off, restored the Company to enable the Department to recover its dues. However, the conduct of the Petitioner in persisting with the present petition even after the Company has been restored and also his action in opposing the appeal before the NCLT for restoration evidences that the petitioner is abusing the process of law to obstruct the assessment proceedings. The resort to present petition by the Petitioner herein is therefore, not bona fide and is being done to avoid legal processes. We, accordingly, dismiss the present petition with costs and vacate the stay/interim order", the Court said.

The Court thus imposed a cost of Rs. 50,000 on the petitioner and dismissed the petition.

Case Title: Ravinder Kumar Aggarwal versus Income Tax Officer

Citation: 2022 LiveLaw (Del) 1125

Counsel for the Petitioner: Mr. Yogesh Kumar Jagia, Advocate.

Counsel for the Respondent: Mr. Zoheb Hossain, Advocate with Mr. Vipul Agrawal and Mr. Parth Semwal, Advocates.

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