The Division Bench of the Delhi High Court in the case of Ravinder Kumar Aggarwal vs Income Tax Officer Ward 20(3), New Delhi consisting of Justices Manmohan and Justice Manmeet Pritam Singh Arora held that a notice u/s 148 of Income Act issued in the name of a struck off Company will be valid in case of a subsequent ruling of NCLT restoring the same.
Facts
The petitioner is the director of RKA International Pvt. Ltd., a company registered under the 1956 Companies Act. It was struck off by the Registrar of Companies, Delhi and Haryana ('ROC'), u/s 248 of the Companies Act, 2013 ('Companies Act'), due to the Company's defaults.
This petition was filed by the Petitioner seeking quashing of the notice issued u/s 148 of the Income Tax Act, 1961 (‘the Act') for Assessment Year (‘AY') 2012-13 on the grounds that the said notice is null and void, as it was issued in the name of the struck off company.
Contentions Made
Petitioner: It was contended a subsequent ruling restoring the Company wouldn't fix the problem of the disputed notice being issued in the name of a non-existent company.
Respondent: Since the Company has been reinstated, it was argued that this petition, which was based on the impugned notice being issued in the name of a struck-off Company, is now ineffective. It was further argued that the Company was operating during AY 2012-13 and failed to file its income tax return ('ITR') for the assessment year, hence a notice u/s 148 of the Act was warranted.
In rejoinder, the Respondent's counsel stated the Income Tax Department submitted an appeal for the Company's restoration before the impugned notice for the relevant assessment year. So, the restoration relates back to the date of striking off and the impugned notice is valid.
Both parties relied on CIT, Jaipur v. Gopal Shri Scrips Private Limited.
Observations of the Court
Regarding the submission that when the Company was struck off from the ROC, the subsequent NCLT judgment restoring the Company will not cure the fault issuing of notice to the non-existent organization, the Bench opined that the same was against Section 252(3) of the Companies Act. As per this provision, with the NCLT's restoration order, the company is deemed to exist even on the date of the impugned notification. In this regard, it referred to Section 250 of the Companies Act. It also referred to repealed Section 560 of the Companies Act, 1956, which corresponds to Section 248 of the Companies Act. Section 250 of the Companies Act states that even if a company is dissolved due to being struck off under Section 248, it shall continue to exist for the purpose of paying its responsibilities.
In Gopal Shri Scrips (supra), there was no order reviving the company, hence it was struck off. Despite this, the Supreme Court found that the High Court was erroneous in rejecting the appeal filed against a struck-off company and remanded the matter to hear the appeal on merits.
Judgment
Before parting, the Bench observed that the Petitioner here was a Respondent in the Income Tax department's appeal to restore the Company. The NCLT order showed that he opposed the Department's appeal and the Company's reinstatement. It further highlighted that the Company was struck off by the Ministry of Corporate Affairs due to its default in filing its statutory return with the ROC. The NCLT restored the Company to allow the Income Tax department to recover its dues after noting the disadvantage caused by the striking off. His persistence with the petition after the company was restored and his opposition to the appeal before the NCLT for restoration demonstrated that he was misusing the legal procedure to obstruct the assessment proceedings. His petition was not bona fide and done to circumvent legal processes. So, it dismissed the petition and vacated the stay/interim order.
The Petitioner was directed to pay Rs.50,000 to Delhi High Court Legal Services Committee and deposit a proof regarding the same within two weeks of the judgment.
Case: Ravinder Kumar Aggarwal vs Income Tax Officer Ward 20(3), New Delhi
Citation: W.P.(C) 7122/2019 & CM APPL.29656/2019
Bench: Justice Manmohan, Justice Manmeet Pritam Singh Arora
Decided on: 17th November 2022
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