Income Tax Appellate Tribunal - Delhi
M/S Continental Exim Limited (Through ... vs Ito Ward-6 (3), Delhi, New Delhi on 19 March, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B': NEW DELHI
BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER
AND
SHRI MANISH AGARWAL, ACCOUNTANT MEMBER
ITA No.5054/Del/2024
[Assessment Year: 2012-13]
M/s Continental Exim Limited Income Tax Officer,
(Through Ex Director: Sh. Kapil Ward 6(3),
Goel), Vs New Delhi-110002
A-275, New Friends Colony,
New Delhi-110025
PAN-AAACC0710E
Assessee Revenue
Assessee by Shri Ved Jain, Adv.,
Ms. Uma Upadhyay, CA and
Ms. Kirti Gupta, AR
Revenue by Sh. Rajesh Kumar Dhanesta, Sr. DR
Date of Hearing 25.02.2025
Date of Pronouncement 25.02.2025
ORDER
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the order of the CIT(A) National Faceless Appeal Centre ((NFAC) Delhi, having DIN No. ITBA/NFAC/S/250/2024-25/1068331616(1), dated 04/09/2024 in appeal NO. CIT(A), Delhi-2/10558/2019-20 for Assessment Year 2012-13, passed under section 250 of the Income Tax Act, 1961 (hereinafter referred as 'the Act').
2. Brief facts of the case are that the assessee was a private limited company and filed its return of income for Ay 2012-13 on 31.03.2014 declaring loss of Rs. 730/-. The AO based on the information that assessee has obtained accommodation entry of Rs. 25,00,000/- has issued notice u/s 148 on 31.03.2019. Thereafter various notices were issued to the assessee however, no compliance was made. Thus the AO finally issued notice to its director Shri Kapil Goel. In reply, the director of 2 ITA No.5054/Del/2024 M/s Continental Exim Limited vs. ITO the assessee company stated that the company has already been stuck off from the Register of Companies by the Registrar of the Companies (ROC, in short), therefore, the present proceedings u/s 148 against such company be dropped. The AO dismissed the claim of assessee and by observing that during the year assessee has increased its Share capital by Rs. 42,05,200/- and share premium by Rs. 63,07,800/- and the immediate source of the same has remained unexplained, made the total addition of Rs. 1,05,13,000/-, u/s 68 of the Act being the amount of Share capital and share premium received during the year. In first appeal assessee contended that when the notice u/s 148 was issued, the assessee company was struck off by the ROC and when it is cessed to exits, the entire reassessment proceedings based on the notice issued on non-existent entity is void ab initio. However, ld. CIT(A), NFAC has not accepted the contention of the assessee and dismissed the appeal by confirming the additions made.
3. Against the said order of the NFAC, the assessee is in appeal before the Tribunal.
4. The assessee challenged the appellate order on the strength of following grounds of appeal:-
"1. On the facts and circumstances of the case, the order passed by the Learned Commissioner of Income Tax (Appeals) (hereinafter referred as "CIT(A)") is bad, both in the eye of law and on the facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the notice issued under section 148 of the Income Tax Act is illegal and non-est since the same has been issued in the name of non-existent entity.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment order passed by the AO is illegal and liable to be quashed as the very initiation of the assessment proceedings vide notice under section 148 of the Act in the name of non-existent entity is itself illegal and void-ab-initio.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that the assessment order passed by the AO in the absence of valid service of notice issued under section 148 of the Income Tax Act is bad in law and liable to be quashed.3 ITA No.5054/Del/2024
M/s Continental Exim Limited vs. ITO
5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the order passed by the AO despite the fact that issue of notice u/s 148, reopening of the assessment proceedings and re- assessment order passed under section 148 of the Act are illegal, as the same have been made without assumption of valid jurisdiction upon the assessee
6. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the order of the AO rejecting the contention of the assessee that reopening the assessment under Section 147 of the Act and consequent reassessment without complying with the statutory conditions and the procedure prescribed under the law are bad and liable to be quashed.
7. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the order of the AO despite the fact that the reasons recorded for reopening the assessment does not meet the requirements under section 147 of the Act, bad in law and are contrary to the facts.
8. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the reopening despite the fact there is no live nexus between the reasons recorded and the belief formed by the assessing officer.
9. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the reopening despite the fact that the same has been made by the AO on the basis of borrowed satisfaction without independent application of mind.
10. On the facts and circumstances of the case, the learned CIT(A), has erred, both on facts and in law, in rejecting the contention of the assessee that the reassessment proceedings initiated by the learned AO without obtaining prior valid approval of the prescribed authority under the Act is bad in law and liable to be quashed.
11. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law, in confirming the action of the Ld. AO in passing the order on the basis of material collected at the back of the assessee without giving it an opportunity to rebut the same in violation of principle of natural justice.
12. Without prejudice to the above, the learned CIT(A), NFAC has erred both on facts and in law, in confirming the reopening of assessment proceedings ignoring the settled position of the law that if any material found during the course of search, belongs to a person other than the person in whose case search was conducted, then assessment of such person shall be completed under section 153C of the Act and not under section 148 of the Act.
13. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law, in confirming the above said addition of Rs.1,05,13,000/- on account of increase in share capital and security premium under section 68 of the Act.
14. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law, in confirming the above said addition despite the fact that the 4 ITA No.5054/Del/2024 M/s Continental Exim Limited vs. ITO same has been made by the AO without conducting any independent enquiry u/s 131/133(6) of the Income Tax Act, 1961.
15. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law, in confirming the above said addition despite the fact that the same has been made by the AO relying upon the statement of the third party recorded at the back of the assessee without providing opportunity to the assessee to cross examine the same.
16. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in confirming the above said addition by indulging in gross conjecture and surmises without there being any direct material on record.
17. That the appellant craves leave to add, amend or alter any of the grounds of appeal."
5. The grounds of appeal No. 1 to 3 taken by the assessee are legal grounds wherein the assessee has challenged the legality of reassessment order passed on non-existent entity thus the same are taken first for consideration.
6. Before us, Ld. AR argued that the assessee company had applied under the fast-track scheme of the Ministry of Corporate affairs and its name was struck-off from the Register of Companies on 09.02.2016 and the same is available in public domain also. The notice u/s 148 was issued on 31.3.2019 in the name of the assessee which is against an entity that legally ceased to exist, therefore, the reassessment notice so issued u/s 148 and all the consequent proceedings are null and void ab initio. He further submits that it is a well settled law that an assessment order against a company that had been dissolved and struck off from the Register of Companies u/s 560 of The Companies Act, 2013 was not valid as once a company is dissolved, it ceases to exits in the eyes of law. He thus submit that it cannot be treated as a person against whom re- assessment proceedings could be initiated under the Act. He placed reliance on the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Vived Marketing Servieing Pvt. Ltd. 2009 (9) TMI 917. He also placed reliance on various judgments of other High Courts and Co- ordinate Bench of Tribunal which are as under:
5 ITA No.5054/Del/2024M/s Continental Exim Limited vs. ITO
(i) Jammu and Kashmir and Ladakh High Court M/s. Rainawari Finance & Investment Company Pvt. Ltd. Vs. ITO, Jammu 2023 (11) TMI 812.
(ii) ITO, Ward No.2(3)(1), Mumbai vs. M/s Sil Verline Trading Company Ltd., 2023 (12) TMI 544.
(iii) Jitendra Chandralal Navlani vs. Union of India [2024] 159 taxmann.com 498 (Mum.)
7. With regard to the judgment in the case of Ravindra Kumar Aggarwal vs. Income Tax Officer [2023] 146 taxmannn.com 205 (Delhi), relying upon by CIT(A), NFAC while dismissing the appeal of the assessee on this issue, the Ld. AR submit that the facts of the case of the assessee are entirely different and are not applicable to the facts of the case of the assessee. In that case, initially the company was struck off by the ROC in the year 2017 due to default in filing statutory returns and, thereafter as per order passed by NCLT, name of the company was restored in the Register of Companies. However, during the interminent period notice u/s 148 was issued for AY 2012-13. Under these circumstances, the Hon,ble Jurisdictional High Court was of the view that the once the company is restored, the Company is deemed to have continued its existent as if its name was never been struck off. In the instant case, after struck off the name of the company from the Register of the Companies, there is no such restoration order is passed by any authority till date and company seized to exists with effect from 09.02.2016 i.e. the day when it was struck off from the Register of Companies. He, therefore, prayed that the order passed u/s 147/144 of the Act as a consequence of notice issued u/s 148 on 31st March, 2019 is bad in law and be quashed.
8. On the other hand, the Ld. Sr. DR vehemently supported the orders of the lower authorities and submit that this issue has been elaborately discussed by the Ld. CIT(A) and after considering the arguments had dismissed the claim of the assessee. He further submit that the Department is in process of filing the petition before NCLT for rival of the 6 ITA No.5054/Del/2024 M/s Continental Exim Limited vs. ITO Company, therefore, the order of the lower authorities be upheld on this issue.
9. We have heard the rival submissions and perused the materials available on record. In this case, admittedly the notice u/s 148 was issued when the company was seized to exist i.e. when it is its name was struck off from the Register of Companies. It is also a matter of fact that the company had applied for winding up under the scheme declared by the Ministry of Corporate Affairs wherein after obtaining the approval from the jurisdictional Assessing Officer of Income Tax Department and other stake holders, the name of the company was struck off. Once the notice was issued when company was not in existent such notice is bad in law. The Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki reported in [2019] 416 ITR 613 has held that initiation of assessment proceedings against an entity which had ceased to exist was void ab initio and participation of the company cannot be operate as an estoppel against law.
10. The Hon'ble Jurisdictional High Court in the case of Vived Marketing Servieing Pvt. Ltd. (supra) has held as under:
"When the Assessing Officer passed the order of assessment against the respondent company, it had already been dissolved and struck off in the register of the Registrar of companies under Section 560 of the Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any assessment order passed against the company which was not in existence as on that date in the eyes of law it had already been dissolved. The Tribunal relied upon its earlier decision in Impsat Pvt. Ltd. Vs. ITO 276 ITR 136 (AT). We are of the opinion that the view taken by the Tribunal is perfectly valid and in accordance with law. No substantial question of law arises. Dismissed."
The Hon'ble Jammu and Kashmir and Ladakh High Court in the case of Rainawari Finance & Investment Company Pvt. Ltd. (supra) has held as under:
"21. Be that as it may, now it has come to light that on the date the assessment order was passed, the appellant-company stood dissolved under Section 560(5) of the Companies Act and, therefore, could not have been assessed. In terms of Section 143 of the Income Tax Act, assessment can be made by the assessing authority only against the assessee, who has filed a return under Section 139 of the Income Tax Act or in response to 7 ITA No.5054/Del/2024 M/s Continental Exim Limited vs. ITO a notice issued under Subsection (1) of Section 142 of the Income Tax Act. The term assessee is defined in Subsection (7) of Section 2 of the Income Tax Act to mean that a person by who many tax or any other sum of money is payable under the income Tax Act and the term "person" used in Subsection (7) is defined in Subsection (31) of Section 2 of the Income Tax Act to include an individual, a Hindu undivided family, a company, a firm, an association of person or a body of individuals, whether incorporated or not, a local authority, and every artificial juridical person, not falling within any of the aforesaid clauses.
22. From a reading of Sub-section (7) along with Subsection 31 of Section 2 of the Income Tax Act, it becomes abundantly clear that the assessee to be assessed for income tax under Section 143 of the Income Tax Act must be a person in existence. Indisputably, a company is a juridical person but the moment it is struck off from the Register of Companies and is dissolved, it ceases to exist. Making of an assessment order against a non-existent company would be like passing a decree by a civil court against a dead person. Such order of assessment made against a non-existent entity would be nullity and would not give rise to any right or liability under such assessment order. The view we have taken is supported by a judgment of the High Court of Delhi dated 17.09.2009 passed in ITA No. 273/2009 titled Commissioner of Income Tax v. Vived Marketing Servicing Pvt. Ltd. One paragraph judgment rendered by the Delhi High Court has upheld the decision of ITAT in Impsat Pvt. Ltd. v. ITO 276 ITR 136 (AT). One paragraph judgment reads thus:-
"When the Assessing officer passed the order of assessment against the respondent company, it had already been dissolved and struck off the register of the Registrar of companies under Section 560 of the Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any assessment order passed against the company which was not in existence as on that date in the eyes of law it had already been dissolved. The Tribunal relied upon its earlier decision in Impsat Pvt. Ltd. v. ITA 276 ITR 136 (AT). We are of the opinion that the view taken by the Tribunal is perfectly valid and in accordance with law. No substantial question of law arises. Dismissed."
23......
24. We, thus, answer the question by holding that once a company is dissolved under Section 560(5) of the Companies Act, it ceases to exist and, therefore, no order of assessment could be validly passed against it under the Income Tax Act and if it is passed, it would be a nullity. Having answered the aforesaid question, we allow the appeal and set aside the order of assessment dated 21.12.2006, order of the Commissioner of Income Tax (Appeals), Jammu dated 01.04.2013 and the order of the Tribunal dated 30.01.2014."
10. The Co-ordinate Bench of the Tribunal in the case of Marut Nandan & Co. vs. ITO [2025] (2) TMI-829 has held that re-assessment noticed issued u/s 148 of the Act in the name of the non-existent entity is clearly vitiated and rendered nonest in law by respectfully following the ratio laid 8 ITA No.5054/Del/2024 M/s Continental Exim Limited vs. ITO down by the Hon'ble Supreme Court in the case of CIT vs. Maruti Suzuki has quashed the order u/s 148 of the Act.
11. In view of the above discussion and by respectfully following the judgment of the Hon'ble Apex Court in the case of Maruti Suzuki (supra) and also of High Courts and Co-ordinate Bench of the Tribunal and further considering the facts of judgement by jurisdictional High Court in case of Ravindra Kumar Aggarwal (supra) relied upon by the Revenue are totally distinguishable, in our considered opinion, the notice issued u/s 148 of the Act, in the present case in the name of a company when it was not in existent is bad in law and, therefore, consequent re-assessment order is hereby quashed. However, the Ld. Sr. DR submits that the Department is in process of filing the petition before NCLT for restoration of the company, in such situation the Department is free to take necessary action as per law in the order of NCTL came in favour of Revenue.
12. Since, we have allowed ground No.1 to 3 of the assessee taken on the jurisdictional issue, therefore, the other grounds of appeal challenging the other legal aspects as well as merits of the additions are not adjudicated.
13. As a result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 25 February, 2025.
Sd/- Sd/-
[SATBEER SINGH GODARA] [MANISH AGARWAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated 19.03.2025.
PK/Sr. Ps
Copy forwarded to:
1. Assessee
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar,
ITAT, New Delhi