Income Tax Department Can Restore Struck-Off Company As 'Creditor' For Tax Assessment: NCLT Kochi

The National Company Law Tribunal (NCLT) at Kochi on 23 July held that the Income Tax Department qualifies as a “creditor” under Section 252(3) of the Companies Act, 2013, and can seek restoration of a struck-off company's name even when its claim is contingent or prospective. Section 252(3) allows the Tribunal to restore the name of a company removed from the Register of Companies if an application is made by, among others, a creditor and the Tribunal finds that restoration is necessary and just.

A Bench comprising Judicial Member Vinay Goel and Technical Member Ravichandran Ramasamy allowed the Income Tax Officer's application seeking restoration of the name of Nandanam Builders and Developers Private Limited, which the Registrar of Companies had struck off in June 2017. It held:

“Although the income tax assessments for the relevant assessment years in respect of the said Company have not yet been completed owing to the fact that the Company no longer exists on record as a legal entity, the Appellant is nevertheless entitled to be treated as a "creditor", as the term "creditor" under Section 252(3) of the Companies Act, 2013, is wide enough to include a person whose claim is contingent or prospective in nature.”

The Income Tax Department approached the Tribunal after it found that Nandanam Builders and Developers Private Limited had failed to file its income tax return for Assessment Year 2018–19. During a risk management analysis, the Department detected cash transactions worth Rs. 52.5 lakh, raising concerns about possible escapement of taxable income. It issued notices under the Income Tax Act but was informed that the company had already been struck off. It submitted that the company's removal from the Register of Companies prevented it from completing assessment proceedings, raising tax demands, and initiating recovery proceedings.

The Registrar of Companies submitted that it had struck off the company's name after following the prescribed procedure due to the company's failure to file statutory returns.

The Tribunal observed that the strike-off prevented the Income Tax Department from completing assessment or reassessment proceedings relating to income allegedly escaping assessment. It held that the expression “creditor” under Section 252(3) has a wide meaning and includes persons whose claims have not crystallised but may arise in future.

The Bench also noted that the company had undertaken substantial financial transactions worth Rs. 52.5 lakh, which remained unexplained and could represent income that escaped assessment. It stated:

“This Tribunal is satisfied that, at the time its name was struck off, the Company was carrying on business or was in operation and had undertaken substantial financial transactions, which remain unexplained. Such transactions constitute income that has escaped assessment under the provisions of the Income Tax Act. Restoration of the Company's name is, therefore, necessary to facilitate the completion of the pending statutory proceedings against the Company.”

Accordingly, the NCLT directed the Registrar of Companies to restore Nandanam Builders and Developers Private Limited's name to the Register of Companies and revive its status as an active company. It also directed the company to file all pending statutory documents within 45 days of restoration.

For Appellant: Advocates Cyriac Tom and Varsha

For ROC: Representative of ROC