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TMI Blog2010 (4) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1990-1991. An assessment order under Section 143(3) was made by the Assistant Commissioner of Income Tax, Central Circle - 30, Mumbai for the company. The Assessing Officer initiated proceedings under Section 179 of the Income Tax Act, 1961 against the petitioner on the ground that though there was a demand of Rs.25.64 lakhs against the company for the period between 1990-1991 to 1995-1996, the dues could not be recovered from the company. By an order dated 3 September 2006, the Assessing Officer held the petitioner to be jointly and severally liable under Section 179 for the payment of the tax dues of the company in the aforesaid amount together with interest payable under Section 220(2). A revised order was issued by the Assessing Officer on 11 October 2006 setting out correct details of the tax due from the company. The amount which was claimed from the petitioner as jointly and severally liable under Section 179 was not altered. An attachment has been levied in respect of a residential flat belonging to the petitioner by an order dated 29 November 2006. The petitioner submitted a representation on 19 June 2007, in which he contended that the non recovery of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and severally liable where any tax due from a private company cannot be recovered. The submission is that the expression "tax due" cannot comprehend a penalty. The statute makes a distinction between a tax and penalty. Secondly, it has been submitted that non recovery of the tax due from the company cannot be attributed to any gross neglect, misfeasance or breach of duty on the part of the petitioner in relation to the affairs of the company. The assessment order that was issued on 31 March 1990 under Section 143(3) made an addition on two counts, namely (i) An addition on account of variation of opening stock at market value in the amount of Rs. 8,71,699/; and (ii) Interest written back to the extent of Rs.8,69,594/. The submission of the petitioner is that both these decisions of the Board of Directors were after the petitioner had ceased to be a director of the company on 14 October 1989 and hence the petitioner cannot be attributed with any conduct in the nature of neglect, misfeasance or breach of duty leading to the non recovery of tax. 6. Subsection (1) of Section 179 provides that notwithstanding anything contained in the Companies Act, 1956, where any tax due from a pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 271(1) (c) As already noted earlier, 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 incometax chargeable under the provisions of the Act. Section 2(43) is as follows: "2. In this Act, unless the context otherwise requires, (43) "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means incometax chargeable under the provisions of this Act, and in relation to any other assessment year incometax and supertax chargeable under the provisions of this Act prior to the aforesaid dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year, a partner of a firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other sum payable by the firm for the assessment year. Section 189 similarly provides that every person who was at the time of discontinuance or dissolution of a partnership firm as well as a legal representative of any such person who is deceased shall be jointly and severally liable for the amount of tax, penalty or other sum payable in respect of a firm which has been dissolved or whose business has been discontinued. Section 221(1) provides that where an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of arrears and the amount of interest payable under subsection (2) of section 220, be liable by way of penalty, to pay such amount as the Assessing Officer may direct. Hence, in the case of an assessee in default, Parliament has made a specific provision making such a person liable to pay tax and in addition thereto the amount of interest payable under subsection (2) of Section 220 and penalty. Section 226 which speaks of other mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial Court Judge, after examining various authorities in paragraphs 51 to 70 of his Judgment, has come to the conclusion that neither penalty nor interest can be considered as tax under section 11(2)(a). We agree with the reasoning and conclusion drawn by the Special Court in this connection." These observations interpreted the Income Tax Act, 1961. 12. In Union of India V/s. Manik Dattatreya Lotlikar{(1988) 172 ITR 1 (Bom)}, a Division Bench of this Court held that the expression "tax" for the purposes of Section 179 would include a penalty (at para 11). The judgment of the Division Bench cannot now be reflective of the correct position in law in view of the judgment of the Supreme Court in Harshad Mehta's case in so far as the aforesaid issue is concerned. 13. The second aspect of the submission which has been urged on behalf of the petitioner is that the non recovery of the tax from the company cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. In order to consider the submission, both the counsel appearing on behalf of the Revenue and the counsel appearing on behalf of the assessee have adverted to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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