TMI Blog2012 (10) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent assessment year to mean inter alia Income Tax chargeable under the provisions of the Act. The structure and construct of the Act has consciously used different words to create constructive liability on third parties, in the case of default in payment of taxes by an assessee. The treatment of the same subject matter by using different terms - in some instances expansive and in others, restrictive, mean that the Court has to adopt a circumspect approach and limit itself to the words used in the given case (in the present case, "tax due" under Section 179) and not "travel outside them on a voyage of discovery" The petitioner cannot be made liable for anything more than the tax (defined under Section 2 (43)). The first respondent is consequently directed to determine the liability of the Petitioner - W.P.(C) Nos. 2303 & 5175 OF 2012 AND C.M. APPL. Nos. 4936 & 10572 OF 2012 - - - Dated:- 11-10-2012 - S. RAVINDRA BHAT AND R.V. EASWAR, JJ. ORDER S. Ravindra Bhat, J. - These writ petitions challenge the orders dated 3.11.2011 and 2.7.2012 passed by the first respondent under Sections 179/154/ of the Income Tax Act (the "Act") respectively. 2. The facts, to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 179 was passed. It is not clear and there is no material/evidence whether the order under Section 179 of the Act dated 14th November, 2007 was ever served on the petitioner. No steps for recovery were undertaken even after passing of the order. Keeping in view the aspects and questions raised, we feel that it will be appropriate and proper if the petitioner is given a hearing and a fresh order under Section 179 of the Act is passed. 6. Accordingly, the impugned order dated 14th November, 2007 is set aside with a direction that the petitioner or his authorized representative will appear before the Deputy Commissioner of Income Tax, Circle 7(1), New Delhi on 29th August, 2011 at 2 p.m. He shall also file his reply to the notice under Section 179 of the Act on the said date. If required and necessary, the Assessing Officer can grant further opportunity of hearing to the petitioner. However, the proceedings under Section 179 of the Act will be disposed of within three months from the first date of hearing." 3. After the conclusion of the proceedings before the first Respondent, he made the impugned order dated 3.11.2011 holding the petitioner liable for the outstanding dues of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved that the non-recovery was not due to gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. It was emphasized that in the present case, the company had only two directors, the petitioner, and his late father, and thus, there is no scope for the petitioner to escape the liability under Section 179 of the Act. 7. Counsel for the revenue relied on Union of India and others v. Manik Dattatreya Lotlikar 1988 172 ITR 1 (Bom.) and the Kerala High Court in Ratanlall Murarka and Ors. v. Income-tax Officer, "A" Ward and Ors., [1981] 130 ITR 797 (Ker.) in support of the proposition that all tax arrears would be payable by a director, under Section 179(1). It was also argued that a question of fact cannot be agitated in a writ petition and that whether the director, against whom proceedings for recovery of arrears of tax are initiated, has discharged the burden of proving that the non-recovery of the arrears of tax cannot be attributed to neglect, misfeasance or breach of duty on his part is a question of fact which should not be gone into in writ proceedings. The revenue relied on Union of India v. Praveen D. Desai [1988] 173 ITR 303 (Bom.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA;" 10. There are, apart from Section 179 (1), several other provisions of the Act which cast liability upon specified individuals or entities, in the event the assessee, (either an individual, partnership firm or other entity or concern, etc) defaults in payment of its dues. Section 170 provides for succession to a business "otherwise than on death" and enacts that where an assessee, carrying on any business or profession is succeeded to by another, who continues the business or profession, the predecessor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession. The successor is to be assessed for the income of the previous year after the date of succession. Section 170 (3) says that when "any sum payable" under that Section in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions as they are. As held in Jumma Masjid v. Kodimaniandra AIR 1962 SC 847 (quoting Vickers Sons and Maxim Ltd v Evans 1910 AC 444): "We are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself" Thus, it has been sometimes held that the intention of the Legislature is to, primarily, be gathered from the language used in the statute, which in turn means that attention should be paid to what has been said as also to what has not been said. (See Mohammed Alikhan v. Commissioner of Wealth Tax 1997 (3) SCC 511; Institute of Chartered Accountants v. Price Waterhouse AIR 1998 SC 74). Another rule of interpretation which the Court has to keep in mind, in cases like the present is that when, in relation to the same subject matter, different expressions are used, in the same statute, there exists a presumption that the legislature intended such different use, and that the words are not to be used in the same sense. This was stated in Commissioner of Income Tax v. East West Import Export (P.) Ltd. AIR 1989 SC 836, in the following observations: "..there has been no dispute before us that the requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely the penalty as well as interest, fell for consideration before this Court in the case of Soma Sundarams (Private) Ltd. v. Commissioner of Income Tax Karnataka reported in [1979] 116 ITR 620. Indeed in the said case Section 2(43) of the Income Tax Act fell for consideration before a Division Bench of this Court. It had an occasion to examine whether interest, penalty and fine, which are payable under the provisions of the Act can be termed as income tax, this Court decidedly stated that the component 'income tax' does not include payment of penalty as well as interest. Indeed Section 179 of the Act indicates that the Directors would be liable to pay the tax due in the case, where the company is unable to satisfy the demands and gross negligence, misfeasance and breach of duty are attracted. Thus, what is contemplated under Section 179 of the Act is the Tax component and not the penalty and interest Indeed Section 126 of the Act would relate to notice of demand, which clearly indicates that the entire sum due to the Revenue is classified into three different components i.e., tax, interest, penalty or any other sum, which would not necessarily come under Section 179 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, and after noticing the differing nature of the expressions, used by the Act, creating constructive liability, held that: "7. Section 179(1) refers to "any tax due from a private company" and every director of the company is jointly and severally liable for the payment of "such tax", which cannot be recovered from the company. The expression "tax due" and, for that matter the expression "such tax" must mean tax as defined for the purposes of the Act by Section 2(43). "Tax due" will not comprehend within its ambit a penalty. 8. The provisions of the Act make a clear distinction between the imposition of a tax on the one hand and a penalty on the other. Section 2(43) defines the expression "tax" in relation to an assessment year commencing on 1 April 1965 and any subsequent assessment year to mean inter alia Income Tax chargeable under the provisions of the Act. 10. [W]here Parliament has intended to make a specific provision imposing a liability to pay penalty apart from the tax which is due and payable, a specific provision to that effect has been made. Section 179, which falls for interpretation in the present case imposes a joint and several liability upon a director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee in default. Therefore, held the High Court, a director would be an assessee deemed under Section 179; he has to satisfy all demands. Ratanlal Murarka too went by Section 2 (7) and was concerned with interest liability under Section 220 (2); the Court held that such non tax liability would have to be borne by the director of the company "despite the distinction between tax and interest emphasised by counsel for the petitioner." This court is of the opinion that the absence of any discussion about the different treatment given by Parliament to the same nature of liability, i.e. tax default of an assessee, in one instance only providing for recovery of tax, and in other cases all "amounts" or "sums" points to different nature and content of the same class of liability, which cannot be ignored. The said two decisions do not, therefore help the revenue. 16. As regards the second contention, there is no doubt about the principle that the High Court would not decide questions of fact, in proceedings under Article 226, and that whether the presumption of liability can be rebutted under Section 179 has to be gone into before the tax authorities. Nonetheless, the Court here has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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