Ajay Ispat Pvt.Ltd., Ahmedabad v. The Income tax Officer,Ward-1(1),, Ahmedabad

ITA 3159/AHD/2011 | 2006-2007
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 315920514 RSA 2011
Assessee PAN AABCA3164F
Bench Ahmedabad
Appeal Number ITA 3159/AHD/2011
Duration Of Justice 3 month(s) 16 day(s)
Appellant Ajay Ispat Pvt.Ltd., Ahmedabad
Respondent The Income tax Officer,Ward-1(1),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 30-03-2012
Date Of Final Hearing 26-03-2012
Next Hearing Date 26-03-2012
Assessment Year 2006-2007
Appeal Filed On 14-12-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD .. '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT JUDICIAL MEMBER AND SHRI T.R. MEENA ACCOUNTANT MEMBER ./ I.T.A. NO.3159/AHD/2011 ( & ' & ' & ' & ' / / / / ASSESSMENT YEAR : 2006-07) AJAY ISPAT PVT.LTD. 269 GVMMSV LTD. ODHAV AHMEDABAD & & & & / VS. THE INCOME TAX OFFICER WARD-1(1) JITENDRA CHAMBERS ASHRAM ROAD AHMEDABAD ( '# ./)* ./ PAN/GIR NO. : AABCA 3164 F ( (+ / // / APPELLANT ) .. ( -(+/ RESPONDENT ) (+ . '/ APPELLANT BY : SHRI PAUMIL SHAH -(+ / . ' / RESPONDENT BY : SHRI VINOD TANWANI SR. D.R. &0 / #/ // / DATE OF HEARING : 26/03/2012 12' / # / DATE OF PRONOUNCEMENT : 30/03/12 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL ARISING FROM THE ORD ER OF LEARNED CIT(A)-6 AHMEDABAD DATED 11/11/2011 WHEREIN THE ASSESSEE'S APPEAL WAS DISMISSED BY HOLDING THE SAID APPEAL AS AN INVALID APPEAL. THE ASSESSEE HAS FILED THE SAID APPEAL AGAINST THE LEVY OF PENAL TY UNDER SECTION 271(1)(C) OF THE ACT. GROUNDS RAISED IN THE PRESENT APPEAL BY THE APPELLANT ARE ARGUMENTATIVE AND DESCRIPTIVE HENCE NOT REPRODUCED BUT PRIMARILY THE APPELLANT IS AGGRIEVED BY THE DISMISS AL OF APPEAL AS ALSO ITA NO .3159AHD/2011 AJAY ISPAT PVT.LTD. VS. ITO ASST.YEAR 2006-07 - 2 - CONFIRMATION OF CONCEALMENT PENALTY OF RS.3 82 066/ -IMPOSED ON ACCOUNT OF AN ADDITION OF RS.11 57 777/- FOR DISALLOWANCE OF EXPENSES. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG PENALTY ORDER LEVIED UNDER SECTION 271(1)(C) DATED 30/08/2010 WERE THAT THE FOLLOWING TWO EXPENSES WERE DISALLOWED:- (I) LOANS WRITTEN OFF . RS.8 42 000/- (II) DEFERRED TAX WRITTEN OFF RS.3 15 777/- 2.1. WHILE IMPOSING PENALTY THE AO HAS COMMEN TED THAT THE LOANS WRITTEN OFF WERE FOUND TO BE GIVEN AS LOANS AND ADV ANCES TO DIRECTORS AND SHAREHOLDERS. THE ASSESSEE WAS UNABLE TO ESTABLISH THE BUSINESS PURPOSE OF DEDUCTION HENCE DISALLOWED. ACCORDING TO AO THE ASSESSEE HAS ALSO NOT EXPLAINED THE GENUINENESS OF DEFERRED TAX WRITT EN OFF. ON THE SAID TOTAL DISALLOWANCE THE IMPUGNED PENALTY WAS IMPOSE D. BEING AGGRIEVED THE APPELLANT-COMPANY HAS FILED AN APPEAL BEFORE LE ARNED CIT(A). 3. IT WAS NOTICED BY THE CIT(A) THAT THE COMPANY WAS WOUND UP WITH EFFECT FROM 27/5/2010. THE NAME OF THE APPELLANT-COMPANY WAS STRUCK OFF FROM THE RECORDS OF ROC. THEREFORE IT WAS NOTED BY LD. CIT(A) THAT THE APPEAL WAS FILED BY AN ERSTWHILE DIRECTOR OF THE COMPANY. ACCORDING TO CIT(A) THE COMPANY WAS NO L ONGER IN EXISTENCE AFTER THE STRUCK OFF FROM THE REGISTER OF ROC. HE H AS OPINED QUOTE IN THE ABSENCE OF EXISTING COMPANY THERE CANNOT BE AN Y DIRECTOR WHO CAN SIGN THE VERIFICATION FOR THE FILING OF APPEAL. THERE CANNOT BE ANY APPEAL BY A COMPANY WHICH IS NOT IN EXISTENCE. IN V IEW OF THIS THIS APPEAL IS TREATED AS INVALID AND ACCORDINGLY DISMIS SED. UNQUOTE. BEING FURTHER AGGRIEVED NOW THE ASSESSEE IS IN SEC OND APPEAL BEFORE US. 4. FROM THE SIDE OF THE APPELLANT LEARNED AR M R.PAUMIL SHAH APPEARED. HE HAS ARGUED THAT THE COMPANY WAS RUNNIN G IN LOSSES FURTHER ITA NO .3159AHD/2011 AJAY ISPAT PVT.LTD. VS. ITO ASST.YEAR 2006-07 - 3 - ON ACCOUNT OF FAMILY PROBLEMS APPLIED TO REGISTRAR OF COMPANIES FOR STRIKING OFF THE NAME OF THE COMPANY UNDER SECTION 560 OF THE COMPANIES ACT WITH EFFECT FROM 27.05.2005. THE COMPANY HAS ALSO INFORMED THE REVENUE DEPARTMENT FOR THE CANCELLATION OF PERMANEN T ACCOUNT NUMBER. HE HAS INFORMED THAT THROUGH A LETTER DATED 26/10/2 007 THE COMPANY HAS ASKED THE REGISTRAR OF COMPANIES TO STRUCK THE NAME OF THE COMPANY UNDER SECTION 560 OF THE COMPANIES ACT. THE RETURN FOR THE ASSESSMENT YEAR 2006-07 WAS FILED ON 30/10/2006 DECLARING A LO SS OF RS.11 70 229/-. THE NAME OF THE COMPANY WAS STRUCK OFF ON 27/5/2010 . THE ASSESSMENT OF THE COMPANY WAS FINALIZED ON 18/3/2010 UNDER SEC TION 143(3) READ WITH SECTION 147 OF IT ACT AND TOTAL LOSS OF RS.12 452/- WAS ASSESSED. THEREAFTER PENALTY WAS IMPOSED UNDER SECTION 271(1 )(C) VIDE AN ORDER DATED 30/8/2010. IF THE COMPANY WAS NOT IN EXISTENC E THEN HOW THE ASSESSMENT WAS MADE IN THE NAME OF THE COMPANY AND ALSO PENALTY WAS IMPOSED. LEARNED AR HAS THEREFORE PLEADED THAT IF T HE PENALTY HAS BEEN IMPOSED ON A COMPANY THEN HE HAS LEGAL RIGHT OF AP PEAL. 5. FROM THE SIDE OF THE REVENUE LEARNED DR MR.V INOD TANWANI APPEARED. AT THE OUTSET IT IS WORTH TO APPRECIATE THAT THE LEARNED DR HAS EXPRESSED THAT AN INTERESTING SITUATION HAD ARISEN DUE TO THE DISMISSAL OF APPEAL BY THE LEARNED CIT(A) ON A VERY TECHNICAL RE ASON. HE HAS INFORMED THAT AS PER THE IT ACT IN CASE OF A LIQUID ATION OF A COMPANY THE PROCEDURE IS LAID DOWN IN SECTION 140 OF THE INCOME TAX ACT. HOWEVER THIS IS NOT THE CASE OF LIQUIDATION BUT THE COMPANY WAS STRUCK OFF BY THE REGISTRAR OF COMPANIES. AT THE TIME WHEN THE APPEAL MEMO WAS SIGNED ON FORM NO. 35 THE COMPANY WAS NOT IN EXISTENCE THE REFORE THE DIRECTOR HAS WRONGLY SIGNED THE SAID REQUISITE FORM. IN ALL HIS FAIRNESS MR.VINOD TANWANI HAS ALSO EXPRESSED THAT THE PENALTY WAS IMP OSED HENCE THERE ITA NO .3159AHD/2011 AJAY ISPAT PVT.LTD. VS. ITO ASST.YEAR 2006-07 - 4 - OUGHT TO BE SOME LEGAL REMEDY AVAILABLE TO SUCH A COMPANY WHO IS NO MORE IN EXISTENCE. FURTHER IN A TRUE SPIRIT TO ASSI ST THE BENCH TO ARRIVE AT A CORRECT DECISION HE HAS EXPLAINED SOME OF THE PROV ISIONS OF THE COMPANIES ACT. 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES AND AFTER APPRECIATING THE PRELIMINARY FACTS OF THE CASE WE ARE ALSO OF THE VIEW THAT A STRANGE SITUATION HAD ARISEN DUE TO THE FACT THAT ON ONE HAND THE REVENUE DEPARTMENT HAS ASSESSED THE COMPANY SIMULT ANEOUSLY ALSO IMPOSED THE PENALTY ON THE COMPANY WHEN THE SAID COMPANY WAS UNDER THE PROCESS OF STRIKING OFF THE NAME FROM THE REGIS TER OF THE REGISTRAR OF COMPANIES. MEANING THEREBY THE REVENUE DEPARTMENT HAS CONSIDERED THE SAID COMPANY AS AN EXISTING COMPANY AND PROCEEDED TO TAKE ACTION AGAINST A COMPANY AS PER LAW. BUT WHEN THE APPEAL WAS FILED BY THE DIRECTOR OF THE COMPANY ON BEHALF OF THE COM PANY THEN IT WAS HELD BY LD. CIT (A) THAT SINCE THE COMPANY WAS NOT IN EXISTENCE THEREFORE THE DIRECTOR HAD NO LOCUS STANDI TO FILE THE APPEAL. WE HAVE EXAMINED THE APPEAL MEMO THAT IS FORM NO. 35 FILE D BY THE DIRECTOR DATED 15/9/2010. ONE SHRI MOHINDER PAUL B GUPTA HA S SIGNED THE SAID FORM IN THE CAPACITY OF AN EX-DIRECTOR. THE FIRST A ND THE FOREMOST QUESTION IS THAT WHO IS AUTHORIZED TO SIGN FORM NO.35 I.E. THE APPEAL MEMO BEING SUBMITTED BEFORE LEARNED CIT(A). 6.1. SECTION 249 (1) PRESCRIBES THAT EVERY APPEAL SHALL BE IN THE PRESCRIBED FORM AND SHALL BE VERIFIED IN THE PRESCR IBED MANNER. AS PER RULE 45(2) OF INCOME TAX RULES THE FORM OF APPEAL AS PRESCRIBED AND THE GROUNDS OF APPEAL AS ALSO THE FORM OF VERIFICAT ION APPENDED THERETO SHALL BE SIGNED AND VERIFIED BY THE PERSON WHO IS A UTHORIZED TO SIGN ITA NO .3159AHD/2011 AJAY ISPAT PVT.LTD. VS. ITO ASST.YEAR 2006-07 - 5 - THE RETURN OF INCOME UNDER SECTION 140 OF THE INCO ME TAX ACT AS APPLICABLE TO THE ASSESSEE. WE HAVE THEREFORE STUDI ED SECTION 140 OF IT ACT TITLED AS RETURN BY WHOM TO BE SIGNED. THIS S ECTION PRESCRIBES THAT THE RETURN UNDER SECTION 139 SHALL BE SIGNED AND VE RIFIED IN THE CASE OF THE COMPANY {SEC 140(C)} BY THE MANAGING DIRECTOR. THE OBJECT OF THIS PROVISION APPEARS TO BE TO ENSURE THAT THE RETURNS OF INCOME HAS TO BE SIGNED BY THE PERSON MAINLY RESPONSIBLE FOR THE AFF AIRS OF THE COMPANY. IT IS INTERESTING TO NOTE THAT AS PER ONE OF THE PROVI SO ANNEXED TO THIS SECTION THE SITUATION TAKEN INTO CONSIDERATION ARE THREE FOLD; (I)THAT WHERE THE COMPANY IS BEING WOUND UP WHETHER UNDER THE OR DERS OF THE COURT OR OTHERWISE OR (II) THAT ANY PERSON HAS BEEN APPOINT ED AS THE RECEIVER OF THE COMPANY SO SHALL BE SIGNED BY THE LIQUIDATOR.(I II) AN ANOTHER SITUATION HAS ALSO BEEN TAKEN INTO ACCOUNT BY THE STATUTE THA T WHERE THE MANAGEMENT OF THE COMPANY HAS BEEN TAKEN OVER BY TH E CENTRAL GOVERNMENT THEN THE RETURN OF THE COMPANY SHALL BE SIGNED AND VERIFIED BY THE PRINCIPAL OFFICER. 6.2. ON EXAMINATION OF THESE PROVISIONS IT IS CLEAR THAT THE OTHER THREE CONDITIONS NAMELY LIQUIDATION OR WOUND UP OR TAKEN OVER OF THE COMPANY HAS BEEN DEALT WITH BY THE STATUTE BUT THE STATUTE HAS NOT TAKEN INTO ACCOUNT A SITUATION WHERE A COMPANY HAS APPLIED FOR THE STRIKING OFF THE NAME BY THE REGISTRAR OF COMPANIES . THE PRESENT CONTROVERSY FALLS UNDER THIS CATEGORY. WINDING UP I S A PROCESS BY WHICH THE ASSETS OF THE COMPANY ARE REALIZED AND THE LIAB ILITIES ARE PAID. SECTION 179 OF THE COMPANIES ACT SAYS THAT IF THE NAME OF THE COMPANY IS STRUCK OFF BY THE REGISTRAR OF COMPANIES ITS INDISPOSED PROPERTY IS NOT APPROPRIATED TO ITS LIABILITIES. THE ACT SAYS THAT NOBODY WOULD CLAIM THAT PROPERTY AND THAT THE DOCTRINE OF BONA VACANTIA WILL BE ATTRACTED IN THAT ITA NO .3159AHD/2011 AJAY ISPAT PVT.LTD. VS. ITO ASST.YEAR 2006-07 - 6 - CONTINGENCY. MEANING THEREBY THE COMPANIES ACT HAS MADE A SEPARATE AND SPECIAL PROVISION FOR THE COMPANIES WHOSE NAMES ARE STRUCK OFF THE REGISTRAR WITHIN THE SCOPE OF SECTION 179 OF THE CO MPANIES ACT. 6.3. WE HAVE LAID HANDS ON A GENERAL CIRCULAR NO. 36/20.11 DATED 7/6/2011 PRESCRIBING THE GUIDELINES FOR THE FAST TRACK EXIT MODE FOR DEFUNCT COMPANIES UNDER SECTION 560 OF THE COMPANIE S ACT. THE GUIDELINES SAYS THAT THERE ARE NUMBER OF COMPANIES WHICH ARE REGISTERED UNDER THE COMPANIES ACT 1956 BUT DUE TO VARIOUS RE ASONS INOPERATIVE. SUCH COMPANIES MAY BE DESIROUS OF GETTING THEIR NAM ES STRIKE OFF FROM THE REGISTER OF COMPANIES MAINTAINED BY THE REGISTR AR OF COMPANIES. SUCH A DEFUNCT COMPANY IS IDENTIFIED AS DORMANT BY THE MINISTRY OF CORPORATE AFFAIRS AND THEREFORE MAY APPLY FOR GET TING ITS NAME STRIKE OFF FROM THE REGISTER OF COMPANIES A PROCEDURE IS TO BE ADOPTED BY THE REGISTRAR. UNDER THE SAID PROVISIONS AN AFFIDAVIT I S TO BE GIVEN INDIVIDUALLY BY EVERY DIRECTOR. THERE IS A PROVISIO N TO FURNISH AN INDEMNITY BOND AS WELL. HENCE DIRECTOR HAS TO INDEM NIFY AND UNDERTAKE IN WRITING TO PAY AND SETTLE ALL LAWFUL CLAIM ARISI NG IN FUTURE AFTER THE STRIKING OFF THE NAME AND ALSO TO INDEMNIFY TO SETT LE ALL LAWFUL CLAIMS. AS PER SECTION 560 REGISTRAR HAS POWER TO STRIKE DEFU NCT COMPANY OFF THE REGISTER PROVIDED THAT THE LIABILITY IF ANY OF EVERY DIRECTOR WHO HAS EXERCISING ANY POWER OF MANAGEMENT SHALL CONTINUE A ND MAY BE ENFORCED AS IF THE COMPANY HAD NOT BEEN DISSOLVED. RATHER ONE OF THE SUB-SECTION PRESCRIBES THAT UP TO 20 YEARS FROM THE PUBLICATION IN THE OFFICIAL GAZETTE THE NAME OF THE COMPANY CAN BE A RESTORED TO THE RE GISTER. IN A SITUATION WHERE A DEFUNCT COMPANY CAN BE REVIVED AND THE DIRE CTORS ARE RESPONSIBLE FOR EVERY LAWFUL LIABILITY THEN IN OUR CONSIDERED OPINION THEY ARE ALSO ENTITLED TO VERIFY THE FORM NO. 35 BY SIGNING IN THE CAPACITY OF ITA NO .3159AHD/2011 AJAY ISPAT PVT.LTD. VS. ITO ASST.YEAR 2006-07 - 7 - DIRECTOR. WE HEREBY HOLD THAT IN THE CASE OF A COMP ANY WHOSE NAME HAS BEEN STRUCK-OFF THE REGISTER BY THE REGISTRAR OF CO MPANIES CAN FILE AN APPEAL U/S 246 OF THE I.T.ACT AND IN THAT SITUATIO N THE DIRECTOR OF THE ERSTWHILE IS AUTHORIZED TO SIGN THE REQUISITE FORMS . WE ARE OF THE CONSCIENTIOUS VIEW THAT IN THE PRESENT SCENARIO AN D CONSIDERING THE LEGAL POSITION THE DIRECTOR HAS LAWFULLY SIGNED THE REQUI SITE FORM AND THE LEARNED COMMISSIONER HAS WRONGLY DISMISSED THE APPE AL IN LIMINE . WE THEREFORE DIRECT THE LEARNED CIT(A) TO ADMIT THE AP PEAL AND THEREUPON DECIDE ON MERITS. IN THE RESULT THE GROUNDS ARE AL LOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. SD/- SD/- ( .. ) ( ) '# (T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 30/ 03 /2012 ..& .&../ T.C. NAIR SR. PS '3 / 4 5'4' '3 / 4 5'4' '3 / 4 5'4' '3 / 4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. -(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-6 AHMEDABAD 5. 49: & / DR ITAT AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER -4 //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD