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2012 (11) TMI 189 - HC - Income TaxLiability of directors of private company in liquidation - Section 179 v/s 156 - Penalty u/s 271(1)(c) - Held that:- Comparing the language used in section 179(1) with that of section 156 i.e. Notice of demand, it emerges that in section 179, the term used is 'tax due' where as in section 156 which is a recovery provision refers to a notice of demand which would specify the sum payable. The sum payable may as provided in the section itself include tax, interest, penalty fine or any other sum which is payable in consequence of any order under the Act. Section 220 pertains to "when tax payable and when assessee deemed to be in default". Section 220(2) provides that if the amount so specified is not paid within such time, the assessee shall be liable to pay interest. Such interest thus would be on the entire sum payable which may include the tax, interest and penalty or any other source found payable. It would therefore, not be possible to stretch the language of section 179(1) to include interest and penalty also in the expression 'tax due' as decided in Ratanlall Murarka And Others Versus Income-Tax Officer, 'a' Ward, Companies Circle, Ernakulam, And Others [1980 (7) TMI 60 - KERALA HIGH COURT]. Thus it can be stated here that authority completely failed to appreciate in proper perspective the requirement of section 179(1). Once it is shown that there is a private company whose tax dues have remained outstanding and same cannot be recovered, any person who was a director of such a company at the relevant time would be liable to pay such dues but in the present case the petitioner had putforth a strong representation to the proposal of recovery of tax from him under section 179. In such representation, he had detailed the steps taken by him and the circumstances due to which non recovery of tax cannot be attributed to his gross neglect. It was this representation and the factors which the petitioner had putforth before the Assistant Commissioner which had to be taken into account before the order could be passed. It is not even the case of the department that the petitioner paid the dues of other creditors of the company in preference to the tax dues of the department or petitioner negligently frittered away the assets of the company due to which the dues of the department could not be recovered. To suggest that the petitioner did not oppose the GSFC's auction sale is begging the question. GSFC had sold the property after several attempts through auction. It is not the case of the department that proper price was not fetched. Also the Assistant Commissioner has referred to several factors, dates and events which, according to him, established gross negligence on part of the petitioner without even putting the petitioner to notice about such factors and events. Therefore, quite apart from our conclusion that the Assistant Commissioner did not record that the petitioner failed to prove that non recovery of tax from the company could not be attributed to his gross neglect, misfeasance or breach of duty, such findings were also based on materials relied upon by the Assistant Commissioner without notice to the petitioner.
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