Ravinder Kumar Aggarwal v. Income Tax Officer

Signature Not Verified $~27 *IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 7122/2019 & CM APPL.29656/2019 RAVINDER KUMAR AGGARWAL..... PetitionerThrough:Mr. Yogesh Kumar Jagia, Advocate. versus INCOME TAX OFFICER, WARD 20(3) NEW DELHI ..... Respondent Through:Mr. Zoheb Hossain, Advocate withMr. Vipul Agrawal and Mr. ParthSemwal, Advocates. %Date of Decision: 17[th]November, 2022 CORAM: HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J (Oral): 1.The Petitioner herein is the director of RKA International Pvt. Ltd., acompany incorporated under the provisions of the Companies Act, 1956(‘the Company’). The Company was struck off by the Registrar ofCompanies, Delhi and Haryana (‘ROC’), from its register of companies,under Section 248 of the Companies Act, 2013 (‘Companies Act’) on 30[th]June, 2017, in pursuance of the proceedings initiated by Ministry ofCorporate Affairs through the office of ROC, due to the defaults of theCompany. W.P.(C) 7122/2019 Page 1 of 9 Signature Not Verified 2.The present petition has been filed by the Petitioner seeking quashingof the notice dated 28[th]March, 2019 (impugned notice), issued underSection 148 of the Income Tax Act, 1961 (‘the Act’) for Assessment Year(‘AY’) 2012-13 on the ground that the said notice is null and void, as it hasbeen issued in the name of the struck off company. 3.The Respondent has filed its counter affidavit, placing on record theorder dated 25[th]September, 2019, passed by the National Company LawTribunal, New Delhi (‘NCLT’), allowing the petition filed by the IncomeTax Department (‘the Department’) under Section 252 of the CompaniesAct, 2013, for restoration of the name of the Company in the register ofcompanies, maintained by the ROC Delhi. Learned Counsel for theRespondent states that since the Company now stands restored, the presentwrit petition which is premised on the sole ground that the impugned noticewas issued in the name of a struck off Company, does not survive any moreand the entire petition has become infructuous. 4.He further, on merits, states that though the Company was struck offwith effect from 7[th]June, 2017, the said Company was active during AY2012-13 and it failed to file its income tax return (‘ITR’) for the saidassessment year and therefore, it is a fit case for issuance of notice underSection 148 of the Act. He states that as per the reasons recorded beforeissuance of the impugned notice, an amount of Rs.10,09,00,000/- hasescaped assessment for AY 2012-13. He states that Company is also liableto pay a tax demand of Rs.3,11,14,000/- for the AY 2011-12. 5.In reply, the learned counsel for the Petitioner states that the order ofthe NCLT, restoring name of the Company in the register of companies on25[th]September, 2019 is to no effect because as on 28[th]March, 2019, when W.P.(C) 7122/2019 Page 2 of 9 Signature Not Verified the impugned notice was issued, the Company was admittedly struck off andthe subsequent order restoring the Company would not cure the defect ofissuance of impugned notice in the name of non-existent Company, on thedate of issue. 6.In rejoinder, learned counsel for the Respondent states that theIncome Tax Department had filed an appeal for the restoration of theCompany on 14[th]September, 2018 i.e., prior to issuance of impugned noticefor the concerned assessment year. He states that the restoration relates backto the date of striking off and the impugned notice does not suffer from anyinfirmity. 7.The learned counsel for the petitioner and respondent both have reliedupon the judgment of the Supreme Court in Commissioner of Income Tax,Jaipur v. Gopal Shri Scrips Private Limited, (2020) 7 SCC 654 in supportof their submissions. 8.We have heard the learned counsel for the parties. 6.In rejoinder, learned counsel for the Respondent states that theIncome Tax Department had filed an appeal for the restoration of theCompany on 14[th]September, 2018 i.e., prior to issuance of impugned noticefor the concerned assessment year. He states that the restoration relates backto the date of striking off and the impugned notice does not suffer from anyinfirmity. 7.The learned counsel for the petitioner and respondent both have reliedupon the judgment of the Supreme Court in Commissioner of Income Tax,Jaipur v. Gopal Shri Scrips Private Limited, (2020) 7 SCC 654 in supportof their submissions. 8.We have heard the learned counsel for the parties. 9.The petitioner herein is the promoter and director of the Company andhe has filed the present petition in his individual capacity, impugning thenotice issued under Section 148 of the Act, in the name of the company. ThePetitioner admits the Company stands restored by the order dated 25[th]September, 2019, passed by the NCLT. The defaulting Company has neitherchallenged the impugned Notice dated 28[th]March, 2019, nor the order dated25[th]September, 2019, passed by the NCLT, which has therefore, attainedfinality in law. In our view, in these facts alone, the Petitioner herein has nolocus standi to maintain the proceedings and even in alternative the presentpetition has become infructuous. 10.With respect to the Petitioner’s contention that, since the impugned W.P.(C) 7122/2019 Signature Not Verified notice was issued on 28[th]March, 2019 i.e., at a point in time, when theCompany was struck off from the ROC, the subsequent order dated 25[th]September, 2019, passed by the NCLT restoring the Company, will not havethe effect of curing the defect issuance of notice to the non-existent entity;we are of the opinion that the said submission of the learned counsel for thePetitioner is fallacious and is in teeth of Section 252(3) of the CompaniesAct, 2013 which reads as under:- “ (3) If a company, or any member or creditor or workmen thereof feelsaggrieved by the company having its name struck off from the register ofcompanies, the Tribunal on an application made by the company, member,creditor or workman before the expiry of twenty years from the publication in theOfficial Gazette of the notice under sub-section (5) of section 248 may, if satisfiedthat the company was, at the time of its name being struck off, carrying onbusiness or in operation or otherwise it is just that the name of the company berestored to the register of companies, order the name of the company to berestored to the register of companies, and the Tribunal may, by the order, givesuch other directions and make such provisions as deemed just for placing thecompany and all other persons in the same position as nearly as may be as if thename of the company had not been struck off from the register of companies”. (Emphasis Supplied) 11.The said provision expressly states that the Tribunal’s order directingrestoration of a company will have the effect of placing the company in thesame position as if the name of the company has not been struck off fromthe register of companies. In other words, with the restoration order dated25[th]September, 2019 passed by the NCLT, even on the date of the issuanceof the impugned notice, the Company is deemed to be in existence. Therelevant extract of the NCLT order directing the ROC to restore the name ofCompany in the register of companies is as under: “12. The petition is therefore allowed. The RoC is therefore directed to restorethe name of the Respondent Company in the Register and also proceed to takesuch other and further penal action against the respondents in accordance withthe statutory provisions.” W.P.(C) 7122/2019 12.In this regard, it would also be relevant to refer to Section 250 of theCompanies Act, 2013, which reads as under: - “12. The petition is therefore allowed. The RoC is therefore directed to restorethe name of the Respondent Company in the Register and also proceed to takesuch other and further penal action against the respondents in accordance withthe statutory provisions.” W.P.(C) 7122/2019 12.In this regard, it would also be relevant to refer to Section 250 of theCompanies Act, 2013, which reads as under: - “250. Effect of company notified as dissolved.-Where a company standsdissolved under section 248, it shall on and from the date mentioned in the noticeunder sub-section (5) of that section cease to operate as a company and theCertificate of Incorporation issued to it shall be deemed to have been cancelledfrom such dateexcept for the purpose of realising the amount due to thecompany and for the payment or discharge of the liabilities or obligations of”the company. (Emphasis Supplied) 13.Section 250 of Companies Act of 2013 is a new provision and itdeclares that even where a Company is dissolved in consequence to it beingstruck off under Section 248, it shall be deemed to continue to be inexistence for the purpose of discharging its liabilities. The said sectionrecognizes the continuing liability of a struck off company, which is inaddition to Section 248(7) of the Companies Act, 2013, which reads asunder: “248. Power of Registrar to remove name of company from register ofcompanies. – (1) XXXXXXXXX (7) The liability, if any, of every director, manager or other officer who wasexercising any power of management, and of every members of the companydissolved under sub-section (5), shall continue and may be enforced as if thecompany had not been dissolved.” 14.With respect to the liability of a struck off company, it would also beinstructive to refer to repealed Section 560 of the Companies Act, 1956,which corresponds to Section 248 of the Companies Act, 2013. The Sub-Section (5) of Section 560 reads as under: - “(5) At the expiry of the time mentioned in the notice referred to in sub-section(3) or (4), the Registrar may, unless cause to the contrary is previously shownby the company, strike its name off the register, and shall publish noticethereof in the Official Gazette; and on the publication in the Official Gazette of W.P.(C) 7122/2019 Signature Not Verified this notice, the company shall stand dissolved:Provided that- (a) the liability, if any, of every director,[1][***] manager or otherofficer who was exercising any power of management, and of everymember of the company, shall continue and may be enforced as ifthe company had not been dissolved; andofficer who was exercising any power of management, and of everymember of the company, shall continue and may be enforced as ifthe company had not been dissolved; and (b) nothing in this sub-section shall affect the power of the Court towind up a company the name of which has been struck off theregister.”wind up a company the name of which has been struck off theregister.” 15.Clause (a) of the Proviso to Sub-Section (5) of Section 560 came upfor consideration before the Supreme Court in Gopal Shri Scrips (Supra),where in similar circumstances a company had been struck off and, on thatbasis, the High Court had dismissed the appeal filed by the Income TaxDepartment on the ground that the appeal is not maintainable since theCompany stands dissolved. The Supreme Court reversed the order of theHigh Court and observed as under: - (b) nothing in this sub-section shall affect the power of the Court towind up a company the name of which has been struck off theregister.”wind up a company the name of which has been struck off theregister.” 15.Clause (a) of the Proviso to Sub-Section (5) of Section 560 came upfor consideration before the Supreme Court in Gopal Shri Scrips (Supra),where in similar circumstances a company had been struck off and, on thatbasis, the High Court had dismissed the appeal filed by the Income TaxDepartment on the ground that the appeal is not maintainable since theCompany stands dissolved. The Supreme Court reversed the order of theHigh Court and observed as under: - “ 10*. In our view, the High Court was wrong in dismissing the appeal ashaving rendered infructuous. The High Court failed to notice Section 506(5)proviso (a) of the Companies Act and further failed to notice Chapter XV ofthe Income Tax Act which deals with “liability in special cases” and itsClause (L) which deals with “discontinuance of business or dissolution”.The aforementioned two provisions, namely, one under the Companies Actand the other under the Income Tax Act specifically deal with the cases ofthe companies, whose name has been struck off under Section 506(5) of theCompanies Act. These provisions provide as to how and in what manner theliability against such company arising under the Companies Act and underthe Income Tax Act is required to be dealt with. Since the High Court didnot decide the appeal keeping in view the aforementioned two relevantprovisions, the impugned order is not legally sustainable and has to be setaside.” 16.It is pertinent to observe that in the judgment of Gopal Shri Scrips(Supra), there was no order restoring the Company and it remained to benon-existent, being struck off. Despite the said fact, the Supreme Court, after W.P.(C) 7122/2019 Signature Not Verified referring to proviso (a) to Sub-section (5) of Section 560 of the CompaniesAct, 1956 and Chapter XV of the Act of 1961, held that the High Court waswrong in dismissing the appeal filed against such a struck off Company andremanded the matter to decide the appeal on merits. 17.In the present proceedings, the Company has admittedly been restoredand as it has been observed above that statutorily upon restoration, theCompany under Section 252(3) of the Companies Act, 2013, is deemed tonot have been struck off from the register of companies at all. Accordingly,the impugned notice dated 28[th]March, 2019, is valid and not non-est on thegrounds urged in the present petition. 18.The learned counsel for the Petitioner has also sought to placereliance on the following cases: (a) Andhra Pradesh High Court in Shrikishen Dhoot & Others V. S. D.Kamlapurkur and others, 1964 SCC OnLine AP 145,Kamlapurkur and others, 1964 SCC OnLine AP 145, (b)Supreme Court in Commissioner of Wealth Tax, Meerut v. SharvanKumar Swarup & Sons, (1994) 6 SCC 623,Kumar Swarup & Sons, (1994) 6 SCC 623, (c) Supreme Court in First Additional Income Tax Officer, Kozhikode(Kerala) v. Mrs. Suseela Sadanandan and Another, (1965) 57 ITR168.(Kerala) v. Mrs. Suseela Sadanandan and Another, (1965) 57 ITR168. 18.1. However, the said decisions are distinguishable in facts inasmuch as, in Shrikishen Dhoot & Others (Supra) the Andhra Pradesh High Court hasheld that a suit is not maintainable against a company which was struck offfrom the register of companies. However, the Court in the said case hasclarified that the existing liability of any director or member prior to thedissolution of the company will continue in spite of the dissolution. 18.2. In Sharvan Kumar Swarup (Supra), the Supreme Court with W.P.(C) 7122/2019Page 7 of 9 Signature Not Verified reference to Rule 1-BB of the Wealth Tax Rules, 1957, has held that the saidRule does not affect or alter the substantive rights and it is merely aprocedural provision and therefore, not attracted to all proceedings pendingat its enactment. 18.1. However, the said decisions are distinguishable in facts inasmuch as, in Shrikishen Dhoot & Others (Supra) the Andhra Pradesh High Court hasheld that a suit is not maintainable against a company which was struck offfrom the register of companies. However, the Court in the said case hasclarified that the existing liability of any director or member prior to thedissolution of the company will continue in spite of the dissolution. 18.2. In Sharvan Kumar Swarup (Supra), the Supreme Court with W.P.(C) 7122/2019Page 7 of 9 Signature Not Verified reference to Rule 1-BB of the Wealth Tax Rules, 1957, has held that the saidRule does not affect or alter the substantive rights and it is merely aprocedural provision and therefore, not attracted to all proceedings pendingat its enactment. 18.3. In Mrs. Suseela Sadanandan (Supra), the Supreme Court, wasconsidering the issue of continuation of proceedings against the legalrepresentative of one deceased Mr. S. P. Sadanandan. The Supreme Court,however, in this case remanded the matter back to High Court to determinewho was the Legal Representative of the estate of deceased Assessee. 18.4. We fail to consider how the aforesaid judgment are applicable to thefacts of present case. 19.Before parting, we may also note that the Petitioner herein was aRespondent in the appeal filed by the Income Tax department before theNCLT, for restoration of the Company. A perusal of the order dated 25[th]September, 2019 passed by the NCLT goes on to show that the Petitionerherein objected to the said appeal filed by the Department and opposed therestoration of the Company. The NCLT however, rejected the submissionsof the Petitioner herein and held as under:- “8.Upon notice being issued, respondents 3 and 4 appeared and filedtheir reply impugning the demand stating that the assessment order wasagainst a dead company and therefore the appellant is merely seeking tolegalise its act which is contrary to the provisions of law. The assessmentsmade against a struck off company are nonest. The respondent have raisedother points also challenging the notice and impugning it in Writ Petition(Civil) 7122/2019 filed before the Hon’ble High Court of Delhi. The Hon’bleHigh Court of Delhi has taken note of the fact that the name of the companyhas been struck off, and directed the appellant to continue the assessmentproceedings, but not pass the final order until further directions. Therespondent’s have further submitted that they have accounted for all fundsreceived by them.9.Keeping in view the submission made, the appellant has justified the Page 8 of 9 Signature Not Verified grounds on which it seeks restoration of the name of the company so as toproceed further. It is equally expedient for the respondent company to seek itsrestoration as they wish to contest the claim made by the appellant before anyjudicial forum.” 20.It would be relevant to note that the Company was initially struck offby the Ministry of Corporate Affairs due to its default in filing its statutoryreturn with the ROC and the Company was, therefore, struck off due to itsown defaults. The NCLT upon realizing that the detriment caused to theinterest of the Income Tax department due to the striking off, restored theCompany to enable the Department to recover its dues. However, theconduct of the Petitioner in persisting with the present petition even after theCompany has been restored and also his action in opposing the appealbefore the NCLT for restoration evidences that the petitioner is abusing theprocess of law to obstruct the assessment proceedings. The resort to presentpetition by the Petitioner herein is therefore, not bona fide and is being doneto avoid legal processes. We, accordingly, dismiss the present petition withcosts and vacate the stay/interim order. 21.The petitioner is directed to deposit the cost of Rs.50,000/- with theDelhi High Court Legal Services Committee. The petitioner shall file theproof of deposit with the Registry of this Court, within two weeks. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J 21.The petitioner is directed to deposit the cost of Rs.50,000/- with theDelhi High Court Legal Services Committee. The petitioner shall file theproof of deposit with the Registry of this Court, within two weeks. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J NOVEMBER 17, 2022/pkv/aa W.P.(C) 7122/2019 Page 9 of 9