[2024] 163 taxmann.

com 83 (Jammu & Kashmir)[03-11-2023]

INCOME TAX : Once a company is dissolved under section 560(5) of Companies Act,
it ceases to exist and, therefore, no order of assessment can be validly passed
against it under Income Tax Act and if it is passed, it would be a nullity

■■■

[2024] 163 taxmann.com 83 (Jammu & Kashmir)

Section 4, read with sections 2(7), 2(31) and 179 of the Income-tax Act, 1961, read with
section 560 of the Companies Act, 1956 - Company - Assessable as (Dissolved company) -
Assessment year 2004-05 - Whether a company is a juridical person but moment it is struck
off from Register of Companies and is dissolved, it ceases to exist - Held, yes - Whether
making of an assessment order against a non-existent company would be like passing a
decree by a civil court against a dead person and such order of assessment made against a
non-existent entity would be nullity and would not give rise to any right or liability under
such assessment order - Held, yes - Whether therefore, once a company is dissolved under
section 560(5) of Companies Act, it ceases to exist and, therefore, no order of assessment
can be validly passed against it under Income Tax Act and if it is passed, it would be a nullity
- Held, yes [Paras 22 and 24] [In favour of assessee]
FACTS

■ Assessee-company filed a Nil return of income for the assessment year 2004-05.
■ The return of income included a note indicating that the assessee-company had applied on 19.03.2004 to
the Registrar of Companies under section 560 of the Companies Act, 1956, for striking off its name from
the Register of Companies under the Simplified Exit Scheme.
■ The assessment was completed under section 143(3), by the Assessing Authority on 21.12.2006. An
addition of Rs.1,00,75,000/- was made, representing the amount of unsecured loans received by the
Company in earlier years and credited to the Capital Reserve during the previous year.
■ On appeal, the Commissioner (Appeals), dismissed the appeal of the assessee. He rejected the contention
of the assessee-company that no assessment order could have been passed against the company which had
become defunct.
■ On further appeal, the Tribunal concurred with the view of the first appellate authority and dismissed the
appeal of the assessee-company vide order dated 30.01.2014.
■ In the instant appeal, the assessee assailed the impugned order on a solitary ground that the assessing
authority could not have passed an assessment order against the Company, which, at the time of making of
the assessment order, stood dissolved under the provisions of Section 560(5) of the Companies Act.
HELD

■ The appellant-company was struck off from the Register of Companies and stood dissolved from the date
of publication of a notice in the Gazette of India issued for 22nd to 28th April, 2006. [Para 5]
■ Indisputably, the order of assessment against the appellant-company was made on 21.12.2006. The status
of the appellant-company on the date of making assessment was that the appellant-company stood struck
off from the Register of Companies and dissolved w.e.f. the publication of notice in the Official Gazette.
For the sake of clarity, it is set out in Section 560 of the Companies Act. [Para 6]
■ From a reading of Section 560 of the Companies Act, it clearly transpires that after the requisite procedure
prescribed under Sub-sections (1) to (4) is followed and the time mentioned in the notice referred to in
Sub-section 3 or 4 expires, the Registrar may strike off the name of the company concerned from the
Register of Companies. If it does so, it shall publish a notice thereof in the Official Gazette and on
publication of the notice in the Official Gazette, the company shall stand dissolved. However, proviso to
Sub-section (5) of Section 560 further provides that notwithstanding dissolution of the company, liability
of every director, manager or other officer who was exercising any power of management and of every
member of the company shall continue and may be enforced as if the company had not been dissolved.
Proviso (b) further provides that nothing provided in Sub-section (5) in respect of dissolution of company
whose name has been struck off from the Register, shall affect the power of the competent Court to wind
up a company. [Para 7]

■ On careful circumspection of Section 560 of the Companies Act, it is clearly found that striking off
company from the Register of Companies and its resultant dissolution under Sub-section (5), remains
under suspended animation and by having recourse to Sub-sections (6) & (7), it can be resuscitated back
to life and continued as if its name had not been struck off. It is, thus, evident that for the purpose of
challenging the action of the Registrar striking off registration of the company and effecting its dissolution
by publication in the Official Gazette, the company is conferred a juridical personality and may in its own
name file an application before the Court for setting aside the order passed by the Registrar under Sub-
section (5) of Section 560 of the Companies Act. [Para 10]
■ Similarly, under Section 226(3) of the Income Tax Act, it is clearly provided that if there is any tax due
from the struck off company, same can be recovered from any person who holds or may subsequently
hold money for or on account of the assessee-company. [Para 11]

■ Section 179 of the Income Tax Act also assumes importance in this point of discussion and it stipulates
that if the tax due from a private company in respect of any income of previous year become
unrecoverable against the company for any reason, then every person who was a director of the private
company at any time during the relevant previous year shall be jointly and severally liable for the payment
of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance
or breach of duty on his part in relation to the affairs of the company. [Para 12]
■ From a reading of the aforesaid provisions together, it clearly comes out that notwithstanding dissolution
of a struck off company in terms of Sub-section (5) of Section 560 of the Companies Act, liability of any
person who holds or may subsequently hold money for and on account of the assessee company or a
director of the private company in respect whereof any tax is due in respect of any income of the previous
year, as is provided under Section 226(3) and Section 179 , still remains and such person or director shall
have the locus standi to challenge the assessment order, if any, passed by the Assessing Officer against
such struck off and dissolved company in respect of any income of the previous year. [Para 13]
■ The aforesaid discussion would lead to a conclusion that in the instant case any director of the company
could have filed an appeal challenging the assessment order on the ground that the liability arising out of
the impugned assessment order, under the circumstances pointed out in Section 179 of the Income Tax
Act, could be fastened upon him. Interestingly, all proceedings, in the first appeal before the
Commissioner (Appeals) and second appeal before the Tribunal were filed in the name of the company
suing through its director Jeane Fernades. [Para 14]

■ One is not in agreement with the argument of the assessee, that in terms of Section 250 of the Companies
Act, 2013, the dissolved company is competent in its name to file first and second appeal as also the
 instant appeal. Said argument of the assessee cannot be agreed, for the simple reason that Section 250 of
the Companies Act, 2013 was not in existence in the year 2006 nor any provision was found parallel to
and in pari materia with Section 250 of the Companies Act, 2013 in the Companies Act, 1956, as was
applicable at the relevant point of time. [Para 15]
■ True it is that in terms of Section 250 of the Companies Act, 2013, where a company stands dissolved
under Section 248 of the Companies Act, 2013 (which is in pari materia with Section 560 of the
Companies Act, 1956) the certificate of incorporation issued to such company shall be deemed to have
been cancelled except for the purpose of realizing the amount due to the company or for payment or
discharge of the liability or obligation of the company. [Para 16]
■ It is equally true that after promulgation of the Companies Act, 2013 and in view of the specific provision
made in Section 250 thereof, the dissolved company is by fiction of law conferred the juridical personality
and may, therefore, be competent to challenge the assessment order, if any, passed against it when it stood
dissolved by the Registrar under section 248 of the Companies Act, 2013. In the absence of similar
provision under the Companies Act, 1956 and in view of the discussion made hereinabove, one is of the
considered opinion that in the instant case the company was given fictional juridical personality only for
the purpose of laying challenge before the Court to the order of the Registrar striking it off from the
Register and effecting its dissolution upon publication of the notice in the Official Gazette and no more.
The directors of the company who under some circumstances may be held liable to pay the dues owned by
the company to the department are competent in law to take proceedings against the assessment order
passed against a dissolved company, if they feel aggrieved. [Para17]
■ Thus, it is viewed that all the proceedings by the company before the Commissioner (Appeals) and the
Tribunal were not maintainable in law. Similarly, instant appeal by the company is not maintainable. The
company having ceased to exist was not competent to challenge the assessment order, though, the director
may have. Since the company all along is represented by the director, as such, in the larger interest of
doing justice and putting an early quietus on the matter, we hold that all proceedings taken in the name of
the company shall be treated to be the proceedings by the director of the company. [Para 18]

■ The discussion so far made would now lead to the determination of the substantial question of law framed
in this appeal. Although, it is not in dispute that the appellant company never brought the notification
published in Government Gazette issued in respect of the company under Section 560(5) of the
Companies Act to the notice of the assessing authority, Commissioner (Appeals) and the Tribunal and, as
such, all the three authorities aforesaid committed no illegality in law in coming to the conclusion that
merely because the company is defunct, the assessing authority cannot be restrained from passing the
assessment order against it. The authorities have concurrently held that there is distinction between the
company which is rendered defunct because of stoppage of operations of the company and the company
which is formally struck off and dissolved in terms of Sub-section (5) of Section 560 of the Companies
Act. However, one cannot lose sight of the fact that on the date of passing of the assessment order, the
company stood struck off from the Register and formally dissolved on the publication of the notice in the
Official Gazette. [Para 19]

■ It is true that the appellant-director, who was apprehending that the liability for the tax due for the
previous year assessed by the assessing authority against the company could be fastened on him should
have been diligent enough to prosecute his appeal and bring true facts to the notice of the concerned
authorities, however, one is also aware that when a company becomes defunct and its management goes
haywire, there is nobody to take the responsibility of the affairs of the company. Even mice leave the ship
when it is sinking. It is in these circumstances, perhaps, the director of the company could not lay his hand
on the Official Gazette and was under a bona fide impression that the application for striking off the
company from the Register of the Companies and effecting dissolution by publication was still pending
before the Registrar of Companies. [Para 20]

■ Be that as it may, now it has come to light that on the date the assessment order was passed, the appellant-
company stood dissolved under Section 560(5) of the Companies Act and, therefore, could not have been
assessed. In terms of Section 143 assessment can be made by the assessing authority only against the
assessee, who has filed a return under Section 139 or in response to a notice issued under Sub-section (1)
of Section 142. The term “assessee” is defined in Sub-section (7) of Section 2 of the Income Tax Act to
mean that a person by whom any tax or any other sum of money is payable under the Income Tax Act and
 the term “person” used in Sub-section (7) is defined in Sub-section (31) of Section 2 of the Income Tax
Act to include an individual, a Hindu undivided family, a company, a firm, an association of person or a
body of individuals, whether incorporated or not, a local authority, and every artificial juridical person, not
falling within any of the aforesaid clauses etc. etc. [Para 21]
■ From a reading of Sub-section (7) along with Sub-section (31) of Section 2 of the Income Tax Act, it
becomes abundantly clear that the assessee to be assessed for income tax under Section 143 of the Income
Tax Act must be a person in existence. Indisputably, a company is a juridical person but the moment it is
struck off from the Register of Companies and is dissolved, it ceases to exist. Making of an assessment
order against a non-existent company would be like passing a decree by a civil court against a dead
person. Such order of assessment made against a non-existent entity would be nullity and would not give
rise to any right or liability under such assessment order. The view taken is supported by a judgment of the
High Court of Delhi dated 17.09.2009 passed in IT Appeal No.273 of 2009 titled CIT v. Vived Marketing
Servicing (P.) Ltd. [Para 22]

■ Thus, it is held that once a company is dissolved under Section 560(5) of the Companies Act, it ceases to
exist and, therefore, no order of assessment could be validly passed against it under the Income Tax Act
and if it is passed, it would be a nullity. Thus, the appeal is allowed and the order of assessment dated
21.12.2006, order of the Commissioner (Appeals), Jammu dated 01.04.2013 and the order of the Tribunal
dated 30.01.2014 are set aside. [Para 24]
CASE REVIEW

CIT v. Vived Marketing Servicing (P.) Ltd. [IT Appeal No.273of 2009, dated 17.09.2009] and Impsat (P.) Ltd.
v. ITO [2004] 91 ITD 354 (Delhi) (para 22) followed.
Order of ITAT, Amritsar Bench in IT Appeal No.355 of 2013, dated 03.01.2015. (para 24) reversed.
CASES REFERRED TO

CIT v. Vived Marketing Servicing (P.) Ltd. [IT Appeal no. 273 of 2009,dated 17-9-2009] (para 22) and Impsat
(P.) Ltd. v. ITO [2004] 91 ITD 354 (DELHI) (para 22).
K.S. Johal, Sr. Adv., Supreet Johal and Inderjeet Gupta, Advs. for the Appellant. Ms. Aruna Thakur,
Adv. for the Respondent.
JUDGMENT

Sanjeev Kumar, J. - This appeal under Section 260A of the Income Tax Act, 1961 ["the Act of 1961"] is
directed against order dated 30.01.2014 passed by the Income Tax Appellate Tribunal, Amritsar Bench ["the
Tribunal"] in ITA No.355(ASR)/2013(Assessment year 2004-05). Vide order dated 03.01.2015 instant appeal
was admitted on the following substantial question of law:-
"Whether on the facts and circumstances of the case, the ITAT erred in law in not appreciating that the
name of the appellant company had been struck off from the Register of the Companies by the Registrar
and the aforesaid company was dissolved under provisions of Section 560 of the Companies Act, 1956,
prior to the date of passing of the assessment order?
2. The aforesaid substantial question of law has arisen in the background of following factual matrix:
The appellant-Company filed a Nil return of income for the assessment year 2004-05 with the Income Tax
Officer Ward No.2 (2), Jammu. The Return of Income also contained a note stating therein that the appellant-
Company had filed an application on 19.03.2004 before the Registrar of Companies under Section 560 of the
Companies Act, 1956 ["the Companies Act"] for striking off the name of the Company from the Register of
the companies under Simplified Exit Scheme. The assessment was completed under Section 143(3) of the
Income Tax Act, 1961 ["the Income Tax Act"] vide order of the Assessing Authority dated 21.12.2006. The
Assessing Authority made an addition of Rs.1,00,75,000/- being the amount of unsecured loans received by
the Company during the earlier years and was credited to the Capital Reserve during the previous year.
Feeling aggrieved, the appellantCompany filed an appeal before the Commissioner of Income Tax (Appeals),
Jammu (headquarters Amritsar) against the order of assessment. The appeal was dismissed by the Ist
Appellate Authority vide its order dated 05.02.2008. Second appeal was preferred by the appellant-Company
before the Tribunal. The Tribunal vide its order dated 13.08.2010 allowed the appeal and remanded the case
back to Commissioner of Income Tax (Appeals) to adjudicate the case afresh after complying with necessary
requirements of deposit of fee in terms of the relevant provisions of the Act.
On remand, Commissioner of Income Tax (Appeals) after providing an opportunity of being heard to the
appellant passed fresh order on 01.04.2013 dismissing the appeal of the appellant-company and confirming
the addition made by the assessing authority in the impugned assessment order. The Commissioner of Income
Tax (Appeals) rejected the contention of the appellant-company that no assessment order could have been
passed against the company which had become defunct. It is this order of the Commissioner of Income Tax
(Appeals) dated 01.04.2013, which was assailed by the appellantcompany before the Tribunal. The Tribunal
concurred with the view of the 1st appellate authority and dismissed the appeal of the appellantcompany vide
order dated 30.01.2014, which is assailed before us in this appeal.
3. The impugned order is assailed by the appellant on a solitary ground that the assessing authority could not
have passed an assessment order against the Company, which, at the time of making of the assessment order,
stood dissolved under the provisions of Section 560(5) of the Companies Act.
4. It is argued by Mr. K.S.Johal, learned senior counsel appearing for the appellant, that on the date of making
assessment by the assessing authority the appellant-company had ceased to exist and stood dissolved under
Section 560(5) of the Companies Act and a notification in this regard stood published in Government Gazette
dated April 22 to April 28, 2006. He, however, fairly concedes that despite the notice with regard to striking
off of the Company w.e.f. 31.03.2006 having been published on the date of making assessment, appellant
could not bring this fact to the notice of the assessing authority at the time of making the assessment. He,
however, submits that dissolution of the Company and striking off its name from the Register of the
Companies in terms of Section 560 of the Companies Act was a fact, though, the evidence in respect thereto
could not be brought to the notice of the authorities despite due diligence. He submits that since the company
was defunct and, therefore, the directors, who had lost interest in the affairs of the company, could not notice
the gazette notification dated 22nd-28th April, 2006. He, however, submits that in view of the evidence, which
is now available with the appellant-company, the matter needs to be remanded back to the assessing authority
for taking appropriate view in the matter.
5. Per contra, Ms. Aruna Thakur, learned counsel appearing for the respondent, argues that the fact that the
company stood formally dissolved under Section 560(5) of the Companies Act was not brought to the notice
of the income tax authorities including the Tribunal by the appellant and, therefore, the appellant-company
cannot be heard to make a grievance that the aforesaid aspect was not considered by the authorities. She
submits that the only argument that was raised by the appellant before the income tax authorities was that the
company had become defunct and, therefore, could not be subjected to assessment under Section 143(3) of the
Income Tax Act.
5. Having heard learned counsel for the parties and perused the material on record, on facts, we find that the
appellant-company was struck off from the Register of Companies and stood dissolved from the date of
publication of a notice in The Gazette of India issued for 22nd to 28th April, 2006.
6. Indisputably, the order of assessment against the appellant company was made on 21.12.2006. The status of
the appellant-company on the date of making assessment was that the appellant-company stood struck off
from the Register of Companies and dissolved w.e.f. the publication of notice in the Official Gazette. For the
sake of clarity, we set out Section 560 of the Companies Act herein below:-
"560. Power of Registrar to strike defunct company off register.---

(1) Where the Registrar has reasonable cause to believe that a company is not carrying on business or
in operation, he shall send to the company by post a letter inquiring whether the company is
carrying on business or in operation.

(2) If the Registrar does not within one month of sending the letter receive any answer thereto, he shall,
within fourteen days after the expiry of the month, send to the company by post a registered letter
referring to the first letter, and stating that no answer thereto has been received and that, if an
answer is not received to the second letter within one month from the date thereof, a notice will be
published in the Official Gazette with a view to striking the name of the company off the register.
 (3) If the Registrar either receives an answer from the company to the effect that it is not carrying on
business or in operation, or does not within one month after sending the second letter receive any
answer, he may publish in the Official Gazette, and send to the company by registered post, a notice
that, at the expiration of three months from the date of that notice, the name of the company
mentioned therein will, unless cause is shown to the contrary, be struck off the register and the
company will be dissolved.

(4) If, in any case where a company is being wound up, the Registrar has reasonable cause to believe
either that no liquidator is acting, or that the affairs of the company have been completely wound
up, and any returns required to be made by the liquidator have not been made for a period of six
consecutive months, the Registrar shall publish in the Official Gazette and send to the company or
the liquidator, if any, a like notice as is provided in sub-section (3).
(5) At the expiry of the time mentioned in the notice referred to in subsection (3) or (4), the Registrar
may, unless cause to the contrary is previously shown by the company, strike its name off the
register, and shall publish notice thereof in the Official Gazette ; and on the publication in the
Official Gazette of this notice, the company shall stand dissolved :
Provided that -

(a) the liability, if any, of every director, manager or other officer who was exercising any power or
management, and of every member of the company, shall continue and may be enforced as if the
company had not been dissolved ; and
(b) nothing in this sub-section shall affect the power of the 2 [Tribunal] to wind up a company the
name of which has been struck off the register.

(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been
struck off the register, the Tribunal, on an application made by the company, member or creditor
before the expiry of twenty years from the publication in the Official Gazette of the notice
aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on
business or in operation or otherwise that it is just that the company be restored to the register, order
the name of the company to be restored to the register ; and the Tribunal may, by the order, give
such directions and make such provisions as seem just for placing the company and all other
persons in the same position as nearly as may be as if the name of the company had not been struck
off.

(7) Upon a certified copy of the order under sub-section (6) being delivered to the Registrar for
registration, the company shall be deemed to have continued in existence as if its name had not
been struck off.
(8) A letter or notice to be sent under this section to a company may be addressed to the company at its
registered office, or if no office has been registered, to the care of some director, manager or other
officer of the company, or if there is no director, manager or officer of the company whose name
and address are known to the Registrar, may be sent to each of the persons who subscribed the
memorandum, addressed to him at the address mentioned in the memorandum.

(9) A notice to be sent under this section to a liquidator may be addressed to the liquidator at his own
place of business."
7. From a reading of Section 560 of the Companies Act, it clearly transpires that after the requisite procedure
prescribed under Subsections (1) to (4) is followed and the time mentioned in the notice referred to in
Subsections 3 or 4 expires, the Registrar may strike off the name of the company concerned from the Register
of Companies. If it does so, it shall publish a notice thereof in the Official Gazette and on publication of the
notice in the Official Gazette, the company shall stand dissolved. However, proviso to Subsection (5) of
Section 560 further provides that notwithstanding dissolution of the company, liability of every director,
manager or other officer who was exercising any power of management and of every member of the company
shall continue and may be enforced as if the company had not been dissolved. Proviso (b) further provides
that nothing provided in Subsection (5) in respect of dissolution of company whose name has been struck off
from the Register, shall affect the power of the competent Court to wind up a company.
8. The provisions of Subsection (6), if read carefully, would indicate that if a company or any member or
creditor of the company feels aggrieved by the decision of the Registrar to strike off registration of the
company, it can move an application before the Court before the expiry of twenty years from the publication
in the Official Gazette of the notice under Subsection (5) and if the Court is satisfied that the company was, at
the time of striking off, carrying on business or in operation or otherwise that it is just that the company be
restored to the register, it may order the name of the company to be restored to the register. The Court may
also order such directions and make such provision as may be seem just for placing the company and all other
persons in the same position as nearly as may be as if the name of the company had not been struck off.
9. In terms of Subsection (7), once a certified copy of the order passed under Subsection (6) is delivered to the
Registrar of Companies for registration, the dissolved company shall be deemed to have continued in
existence as if its name had not been struck off.
10. On careful circumspection of Section 560 of the Companies Act, we clearly find that striking off company
from the Register of Companies and its resultant dissolution under Subsection (5), remains under suspended
animation and by having recourse to Subsections (6) & (7), it can be resuscitated back to life and continued as
if its name had not been struck off. It is, thus, evident that for the purpose of challenging the action of the
Registrar striking off registration of the company and effecting its dissolution by publication in the Official
Gazette, the company is conferred a juridical personality and may in its own name file an application before
the Court for setting aside the order passed by the Registrar under Subsection (5) of Section 560 of the
Companies Act.
11. Similarly, under Section 226(3) of the Income Tax Act, it is clearly provided that if there is any tax due
from the struck off company, same can be recovered from any person who holds or may subsequently hold
money for or on account of the assessee company. Section 226(3) of the Income Tax Act is also relevant for
the purpose of discussion we have undertaken and the same is reproduced herein below:-
"226. Other modes of recovery (1). . . . . . . . . . . . .
(2). . . . . . . . . . . . . .
(3) (i) The Income-tax Officer may, at any time or from time to time, by notice in writing require any
person from whom money is due or may become due to the assessee or any person who holds or may
subsequently hold money for or on account of the assessee, to pay to the Income-tax Officer either
forthwith upon the money becoming due or being held or at or within the time specified in the notice (not
being before the money becomes due or is held) so much of the money as is sufficient to pay the amount
due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that
amount.

(ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold
any money for or on account of the assessee jointly with any other person and for the purposes of
sub-section, the shares of the joint-holders in such account shall be presumed, until the contrary is
proved, to be equal.

(iii) A copy of the notice shall be forwarded to the assessee at his last address known to the Income-tax
Officer, and in the case of a joint account to all the joint-holders at their last addresses known to the
Income-tax Officer.
(iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this
sub-section shall be bound to comply with such notice, and, in particular, where any such notice is
issued to a post office, banking company or an insurer, it shall not be necessary for any pass book,
deposit receipt, policy or any other document to be produced for the purpose of any entry,
endorsement or the like being made before payment is made, notwithstanding any rule, practice or
requirement to the contrary.
(v) Any claim respecting any property in relation to which a notice under this sub-section has been
issued arising after the date of the notice shall be void as against any demand contained in the
notice.
(vi) Where a person to whom a notice under this subsection is sent objects to it by a statement on oath
that the sum demanded or any part thereof is not due to the assessee or that he does not hold any
 money for or on account of the assessee, then, nothing contained in this sub-section shall be
deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is
discovered that such statement was false in any material particular, such person shall be personally
liable to the Income-tax Officer to the extent of his own liability to the assessee on the date of the
notice, or to the extent of the assessee's liability for any sum due under this Act, whichever is less.

(vii) The Income-tax Officer may, at any time or from time to time, amend or revoke any notice issued
under this sub-section or extend the time for making any payment in pursuance of such notice.

(viii) The Income-tax Officer shall grant a receipt for any amount paid in compliance with a notice issued
under this sub-section, and the person so paying shall be fully discharged from his liability to the
assessee to the extent of the amount so paid.
(ix) Any person discharging any liability to the assessee after receipt of a notice under this sub-section
shall be personally liable to the Income-tax Officer to the extent of his own liability to the assessee
so discharged or to the extent of the assessee's liability for any sum due under this Act, whichever is
less.
(x) If the person to whom a notice under this subsection is sent fails to make payment in pursuance
thereof to the Income-tax Officer, he shall be deemed to be an assessee in default in respect of the
amount specified in the notice and further proceedings may be taken against him for the realisation
of the amount as if it were an arrear of tax due from him, in the manner provided in sections 222 to
225 and the notice shall have the same effect as an attachment of a debt by the Tax Recovery
Officer in exercise of his powers under section 222."
12. Section 179 of the Income Tax Act also assumes importance in the point we are discussing and stipulates
that if the tax due from a private company in respect of any income of previous year become unrecoverable
against the company for any reason, then every person who was a director of the private company at any time
during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he
proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his
part in relation to the affairs of the company. Section 179 of the Income Tax Act reads thus:-
"179. Liability of directors of private company in liquidation.— (1) [Notwithstanding anything contained
in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any
income of any previous year or from any other company in respect of any income of any previous year
during which such other company was a private company] cannot be recovered, then, every person who
was a director of the private company at any time during the relevant previous year shall be jointly and
severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to
any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.
(2) Where a private company is converted into a public company and the tax assessed in respect of any
income of any previous year during which such company was a private company cannot be recovered,
then, nothing contained in sub-section (1) shall apply to any person who was a director of such private
company in relation to any tax due in respect of any income of such private company assessable for any
assessment year commencing before the 1st day of April, 1962."
13. From a reading of the aforesaid provisions together, it clearly comes out that notwithstanding dissolution
of a struck off company in terms of Subsection (5) of Section 560 of the Income Tax Act, liability of any
person who holds or may subsequently hold money for and on account of the assessee company or a director
of the private company in respect whereof any tax is due in respect of any income of the previous year, as is
provided under Section 226(3) and Section 179 of the Income Tax Act, still remains and such person or
director shall have the locus standi to challenge the assessment order, if any, passed by the assessing officer
against such struck off and dissolved company in respect of any income of the previous year.
14. The aforesaid discussion would lead us to a conclusion that in the instant case any director of the company
could have filed an appeal challenging the assessment order on the ground that the liability arising out of the
impugned assessment order, under the circumstances pointed out in Section 179 of the Income Tax Act, could
be fastened upon him. Interestingly, all proceedings, in the first appeal before the Commissioner Income Tax
(Appeals) and second appeal before the Tribunal were filed in the name of the company suing through its
director Jeane Fernades.
15. We are not in agreement with the argument of Mr. K.S.Johal, learned senior counsel that in terms of
Section 250 of the Companies Act, 2013, the dissolved company is competent in its name to file first and
second appeal as also the instant appeal. We do not agree with the learned senior counsel for the simple reason
that Section 250 of the Companies Act, 2013 was not in existence in the year 2006 nor do we find any
provision parallel to and in pari materia with Section 250 of the Companies Act, 2013 in the Companies Act,
1956, as was applicable at the relevant point of time.
16. True it is that in terms of Section 250 of the Companies Act, 2013, where a company stands dissolved
under Section 248 of the Companies Act, 2013 (which is in pari materia with Section 560 of the Companies
Act, 1956) the certificate of incorporation issued to such company shall be deemed to have been cancelled
except for the purpose of realizing the amount due to the company or for payment or discharge of the liability
or obligation of the company.
17. It is equally true that after promulgation of the Companies Act, 2013 and in view of the specific provision
made in Section 250 thereof, the dissolved company is by fiction of law conferred the juridical personality
and may, therefore, be competent to challenge the assessment order, if any, passed against it when it stood
dissolved by the Registrar under Section 248 of the Companies Act, 2013. In the absence of similar provision
under the Companies Act, 1956 and in view of the discussion made herein above, we are of the considered
opinion that in the instant case the company was given fictional juridical personality only for the purpose of
laying challenge before the Court to the order of the Registrar striking it off from the Register and effecting its
dissolution upon publication of the notice in the Official Gazette and no more. The directors of the company
who under some circumstances may be held liable to pay the dues owned by the company to the department
are competent in law to take proceedings against the assessment order passed against a dissolved company, if
they feel aggrieved.
18. We are, thus, of the view that all the proceedings by the company before the Commissioner, Income Tax
(Appeals) and the Tribunal were not maintainable in law. Similarly, instant appeal by the company is not
maintainable. The company having ceased to exist was not competent to challenge the assessment order,
though, the director may have. Since the company all along is represented by the director, as such, in the
larger interest of doing justice and putting an early quietus on the matter, we hold that all proceedings taken in
the name of the company shall be treated to be the proceedings by the director of the company.
19. The discussion so far made by us would now lead us to the determination of the substantial question of
law framed in this appeal. Although, it is not in dispute that the appellant company never brought the
notification published in Government Gazette issued in respect of the company under Section 560(5) of the
Companies Act to the notice of the assessing authority, Commissioner of Income Tax (Appeals) and the
Tribunal and, as such, all the three authorities aforesaid committed no illegality in law in coming to the
conclusion that merely because the company is defunct, the assessing authority cannot be restrained from
passing the assessment order against it. The authorities have concurrently held that there is distinction
between the company which is rendered defunct because of stoppage of operations of the company and the
company which is formally struck off and dissolved in terms of Subsection (5) of Section 560 of the
Companies Act. We, however, cannot lose sight of the fact that on the date of passing of the assessment order,
the company stood struck off from the Register and formally dissolved on the publication of the notice in the
Official Gazette.
20. It is true that the appellant-director, who was apprehending that the liability for the tax due for the
previous year assessed by the assessing authority against the company could be fastened on him should have
been diligent enough to prosecute his appeal and bring true facts to the notice of the concerned authorities,
however, we are also aware that when a company becomes defunct and its management goes haywire, there is
nobody to take the responsibility of the affairs of the company. Even mice leave the ship when it is sinking. It
is in these circumstances, perhaps, the director of the company could not lay his hand on the Official Gazette
and was under a bona fide impression that the application for striking off the company from the Register of
the Companies and effecting dissolution by publication was still pending before the Registrar of Companies.
21. Be that as it may, now it has come to light that on the date the assessment order was passed, the appellant-
company stood dissolved under Section 560(5) of the Companies Act and, therefore, could not have been
assessed. In terms of Section 143 of the Income Tax Act, assessment can be made by the assessing authority
only against the assesee, who has filed a return under Section 139 of the Income Tax Act or in response to a
notice issued under Subsection (1) of Section 142 of the Income Tax Act. The term "assessee" is defined in
Subsection (7) of Section 2 of the Income Tax Act to mean that a person by whom any tax or any other sum of
money is payable under the Income Tax Act and the term "person" used in Subsection (7) is defined in
Subsection (31) of Section 2 of the Income Tax Act to include an individual, a Hindu undivided family, a
company, a firm, an association of person or a body of individuals, whether incorporated or not, a local
authority, and every artificial juridical person, not falling within any of the aforesaid clauses etc etc.
22. From a reading of Subsection (7) along with Subsection 31 of Section 2 of the Income Tax Act, it
becomes abundantly clear that the assessee to be assessed for income tax under Section 143 of the Income Tax
Act must be a person in existence. Indisputably, a company is a juridical person but the moment it is struck off
from the Register of Companies and is dissolved, it ceases to exist. Making of an assessment order against a
non-existent company would be like passing a decree by a civil court against a dead person. Such order of
assessment made against a non-existent entity would be nullity and would not give rise to any right or liability
under such assessment order. The view we have taken is supported by a judgment of the High Court of Delhi
dated 17.09.2009 passed in ITA No.273/2009 titled Commissioner of Income Tax v. Vived Marketing Servicing
Pvt. Ltd. One paragraph judgment rendered by the Delhi High Court has upheld the decision of ITAT in
Impsat Pvt. Ltd. v. ITO 276 ITR 136 (AT). One paragraph judgment reads thus:-
"When the Assessing officer passed the order of assessment against the respondent company, it had
already been dissolved and struck off the register of the Registrar of companies under Section 560 of the
Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any
assessment order passed against the company which was not in existence as on that date in the eyes of
law it had already been dissolved. The Tribunal relied upon its earlier decision in Impsat Pvt. Ltd. v. ITA
276 ITR 136 (AT). We are of the opinion that the view taken by the Tribunal is perfectly valid and in
accordance with law. No substantial question of law arises. Dismissed."
23. The relevant observations of the ITAT Delhi Bench in Impsat (P) Ltd. v. Income Tax Officer are also worth
taking note of and are, thus, set out below:-

"17. A reference to page 1901 of A. Ramaiya's commentary on the Companies Act, 1956 (12th Edition)
by Hon'ble Justice Y.V. Chandrachud (former Chief Justice of India) shows the following extract from
Halsbury's Laws of England, fourth ediction, Vol.7, para 1448, page 809 under the heading "Effecting of
dissolution".
"The dissolution puts an end to the existence of the company. Unless and until it has been set aside,
it prevents any proceedings being taken against promoters, directors or officers of the company to
recover money or property due or belonging to it or to prove a debt due from it. When the company
is dissolved, the liquidator's statutory duty towards the creditors and contributories is gone; but, if he
has committed a breach of his duty to any creditor by distributing the assets without complying with
the requirements of the Companies Act, 1948, he is liable in damages to him."
.............
.............
21. That takes us to the next question regarding the validity of an assessment on a non-existent person. It
is a nullity. Reference may be made to the judgments of the Supreme Court in Amarchand N. Shroff's
case (supra) and ITA v. Ram Prasad [1972] 86 ITR 145. These are cases of an individual and a joint
family respectively, but the ratio is that there can be no assessment on a dead person. Just as an individual
ceases to exist on death and a joint Hindu family ceases to exist on being disrupted, a company ceases to
exist on being dissolved under section 560 of the Companies Act. We have already noted the judgment of
the Supreme Court in Hari Prasad Jayantilal's case (supra) as to the effect of dissolution and the treatise
of A. Ramaiya on Company Law in this behalf. If the company is not in existence at the time of making
the assessment, no order of assessment can be validly passed upon it under the Income Tax Act and if one
is passed, it must be a nullity."
24. We, thus, answer the question by holding that once a company is dissolved under Section 560(5) of the
Companies Act, it ceases to exist and, therefore, no order of assessment could be validly passed against it
under the Income Tax Act and if it is passed, it would be a nullity. Having answered the aforesaid question,
we allow the appeal and set aside the order of assessment dated 21.12.2006, order of the Commissioner of
Income Tax (Appeals), Jammu dated 01.04.2013 and the order of the Tribunal dated 30.01.2014.
NEETU
 *In favour of assessee.
†Arising out of order of ITAT, Amritsar Bench in IT Appeal No.355/2013 dated 03.01.2015.