Case Law Details
Pandian Anbalagan Vs ITO (Madras High Court)
Introduction: The case of Pandian Anbalagan Vs ITO brought before the Madras High Court centers on the legality of an assessment order passed against a company that had been struck off from the official register of companies. This article delves into the details of the case, emphasizing the court’s ruling that the assessment order is void and requires the revival of the company for proper proceedings.
Background Information: The petitioner, Pandian Anbalagan, was the Director of Speed & Safe Freight Systems India Private Limited, a company that had been officially struck off from the company register on 29.10.2019. The petitioner received a notice under Section 148 of the Income Tax Act on 31.03.2021, initiating the reopening of the assessment for the year 2015-16.
Legal Argument: The petitioner’s counsel argued that it is not permissible to reopen the assessment against a company that has already been struck off. They contended that the respondent/Department should follow the procedure for the revival of the company as outlined in Section 252 of the Companies Act, in conjunction with Rules 11 and 87 of the NCLT Rules. Only after the company’s revival can the Authority proceed with reopening the assessment and issuing further orders.
Counterargument: The respondent’s counsel countered by referencing Sections 176(5) and 176(7) of the Income Tax Act, asserting that the Department has the right to pass an assessment order against the Principal Officer of the struck-off company.
Assessment Order and Struck-Off Status: Both parties acknowledged that the re-assessment notice was issued against the company, which had been struck off on 21.10.2019. The re-assessment order was subsequently passed on 30.03.2022.
Legal Interpretation: The court analyzed Section 176 of the Income Tax Act, which primarily deals with discontinued businesses and does not explicitly address companies that have been struck off. The section allows for re-assessment orders against the Principal Officer of a company that has discontinued its business. However, the court emphasized that an assessment order cannot be validly issued against a company that has been struck off, as this would be akin to passing an order against a non-existent entity.
The Correct Course of Action: The court ruled that the appropriate course of action for the respondent/Department is to approach the National Company Law Tribunal (NCLT) following the provisions of Section 252 of the Companies Act, coupled with Rules 11 and 87 of the NCLT Rules, for the revival of the struck-off company. Only after the company’s revival can the respondent/Department initiate proceedings under Section 147 of the Income Tax Act.
Conclusion: In conclusion, the Madras High Court found the assessment order against the struck-off company to be void. The court emphasized that such an order cannot be issued against a defunct entity, highlighting the need for the company’s revival through the appropriate legal procedures. This article provides a comprehensive overview of the case, underscoring the court’s decision and its legal implications.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This writ petition has been filed challenging the impugned order dated 30.03.2022 bearing ITBA/AST/S/147/2021-22/1042158368(1) passed by the respondent for PAN:AASCS0886M for AY 2015-16.
2. The learned counsel for the petitioner would submit that the petitioner was the Director of the Speed & Safe Freight Systems India Private Limited and the said Company was struck off from the official register of companies with effect from 29.10.2019. In order to prove the same, he had also produced a Letter bearing No. ROC/CNN/STK-7/2019 dated 29.10.2019 issued by the Ministry of Corporate Affairs, in which his company name was listed at Serial No.1008. Under the said circumstances, the petitioner had received a notice under Section 148 of the Income Tax Act on 31.03.2021 for reopening of assessment for the year 2015-16.
3. The learned counsel would further submit that the assessment order cannot be reopened against the company, which was already struck off. Hence, the respondent/Department have to file an application for revival under Section 252 of the Companies Act, read with Rules 11 and 87 of the NCLT Rules, within the period mentioned therein. After the revival of the Company only, the Authority will get power to reopen the assessment and pass further orders. However, in the present case, though the petitioner had referred the aforesaid procedure of revival of Company, the impugned order was passed by the respondent without application of mind. Hence, he would contend that the said impugned order is liable to be quashed.
4. On the other hand, the learned counsel appearing for the respondent has filed a counter and submitted that under Sections 176(5) and 176(7) of the Income Tax Act, the respondent/Department is entitled to pass assessment order against the Principal Officer of the struck off Company. and also perused the materials available on record.
5. It is admitted by both sides that against the Company, which was struck off as early as on 21.10.2019, the re-assessment notice dated 31.03.2021 was issued and the re-assessment order dated 30.03.2022 was passed by the respondent.
6. As far as the submission made by the learned counsel for the respondent is concerned, Section 176 of the Income Tax Act mainly talks about the discontinued business and it does not mention anything about struck off of the company. Further, Section 176 of the Income Tax Act states that if any company discontinued from business and had not carried on any other business, the re-assessment order can be passed against the Principal Officer of the Company. However, the assessment order cannot be passed once the company is struck off, since the same will be construed as passing of order against a dead person.
7. Therefore, this Court is of the view that the right course available for the respondent/Department is only to approach the NCLT in terms of provisions of Section 252 of the Companies Act read with Rules 11 and 87 of the NCLT Rules for the revival of the Company. After revival of the Company, it is open for the respondent/Department to initiate proceedings under Section 147 of the Income Tax Act. Hence, the impugned order is liable to be quashed.
8. In the result, this Writ Petition is allowed. Accordingly, the impugned order dated 30.03.2022 bearing ITBA/AST/S/147/2021-22/1042158368(1) passed by the respondent for PAN:AASCS0886M for AY 2015-16 is quashed. Consequently, the connected miscellaneous petition is also closed.
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