Facts of the Case

The Income Tax Department filed an appeal seeking restoration of the name of the respondent company which had been struck off by the Registrar of Companies (RoC) due to non-filing of statutory returns.

The Department contended that substantial tax dues were pending against the company, and due to the striking off, recovery proceedings and penalty actions were adversely affected. The striking off effectively obstructed enforcement of tax liability.

Issues Involved

  1. Whether a company struck off under the Companies Act can be restored solely for recovery of income tax dues?
  2. Whether the Income Tax Department qualifies as a “creditor” under Section 252 of the Companies Act, 2013?
  3. Whether existence of pending tax liability constitutes a “just ground” for restoration of a company?

Petitioner’s Arguments (Income Tax Department)

  • The company had outstanding tax demand and assessment proceedings pending.
  • Striking off of the company hampers statutory recovery and enforcement proceedings.
  • The Income Tax Department qualifies as a creditor under Section 252.
  • Restoration is necessary to ensure compliance with tax laws and prevent evasion.
  • The provisions of the Companies Act should not be used to defeat tax recovery.

Respondent’s Arguments

  • The company was struck off due to non-compliance with statutory filing requirements.
  • There was no active business operation at the relevant time.
  • Restoration should not be granted merely on the basis of tax claims without other grounds.

Court Order / Findings

  • The Tribunal/Court held that existence of income tax liability is a valid and sufficient ground for restoration of a company’s name.
  • It was observed that the term “creditor” under Section 252 must be interpreted broadly to include statutory authorities like the Income Tax Department.
  • Restoration was considered necessary in the interest of justice and public interest to enable recovery of dues.
  • The Court emphasized that allowing companies to remain struck off would enable promoters to evade tax liabilities.

Important Clarification

  • Even if a company is not operational, it can still be restored if it is “otherwise just” to do so.
  • Tax authorities are treated as creditors, and their right to recover dues cannot be defeated by striking off.
  • Restoration ensures continuity of legal proceedings and enforcement of statutory liabilities.

Sections Involved

  • Section 252 of the Companies Act, 2013 – Appeal for restoration of company name
  • Relevant Provisions of Income Tax Act, 1961 – Recovery and assessment proceedings
  • Principles relating to liability of dissolved/struck-off companies

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS03052023ITA2522023_115609.pdf

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