The board has laid down ground rules for assessing officers to appeal to RoCs for revival of firms with retrospective effect.

The Central Board of Direct Taxes (CBDT) has decided to appeal for restoration of a section of the companies which were struck off from register of companies by the government last year, as it had commenced income tax proceedings against these firms earlier. The legal existence of these firms, the department reckons, would help the proceedings to continue. The board has laid down ground rules for assessing officers to appeal to RoCs for revival of firms with retrospective effect. Alternatively, the board in its circular also directed income-tax officials to file appeals before the National company law tribunal (NCLT) for revival of ‘struck off company’ immediately on a case-to-case basis. The board in its circular contended that while the relevant law protected the right of the revenue to recover tax arrears even from ‘struck off’ companies, and the companies remained liable to pay their tax-arrears, the non-existence of such firms raised questions on tenability of the income-tax proceedings against them.

In September last year, the government struck off over 2 lakh firms from register of companies for failing to comply with regulatory requirements while initiating action to restrict operations of their bank accounts. Continuing its crackdown on shell companies which are allegedly used as conduits for illicit fund flows and tax evasion, the government had said the directors of deregistered firms would not be able to operate the bank accounts till these entities are legally restored.

The appeal for revival of companies is to be made only if the company had been under income-tax proceedings or the tax department was contemplating to initiate income-tax proceedings. Further, the department can initiate revival proceeding for companies against which there were pending appeals or pending penalty/prosecution proceedings. “Answering the woes of the income tax department to protect revenue’s interest, CBDT has issued a circular clarifying that request/appeal may be filed before that ROC, requesting revival of the companies so ‘struck off’,” Rakesh Nangia, managing partner, Nangia & Co said.