Madras HC Quashes Reassessment for Company Already Liquidated by NCLT

C. Sivanandam Vs ACIT (Madras High Court)

Madras High Court Quashes Reassessment Where Company Was Already Liquidated by NCLT

The Madras High Court allowed the writ petition and quashed the order passed under section 148A(d) as well as the consequential notice issued under section 148 for AY 2016–17, holding that the reassessment proceedings were unsustainable in law. The impugned action was initiated against the petitioner in relation to a company of which he was a director, even though the company had already been ordered to be liquidated by the NCLT on 17.10.2022.

The Court noted that the official liquidator had formally intimated the Assessing Officer about the liquidation and dissolution of the company well before the issuance of the show-cause notice and the impugned order. Despite this, the Department proceeded to pass an adverse order under section 148A(d) and issued a notice under section 148 on the erroneous premise that the company was still in existence.

Holding that the Department’s stand was contrary to the factual and legal position on record, the High Court ruled that the reassessment proceedings could not be sustained once the company had ceased to exist pursuant to the NCLT order. Consequently, the impugned order and notice were set aside, and the writ petition was allowed, with connected miscellaneous petitions closed.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

In this Writ Petition, the petitioner has challenged impugned order dated 23.04.2023 passed u/s.148A(d) of the Income Tax Act, 1961 (in ITBA/COM/F/17/2023-24/1052278984(1) and the consequential notice dated 23.04.2023 issued u/s.148 of the Income Tax Act, 1961 in ITBA/AST/S/91/2023-24/1052279144(1).

2.The relevant portion of the impugned order is reproduced below:-

“ The contention of the assessee is considered and the same is not acceptable. The assessee in its submission has claimed that the company stands dissolved, but perusal of the MCA protal reveals that the status of the company is still under-liquidation and the same has not been dissolved yet. Further, the assessee has not filed any explanation with regard to the findings of the department that the receipt of write off amount received during the FY 2015-16 to the tune of Rs.67,30,32,455/- from M/s.Universal Telecommunication India Pvt. Ltd has escaped assessment.”

3. The writ petition has become infructuous even at the time of its filing. An adverse order under Section 148A(d) was passed on 23.04.2023, after M/s.Indus Mobile Distribution Private Limited, a Company of which the petitioner was the Director had been ordered to be liquidated by the NCLT vide its order dated 17.10.2022 in I.A. No (IBC) / 939 (CHE) / 2022 in CP / 763 / 2018.

4. In fact, the liquidator appointed by the NCLT had also communicated the status of the said Company to the respondent Assessing Officer vide communication dated 09.01.2023, wherein it was stated as under:-

“ With reference to the above I as the liquidator inform you that the mentioned Company, with PAN:AABC16304D has been liquidated and dissolved as per the attached order.”

5. Despite the above, in response to the notice issued under Section 148A(d) of the Income Tax Act dated 30.03.2023, the impugned order dated 23.04.2023 was passed under Section 148A(d) of the Income Tax Act, and the impugned notice dated 23.04.2023 was issued under Section 148 of the Income Tax Act, 1961.

6. Since the said Company was ordered to be liquidated by NCLT on 17.10.2022 of the stand of the Department in the impugned order dated 23.04.2023 passed under Section 148A(d) of the Income Tax Act cannot be countenanced.

7. Therefore, the Writ Petition deserves to be allowed. No costs.

Connected W.M.Ps. are closed.