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2014 (9) TMI 825 - HC - Income TaxJoint and several liability to make payment u/s 179(1) – Liability of directors – Basis of issuing notice valid or not - Held that:- Following the decision in Maganbhai Hansrajbhai Patel v. Assistant Commissioner of Income-Tax [2012 (11) TMI 189 - GUJARAT HIGH COURT] sub-section (1) of section 179 provides for joint and several liability of the directors of a private company wherein the tax due from such company in respect of any income of any previous year cannot be recovered - The first requirement to attract liability of the director of a private limited company is that the tax cannot be recovered from the company itself. Such requirement is held to be a prerequisite and a necessary condition to be fulfilled before action u/s 179 of the Act can be taken - once it is shown that there is a private company whose tax dues have remained outstanding and the 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 - the responsibility to establish such facts is on the director. However, once the director places before the authority his reasons why it should be held that non-recovery cannot be attributed to any of the above three factors, the authority would have to examine such grounds and come to a conclusion in this respect - the lack of gross-negligence, misfeasance or breach of duty on the part of the directors is to be viewed in the context of non-recovery of the tax dues of the company - as long as the director establishes that the non-recovery of the tax cannot be attributed to his gross neglect, etc. his liability u/s 179(1) of the Act would not arise - in the absence of any consideration, the Assistant Commissioner could not have been ordered recovery of dues of the company from the director. The notice is totally silent as regards the satisfaction of the condition precedent for taking action u/s 179 of the Act, namely, that the tax dues cannot be recovered from the Company - the necessary prerequisite for resorting to the provisions of section 179 of the Act itself against the directors is not satisfied - nothing has been stated therein regarding any gross-negligence, misfeasance or breach of duty on the part of the petitioners due to which the tax dues of the Company could not be recovered - the very basis on which the respondent has proceeded, suffers from non-application of mind to the requirements for exercise of powers under section 179(1) of the Act - In the absence of any finding that non recovery of the tax due from the company can be attributed to any gross-negligence, misfeasance or breach of duty on the part of the petitioners, no order could have been made u/s 179(1) of the Act for recovering the same from the directors – thus, the order u/s 179(1) is to be set aside – Decided in favour of assessee.
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