Top Stories Liability of Directors continue even though after dissolving Company u/s 248(5) of Companies  Act: ITAT upholds Notice u/s 148 of Income Tax Act [Read Order] By Aparna. M – On March 28, 2024 4:06 pm – 2 mins read The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) while upheld the notice issued under Section 148 of the Income Tax Act,1961 observed that liability of directors continues even though after dissolving the company under Section 248(5) of the Companies Act, 2013.

The assessee Chandan Realtors Pvt. Ltd. did not file its return of income for the assessment year 2011-2012.On receipt of the Information AO  found that the assessee made payments of 2.10 crore  for acquiring an immovable property. Ao believed that there’s a chance for escapement of  income. Accordingly the AO reopened the assessment by issuing the notice under Section 148 of the Income Tax Act, 1961.

The assessee objected to the reopening of the assessment and argued that it was struck down from the registrar of the companies and dissolved therefore notice issued on a non-existent entity was invalid. However the AO said that merely struck off of name from the office of Registrar of companies, did not render the assessee company as non-existent. Thereafter, the Assessing Officer completed the re-assessment and made addition u/s 68 of the Income Tax Act Rs.3,03,00,000/- for  credit entries to appear in bank account of assessee company. Aggrieved by the order assesee filed an appeal before the CIT(Appeal). The CIT(A) dismissed the appeal filed by the assessee.

Thereafter, the assessee filed an appeal before the tribunal. During the appeal proceedings Kirit Sheth,  counsel appearing for the assessee s relied upon the decision of Pandian Anbalagan vs ITO submitted that notice issued under Section 148  of the Income Tax Act and order passed under Section 143(3) r.w.s. 147 of the Income Tax Act  in the name of a non existent company after  its name is struck-off by the registrar from his records is invalid and unsustainable. Ashok Kumar, Counsel for revenue argued that the company has not been liquidated and it is in existence even today and only it has been stricken off from the registrar of companies which could be restored back either on an appeal by any aggrieved person within a period of three years before the National Company Law Tribunal under Section 255(1) of the Companies Act, 2013. Although the section 250 of Companies Act, 2013 give authority to income tax department for issue of notice even on company struck off from the registrar of companies

The tribunal observed that under the provision of Section 248(7) of the Companies Act the liability of the director in respect of the company though it was dissolved was continued even though the company was dissolved under the provisions of Section 248(5) of the Companies Act. Further the bench determined that section 250 of the Companies Act, 2013 has made it clear that the company shall not be deemed as dissolved or certificate of incorporation shall be continued for the purpose of discharge of the liabilities or obligation of the Company.

After analyzing the submission of both parties, the two-member bench of Annapurna Gupta, ( Accountant Member ) and  Pavan Kumar Gadale,( Judicial Member ) held that upheld the notice issued under Section 148 of the Income Tax Act, 1961 observed that liability of directors continues even though after dissolving the company under Section 248(5) of the Companies Act, 2013.