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2016 (9) TMI 911 - HC - Income TaxLiability of directors of private company in liquidation - whether the company was converted into a public limited company for the purpose of avoiding statutory liability benefiting the petitioners - Held that:- We do not wish to express any opinion as to whether the corporate veil ought to be lifted in the present case even assuming that it is permissible to do so in matters under the Income Tax Act. Suffice it to state that even assuming that it is permissible to do so, there are several issues which ought to be taken into account before deciding whether or not to lift corporate veil. Neither the show cause notice nor the impugned order refers to certain crucial facts including as to the extent of share holding of the directors, the extent of control exercised by them regarding the affairs of the company and the extent of their representation on the board of directors. It would also be necessary to consider the Articles of Association of the company and any other agreements that may exist between the share-holders inter se. There are several other factors also which must be taken into consideration including as to whether the company was converted into a public limited company for the purpose of avoiding statutory liability benefiting the petitioners alone and/or conferring any other benefits upon the petitioners or any one or more of them alone. Lifting the corporate veil in a case such as this has drastic consequences. The impugned order does not consider the same in any detail. 12. The impugned order is, therefore, set aside and the matter is remanded to respondent No.2 for taking a fresh decision in accordance with law. It will be open to respondent No.2 to issue a fresh show cause notice or to furnish further particulars in respect of the same show cause notice. It is also open to respondent No.2 to base its claim on any other cause of action including by way of a tracing action. All the contentions of the parties are kept open.
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