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2022 (10) TMI 612 - CALCUTTA HIGH COURTLiability of directors of private company - recovery action against the appellant by invoking the power under Section 179 - garnishee notices issued - what manner the power under Section 179 of the Act could be invoked? - HELD THAT:- We need not labour much to decide this issue as there are several decisions of the various High Courts on this aspect. In the case of K.B. REDDY [1998 (4) TMI 129 - ANDHRA PRADESH HIGH COURT]. The Court after taking note of Section 179 as it stood after the amendment in the year 1975 pointed out in terms of the said provision where any tax due from a private company in respect of any income of any previous year cannot be recovered, then every person who was a director of the company during the relevant previous year shall be jointly and severally liable for the payment, noting that the language of the Section is clear that it is only in cases where tax cannot be recovered from the company, the liability of the director arises. Since in the said case there was no finding that the department could not recover the arrears of tax from the company, the proceedings initiated under Section 179 of the Act was held to be without jurisdiction. In Mehul Jadavji Shah [2018 (4) TMI 646 - BOMBAY HIGH COURT] relying on MADHAVI KERKAR [2018 (1) TMI 749 - BOMBAY HIGH COURT] held that before the Assessing Officer assumes jurisdiction under section 179 requires to recover the tax due from the delinquent private limited company should have failed and if no steps were taken then the notice issued under section 179 is required to be quashed. Admittedly, in the year 1990 the appellant had retired from his directorship and the company had changed hands and fresh set of directors had taken over the company, necessary formalities under the Income tax Act, 1956 was complied with and fresh certificate of incorporation incorporating the new name of the company was issued. The new set of directors carried on business till the year 1997 when the company went under liquidation. From the records placed before the Court, it is clear that the department has not taken any steps to recover the dues from the defaulting private limited company. It is nearly after 25 years the present attempt had been made by issuing garnishee notice on the appellant who is no more the director of the company eversince 1990. After the company had gone into liquidation, the department could have lodged a claim before the Official Liquidator. There is nothing on record to show that such a claim was made by the department before the Official Liquidator. This aspect is very crucial aspect which the learned Writ Court ought to have considered and the same cannot be brushed aside and a direction could not have been issued without reference to the said fact. Thus we hold that the garnishee notices which were impugned in the writ petition are held to be wholly without jurisdiction and accordingly, they are quashed. Appeal filed is allowed.
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