Case Title:
M/s Dwarka Portfolio Pvt. Ltd. v. Assistant Commissioner of Income Tax
Date of Order:
May 27, 2022
Bench:
Yogesh Kumar U.S. (Judicial Member) and B.R.R. Kumar(Accountant Member)
Parties:
M/s Dwarka Portfolio Pvt. Ltd. (Appellant)& Assistant
Commissioner of Income Tax (Respondent)
Subject
Delhi Bench of ITAT ruled that even if the Company has been struck off from the register of Companies, an appeal filed by it against the revenue department does not become ineffective or infructuous and is maintainable.
Important provisions:
Companies Act, 2013 and Income Tax Act, 1961.
Overview
- M/s Dwarka Portfolio Pvt. Ltd., the assessee, filed an appeal before the ITAT against the orders passed by the Commissioner of Income Tax (Appeals) validating the additions made to the assessee’s income by the Assessing Officer.
- To this, the revenue department argued that, since the Company was struck off, its appeal against the revenue department is not maintainable.
- Whereas, the appellant contended that it could not be the sufficient reason for the non-maintainability of an appeal.
- ITAT however, ruled that the appeal is maintainable even after the Company has been struck off.
Issues Raised
Whether or not the appeal filed by the struck-off Company before the ITAT is maintainable?
Arguments advanced by the Appellant
- The counsel on behalf of the appellant contended that the mere fact that the Company has been struck off from the Register of Companies, the appeal filed by it against the orders of the revenue department cannot be held to be not maintainable.
- Arguments advanced by the Respondent
- The revenue department contended that the appeal file by the assessee Company is not maintainable because the Company was struck off by the Registrar of the Companies after the order was passed by CIT (A).
Judgment Analysis
- The ITAT observed in the mentioned case that, before dissolving any Company, the Registrar needs to follow the provisions mentioned in Section 248 (6) of the Companies Act, 2013, which provides that sufficient provisions shall be made for the realization of the dues and discharge of Company’s liabilities.
- Also, even if a company has been dissolved as per Section 248 of the Act, the Company might cease to exist as an entity but the liabilities that are due continue to exist.
- ITAT also provided that as per Section 179 of the Income Tax Act, the revenue department can recover tax from the Directors of the Company in case of gross neglect or breach of duty on the part of the Directors.
- Also, Section 223 (6) of the Income Tax Act can be invoked by the revenue department for the recovery of any sort of tax due from the struck-off Company.
- The ITAT observed that, if the revenue department will directly recover the tax due from the Directors of the Company, without any interference of the Court/Tribunal, then it would deprive the Directors of their rights that are protected under the law.
- Thus, the ITAT ruled that the assessee could not be denied its right to determine tax liability in furtherance of due process of law, even if it has been struck off by the Registrar of the Companies. Hence, the appeal filed by the appellant is maintainable.
Conclusion
The ITAT rightly observed that the mere the fact that a company has been struck off from the Register of Companies, the rights that have been provided to it or the Directors by the statutes cannot be taken away. If the concerned Court/Tribunal, before which an appeal has been made, dismisses it, the results would be jeopardizing the rights of the Directors of the Company. Hence, the dues if are remaining, need to be decided by the Court or Tribunal instead of the revenue department.
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