Facts of the Case

The Petitioner, being the director of a private company, challenged a notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2012–13.

The company had been struck off by the Registrar of Companies under Section 248 of the Companies Act, 2013 on account of statutory defaults.

Subsequently, the Income Tax Department initiated reassessment proceedings alleging that substantial income had escaped assessment. Meanwhile, the Department also filed an application before the NCLT under Section 252 of the Companies Act, 2013 for restoration of the company’s name, which was later allowed.

The Petitioner challenged the validity of the reassessment notice on the ground that it was issued to a non-existent (struck off) company.

Issues Involved

  1. Whether a notice issued under Section 148 of the Income Tax Act, 1961 to a struck-off company is void ab initio?
  2. Whether restoration of a company under Section 252(3) of the Companies Act, 2013 has retrospective effect?
  3. Whether the petitioner (director) has locus standi to challenge such notice?
  4. Whether reassessment proceedings can continue against a company that was struck off but later restored?

Petitioner’s Arguments

  • The notice under Section 148 was invalid and non-est, as it was issued when the company stood struck off.
  • Restoration of the company by NCLT cannot cure the defect retrospectively.
  • Proceedings initiated against a non-existent entity are legally unsustainable.
  • Reliance was placed on judicial precedents asserting that actions against dissolved companies are void.

 

Respondent’s Arguments

  • The company has been restored under Section 252 of the Companies Act, 2013, and such restoration relates back to the date of striking off.
  • Under law, restoration places the company in the same position as if it had never been struck off.
  • The company had substantial escaped income and failed to file returns; thus, reassessment was justified.
  • The petition had become infructuous, as the company now legally exists.
  • The petitioner lacks locus standi since the company itself did not challenge the notice.

Court’s Findings / Order

  • The Delhi High Court held that restoration under Section 252(3) has retrospective effect, meaning the company is deemed to have always existed.
  • Consequently, the notice issued under Section 148 of the Income Tax Act cannot be treated as invalid.
  • The Court further held that:
    • The petitioner lacked locus standi to maintain the writ petition.
    • The petition had become infructuous after restoration of the company.
  • The Court dismissed the petition with costs of ₹50,000, observing abuse of process.

Important Clarifications by the Court

  • Section 252(3) Companies Act, 2013: Restoration places the company in the same position as if its name had never been struck off.
  • Section 250 Companies Act, 2013: Even a dissolved company continues to exist for limited purposes such as discharge of liabilities.
  • Section 248(7) Companies Act, 2013: Liability of directors and members continues despite dissolution.
  • Reliance on Commissioner of Income Tax v. Gopal Shri Scrips Pvt. Ltd. (2020) 7 SCC 654, where proceedings against struck-off companies were upheld considering continuing liabilities.

Sections Involved

  • Section 148, Income Tax Act, 1961 – Income escaping assessment
  • Section 248, Companies Act, 2013 – Removal of name of company
  • Section 250, Companies Act, 2013 – Effect of dissolution
  • Section 252(3), Companies Act, 2013 – Restoration of company
  • Section 248(7), Companies Act, 2013 – Continuing liability
  • (Reference) Section 560(5), Companies Act, 1956 – Earlier analogous provision

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/58917112022CW71222019_205903.pdf

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