TMI Blog2009 (6) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... for M.V. Seshachala for the Respondents. JUDGMENT Ajit J. Gunjal J.- The petitioners are before this court for the second time. The genesis of the petitioners' case can be summarized as follows : 2. The first petitioner is the managing director and petitioners Nos. 2 to 4 are the directors of a private limited company under the name and style of H. E. Distilleries Private Limited. The company was incorporated in the year 1990 and commenced its operation from the year 1991. It appears, the company, right from day one has been incurring loss and never really took off. The officers of the respondents on January 18, 2001, armed with a warrant of authorization, conducted a search in the premises of the company. During the course of the said search operation several documents were seized by the Department. It appears, a statement of the fourth petitioner was also recorded who is a director of the company during the course of the said search proceedings. Pursuant to the said search, an order of assessment was passed by the Assessing Officer determining a total amount of Rs. 2,42,47,658 as undisclosed income and the net tax payable on it to be Rs. 1,70,21,856. The assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as, unless it is proved, non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on the part of the directors in relation to the affairs of the company. According to him, none of the three ingredients are satisfied before proceeding under section 179 of the Act. In support of his contention he has relied on a few decisions of this court as well as the apex court. Another contention of Mr. Shankar is that none of the objections are considered. Hence, there is non-application of mind by the respondents. He further submits that petitioners Nos. 2 and 3 are not whole-time directors and they are liable to be absolved of the proceedings under section 179 of the Act. 4. Mr. Aravind, learned counsel appearing for the Revenue submits that after remand, the matter was reconsidered and several objections have been raised by the petitioner and answered by the authority. He further submits that right from the day the company was incorporated, i.e., in the year 1991 and thereafter till the search was made in the year 2001, the petitioners had not chosen to file returns at all. Thus, one part of section 179 of the Act regarding gross negligence and misfeasanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 179 of the Act, inasmuch as, it would relate to a conversion of a private limited company into a public company. Indeed, before invoking section 179 of the Act, the directors of the company are required to prove that they were not in a position to file the returns and the same cannot be attributed to any gross neglect, misfeasance or breach of duty on their part, in relation to the affairs of the company. Indeed, the burden is on the directors of the com-pany to prove that the non-filing of returns cannot be attributed for any gross neglect, misfeasance or breach of duty. Indeed, before invoking section 179 of the Act it is not necessary that all the three ingredients are required to be satisfied. Indeed, it is sufficient if it is held that there is a gross neglect or misfeasance or breach of duty on the part of the directors in relation to the affairs of the company. The directors of the company are liable to satisfy the claim in their capacity as directors. Indeed, it is to be noticed that in the case on hand, there are as many as three claimants for the amount due to the statutory authority. Indeed, the bank has advanced credit facility and the same is not discharged. Thus, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so urged before the competent authority indicating that 90,000 sq. ft. of land and several buildings were available. In fact, that has been rightly rejected by the respondent, inasmuch as, the company had availed of various types of loans from the Bank of India and also has not paid the tax due to the Commercial Tax Department. It is not in dispute that the Bank of India as well as the Commercial Tax Department have initiated recovery proceedings. There is an inter se dispute between the Commercial Tax Department of the State as well as the Bank of India which is not really germane for the disposal of the present proceedings, but however, suffice it to make an observation that the said amount is due. To my mind, the petitioners have failed to discharge the burden cast on them that the said non-payment of dues cannot be attributed to gross negligence, misfeasance and breach of duty. Indeed, every citizen of the country is required to file his tax returns whether taxable or not. It is no doubt true that a contention is sought to be urged by Mr. Shankar, learned counsel for the petitioner that if an assessee does not have taxable income he is not required to file his income. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore a Division Bench of this court. It had an occasion to examine whether interest, penalty and fine, which are payable under the provisions of the Act can be termed as income-tax, this court decidedly stated that the component "income-tax" does not include payment of penalty as well as interest. Indeed section 179 of the Act indicates that the directors would be liable to pay the tax due in the case, where the company is unable to satisfy the demands and gross negligence, misfeasance and breach of duty are attracted. Thus, what is contemplated under section 179 of the Act is the tax component and not the penalty and interest. Indeed section 126 of the Act would relate to notice of demand, which clearly indicates that the entire sum due to the Revenue is classified into three different components i.e., tax, interest, penalty or any other sum, which would not necessarily come under section 179 of the Act. Indeed this reference would be only to the directors of the company. With reference to section 222 of the Act the assessee undoubtedly is liable to pay the tax, interest and penalty. However, the same cannot be said about the directors of the company. Indeed whether tax would inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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