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2020 (1) TMI 1071 - HC - Income TaxLiability of directors of private company in liquidation u/s 179 - satisfaction of the condition precedent for taking action under Section 179 - condition precedent for the purpose of invoking Section 179 that it is only in the event the Department fails to recover the dues from the company that it can proceed against the Director jointly or severally - HELD THAT:- As decided in MAGANBHAI HANSRAJBHAI PATEL [2012 (11) TMI 189 - GUJARAT HIGH COURT] before recovery in respect of the dues from a private company can be initiated against the directors, to make them jointly and severally liable for such dues, it is necessary for the Revenue to establish that such recovery cannot be made against the company and then alone it can reach to the directors who were responsible for the conduct of the business during the previous year in relation to which liability exists. There is no escape from the fact that the perusal of the Notice under Section 179 of the Act, 1961, reveals that the same is totally silent as regards the satisfaction of the condition precedent for taking action under Section 179 of the Act, 1961, viz. that the tax dues cannot be recovered from the Company. In the show-cause notice, there is no whisper of any steps having been taken against the Company for recovery of the outstanding amount. Additional affidavit-in-reply as regards the steps taken against the company for the recovery of the dues, we would like to give one chance to the department to undertake a fresh exercise so far as Section 179 is concerned. If the show-cause notice is silent including the impugned order, the void left behind in the two documents cannot be filled by way of an affidavit-in-reply. Ultimately, it is the subjective satisfaction of the authority concerned that is important and it should be reflected from the order itself based on some cogent materials. However, with a view to protect the interest of both, the writ applicant as well as Revenue, we are inclined to quash the impugned order and give one opportunity to the Revenue to initiate the proceedings afresh by issuance of fresh show-cause notice with all necessary details so that the writ-applicant can meet with the case of the Revenue. We are inclined to adopt such measure keeping in mind the statement made by the learned counsel Mr.Soparkar that till the fresh proceedings are not completed, his client will not operate the bank account. Writ-application is partly allowed. The impugned notice as well as the order is hereby quashed and set aside. It shall be open for the respondent to issue fresh show-cause notice for the purpose of proceeding against the writ-applicant under Section 179 - We would like to give a time bound program so that the proceedings may not go on for an indefinite period. We are also issuing such direction because of the statement being made that the writ-applicant will not operate the bank account till the fresh proceedings are initiated and completed. In such circumstances, we grant two months’ time from the date of receipt of the writ of this order to the Department to initiate fresh proceedings and pass appropriate orders in accordance with law. Till the final order is passed, the writ-applicant shall not operate the bank account concerned. Two notices under Section 226(3) of the Act, 1961, i.e. one, to the Kalupur Commercial Cooperative Bank Limited, and another, to the HDFC Bank Limited, are also quashed and set aside.
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