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Judgment
Dr. P.S.N. Prasad, J
This appeal has been filed by Income Tax Authority invoking the provisions of Section 252 of the Companies Act, 2013 for restoration of the name of the Respondent No. 2 company, viz. M/s. Pawaskar Builders Pvt. Ltd., in the Register of Companies maintained by the Registrar of Companies ("RoC"), Respondent No. 1.
Service was duly effected on the Respondents. Other than the RoC, respondent No. 3 appeared to oppose the prayer made by the Appellant. The RoC submitted that they have no objections to the prayer of the Appellant being granted by this Tribunal.
Respondent No. 3 has filed its reply dated 28.08.2019 in which the respondent No. 3 has made following submissions:-
(i) That he has no connection whatsoever with the respondent No. 2 ("the Company") inasmuch as he has never held any position in the company, nor was he privy to the business, affairs or compliances of the company at any point in time. The answering respondent has been pursuing a completely different and unrelated occupation of teaching from the year 2009. The answering respondent is currently working at the position of an Associate Professor of Law and Management at Sydenham institute of Management Studies and Research and Entrepreneurship Education, Mumbai. It appears that the answering respondent has been impleaded in the present appeal solely on account of the fact that he is the legal heir of Late Smt. Priti Sudhir Pawaskar, the original Respondent No. 3 in the present case. True copy of the Appointment Letter dated 25.08.2009 issued to the answering respondent by Sydenham Institute of Management Studies and Research and Entrepreneurship Education, Mumbai is annexed herewith as Annexure-A.
(ii) The without prejudice to the above, it is submitted that the present appeal is nothing but an abuse of the process of law, aimed at conducting a roving and a fishing inquiry into the affairs of the company which was a defunct company and was closed/struck off way back in the year 2011 without having conducted any business or transactions during its existence, and which is now being hounded by the Appellant solely on the basis of a bald averment that "information has been received" from the Kolkata Unit regarding the alleged receipt of a sum of Rs. 51 lakhs by the company during AY 2011-12 (FY 2010-11), for which the appellant has not bothered to file any supporting proof or document. The appeal being thoroughly devoid of substance or merits is, accordingly, liable to be dismissed at the threshold.
(iii) That it is further submitted that the appellant has no locus standi to file the instant appeal for seeking restoration of the company since as per the provisions of section 252 of the companies Act, 2013, the relief of restoration of the name of the company, can only be sought by a 'member" or a 'creditor'. A perusal of the documents filed by the appellant demonstrates that the appellant was not a creditor of the company on the date of the filing of the application before the ROC for striking off the name of the company under the Easy Exit Scheme, 2011. In fact, even as per the case set up by the Appellant, the assessment of the alleged tax payable by the company is yet to be conducted by the appellant, and the alleged tax liability of the company has not been crystallised as of date. Therefore, the appellant cannot be said to fall within the description of a 'creditor' as on the date of filing of the instant appeal.
(iv) That without prejudice to the above, it is further submitted that the very basis for initiation of proceedings against the company under Section 147/148 of the Income Tax Act, 1961 ("the Act") is bad in law inasmuch as the appellant has failed to disclose any cogent "reason to believe" that any income of the company, chargeable to tax, has escaped assessment. It is a settled principle of law that the Assessing Officer cannot form an opinion for initiation of proceedings under Section 147 of the Act unless the "reason to believe" has a direct nexus or a livelink with the opinion formed by him that the taxable income of the assessee has escaped assessment.
(v) That it is further submitted that the restoration of the company is unlikely to serve any legal purpose inasmuch as a perusal of the documents annexed by the appellant clearly demonstrates that the said company was a having nil assets and the same was inoperative at the time of its striking off from the rolls of the respondent No. 1.
Appellant has filed its rejoinder dated 13.02.2020 in which the following submissions has been made:-
(i) it has been submitted that as per the information received from Investigation Wing of Income Tax Department, Kolkata, vide letter F. No. ADIT (Inv)/U-5/Pawha/2017-18 Kolkata/6614 dated 07.03.2018, it is revealed that M/s. Pawaskar Builders Pvt. Ltd. ('the company') is beneficiary of Rs. 51,00,000/- during FY 2010-11, relevant AY 2011-12.
(ii) Upon receipt of such information, the AO conducted enquiries about the financial transactions and ITR of the Company but found that the company had not filed ITR for relevant AY 2011-12. After recording reasons and obtaining approval from the competent authority issued notice dated 27.03.2018 u/s 148 of the Income Tax Act, 1961 ('the IT Act').
(iii) From the MCA website, it was found that the status of company was "Strike Off. It was also found that the company was struck off in the year 2011 under section 560(5) of Companies Act, 1956 under Easy Exit Scheme 2011. It is apparent that after using the company for receipt of Rs. 51 lakhs in the FY 2010-11, the company was struck off by applying to ROC, without filing ITR and payment of due taxes. It is pertinent that R-3 has given Affidavit and Indemnity along with Form EES, 2011 undertaking to Indemnify liability of the company. Copy of the Form EES, 2011 along with Affidavit attached thereto is annexed as Annexure AR-1.
(iv) Upon receipt of EES, 2011 Form dated 20.04.2011 along with Affidavit and Indemnity Bond, the ROC approved the form on 11.07.2011 and struck off the name of the company under the provisions of Section 560 (5) in 2011.
(v) The assessment order dated 23.12.2018 has been passed within the prescribed statutory period of limitation under the IT Act pending revival of the Respondent Company by this Hon'ble Tribunal, resulting into creation of demand of Rs. 32,47,137/- and further penalty orders have been passed imposing penalty of Rs. 15,75,900/- and 5,000/- under Section 271 (1) (c) and 271F of the IT Act. To make the assessment orders and penalty orders valid orders and to facilitate recovery of tax dues, it is imperative that the name of the company be restored back to the register of companies. Thus Income Tax Department is a creditor and is entitled to approach this Hon'ble Tribunal for restoration of the name of the company to the register of companies.
Appellant has relied upon following judgments in which it has been consistently held that assessment passed on a non-existent company is a nullity. The rest of the judgment are as follows
a) CIT v. Vivid Marketing Servicing Pvt. Ltd. ITA 273/2009 Delhi High Court]
b) CIT (C)-II v. Micra India Pvt. Ltd. [ITA No. 441/2013 decided on 22.01.2015]
c) PCIT v. Sapient Consulting Ltd. [ITA No. 341/2016 Delhi High Court]
d) CIT v. Dimensions Apparels (P) Ltd. [370 ITR 288 Delhi High Court]
e) PCIT V. Maruti Suzuki India Ltd. [85 Taxmann.com 330 Delhi High Court]
In view of above judgments, the assessment order passed on 23.12.2018 at a time when the company stood struck off, is not valid in the eyes of law unless the company is restored to the register of companies. Therefore, in order to render the Assessment Order valid in the eyes of law and to recover the outstanding dues, the company needs to be restored back to the register of companies with such directions and provisions for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the register of companies.
Vide proceedings initiated by the Ministry of Corporate Affairs, through the office of the RoC several names of companies were struck off for want of statutory filings. Respondent No. 2 company, which had also not filed any returns or financial statements was duly struck off from the register of companies.
Invoking the provision of section 252 of the Act, the Income Tax Dept. prays for its restoration in order to carry out proceedings initiated against Respondent 2. As per the information available on website of MCA, respondent company was incorporated on 29.05.1982 under Companies Act, 1956 under Registrar of Companies, Delhi having registered address at A-6, Neeti Bagh, New Delhi-110049. The Authorised Capital is Rs. 2,00,000/- and paid-up share capital is Rs. 200/- each.
Information was received from Assistant Director of Income tax (Inv.), Unit-5, Kolkata vide his letter F. No. ADIT (Inv)/U-5/Pawha/2017-18/Kolkata/6614 dated 07.03.2018 informing that account No. 07921900002035 of M/s. Jain Natural Energy Pvt. Ltd. was enquired and analyzed with ITR and it was found that no active business was noticed. There was no sale and purchase shown in the returns. Hence the transaction happened in the bank account are suspicious. As per trail prepared, the respondent company is a beneficiary of Rs. 51,00,000/- for the financial year 2010-11 relevant Assessment Year 2011-12.
As per ITD/ITBA the respondent has not filed any return of income for A.Y. 2011-12 or subsequent year. As per the provisions of Section 139 of the I.T. Act, every company is mandatorily required to file its return of income within the prescribed time in the prescribed manner. Thus, the company has violated the provisions of the Income Tax Act by not filing the ITR and concealed its income of Rs. 51,00,000/-.
It is further seen that the respondent company holds two PAN i.e., AAACP1742P and AAACP4837B respectively in the name of M/s. Pawha Builders Pvt. Ltd. and M/s. Pawaskar Builders Pvt. Ltd. respectively. The PAN of Pahwa Builders Pvt. Ltd. is on deletion side in the ITD system whereas the PAN of M/s. Pawaskar Builders Pvt. Ltd. is on the retention side in the system.
As the respondent did not file its ITR and did not disclose fully and truly all material particulars necessary for assessment, the Assessing Officer has reasons to believe that an estimated amount of at least Rs. 51,00,000/-, representing bogus accommodation entry (introduction of black money), has escaped assessment within the meaning of section 147/148 of the I.T. Act and has not been brought under tax for the A.Y. 2011-12, thereby rendering the company liable for consequences under Income Tax Act, 1961 and entitling the Revenue to initiate proceedings against the company. Thus, prima facie, there appears tax evasion which requires action in accordance with law.
Therefore, notice dated 27.03.2018 under Section 148 of the I.T. Act for A.Y. 2011-12 has been issued to the respondent company and sent by post as well as the email. The case of the respondent company has been re-opened under section 147 of the I.T. Act for assessing the aforesaid transactions in the hands of the company.
The said proceedings for assessment of income of the respondent company for A.Y. 2011-12 are pending and getting time barred by limitation on 31.12.2018 as per the provision of section 152(2) of Income Tax Act, 1961 (effective from 01.06.2016) which is reproduced below for case of reference:
"No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served".
On perusal of Company Master Data appellant came to know that the said respondent company has been "struck off by ROC but STK-7 was not available hence it could not be ascertained as to when the company was struck by Registrar of Companies, whether under 248 of the Companies Act, 2013 or under 560 (5) or through voluntary mode by the company itself. The appellant was able to get possession of Form EES, 2011 through professional help and learnt that the respondent company was struck off in the year 2011 under section 560 (5) of Companies Act, 1956 under Easy Exist Scheme. Thus the directors of company had managed to get the name of the company struck off by providing false affidavit and concealing the factum of accommodation entry of Rs. 51,00,000/- and non compliance of provisions of Income Tax Act. The effect of strike off is seriously affecting the assessment and recovery proceedings. It is submitted that for framing assessment and for recovery of the taxes and further consequential proceedings against the respondent company under the I.T. Act, it is just and equitable and in public interest that the name of the respondent company be restored to the register of companies as if the name of the company had not been struck off from the register of companies.
The Income Tax Department is an aggrieved party and a creditor within the meaning of Section 560 (6) of Companies Act, 1956 read with Section 252 of the Companies Act, 2013. If the name of the respondent company is not restored back, great prejudice will be caused to Revenue and public at large. For framing the assessment order and for recovering the taxes due, it is necessary that the Respondent 2's name be restored to the register maintained by the RoC.
The appellant has countered the arguments made by the counsel of the respondent No. 3 as follows:-
(i) This Hon'ble Tribunal in the case of M/s. Motiram Pharmaceuticals Pvt. Ltd. (Appeal No. 196/2017) decided on 05.07.2018 wherein the company had voluntarily got itself struck off with the purpose to evade payment of taxes, after extensively analyzing the term "aggrieved party" held Income Tax Department to be an aggrieved party and went on to allow the appeal and revive the company.
(ii) Respondent No. 3 is a legal heir of the deceased director of the company who has given affidavit and indemnity bond to indemnify for future liability of the company. Section 159 of the IT Act provides that "where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died".
(iii) On the issue of validity of the notice under Section 148 of the IT Act, the appellant has cited the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2008) 14 SCC 208 and other judgments of the Hon'ble Supreme Court of India according to which the respondent can challenge these issues in the appropriate forum viz., the IT authorities and this issue cannot be adjudicated before the Hon'ble NCLT.
We have gone though the details of records submitted by both the parties, heard the arguments made by the counsels of both the parties and have also gone through the written arguments filed by both the parties. Based on the grounds raised in the appeal by the appellant, keeping in mind the loss of revenue and public interest, this Tribunal allows this appeal. The ROC is therefore directed to restore the name of the respondent No. 2 is its register and also proceed to take such other and further penal action against the respondents in accordance with the statutory provisions.