TMI Blog2012 (7) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... d without a personal hearing, as directed by the order of the CIT as a breach of the principles of natural justice has occurred the order of ITO is liable to the quashed and set aside and the matter ought to be remanded to the Tax Officer for de novo adjudication - in favour of assessee by way of remand. - WRIT PETITION NO. 2362 OF 2011 - - - Dated:- 10-7-2012 - S. J. VAZIFDAR M. S. SANKLECHA, JJ. Mr. Vipul Joshi i/by Mr.Jitendra Singh for the Petitioner. Ms. Suchitra Kamble for the Respondent. JUDGMENT ( Per M. S. Sanklecha, J ) 1. Rule; By consent Rule returnable forthwith. The Respondents waives service. At the instance and request of the advocates for both sides, the petition is taken up for final hearing. 2. The Petitioner now 77 years old, challenges: (a) an order dated 6 January, 2010 of the Income Tax Officer, holding that the petitioner is liable under Section 179 of the Income Tax Act, 1961(hereinafter referred to as the said Act ) to pay the tax dues of a private limited company, in which he was a Director ; and (b ) an Order dated 30th March, 2011 passed in Revision under Section 264 of the said Act by the Commissioner of Income Tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f and recording a finding indicating the extent of the demand which cannot be recovered from the company before passing such order u/s. 179, if deemed necessary. The petitioner shall be allowed adequate opportunity of being heard, before passing any such fresh order u/s. 179 of the Income Tax Act. (d) The Income Tax Officer issued a fresh show cause notice on 20th July, 2009 to the petitioner. The notice did not set out any particulars with regard to the efforts made and the extent of non recovery of the tax dues from the properties of the said company. (e ) By his reply dated 27th July, 2009, the petitioner reiterated what he had stated in response to the earlier show cause while pointing out from the Balance Sheet of the said company for the year ending 31st March, 1995, that it owned immovable properties in the form of plots of land with factory building thereon, residential flats and office premises in the name of M/s. Deven's Pharmaceuticals, a partnership firm in which the said company had a 98% share along with its Director one J.D. Kale and J. C. Gohil who had 1% share each. (f ) On 2nd December 2009, the Income Tax Officer informed the petitioner that the flats and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original order under section 179 was passed on 25/01/2007. Against the said order, the assessee had preferred revision U/s.264. In the order u/s.264 dated 05/11/2007 the A. O. was directed to provide to the assessee adequate opportunity of being heard, before passing fresh order u/s. 179. 2 The order u/s. 179 dated 6/1/2010 and the submissions made by the assessee are perused. The assessee has grossly failed to substantiate before the Assessing Officer that he was not liable, as a Director for the outstanding incometax dues of the company i.e. M/s. Metroni Drugs Pvt. Ltd. 3 In view of the facts mentioned hereinabove, I decline to interfere in the order passed u/s.179. (k) It is against the aforesaid orders dated 6th January, 2010 and 30 March, 2011 passed by the Income Tax Officer and Commissioner of Income Tax respectively that the petitioner has filed the present petition. The Respondents have filed an Affidavit in reply dated 16th December 2011 opposing the Petition and praying that it be dismissed. 4. Mr. Vipul Joshi in support of the petition submits that a) the orders dated 6th January, 2010 and 30th March, 2011 have been passed in breach of principles of natural j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to pay the tax dues of the said company under Section 179 of the said Act. She further submitted that the petitioner has failed to prove that nonrecovery of tax cannot be attributed to his neglect in relation to the affairs of the company and therefore the present petition be dismissed. 6. In a writ proceedings, the Court is concerned more with the decision making process rather than the merits of the decision per se, unless the same is arbitrary or the decision itself revels that the decision making process was bad in law. This is essentially so because in judicial review, the Court does not sit in appeal over the decisions of the quasi judicial authority, but essentially ensures that the decision making process is in accordance with law. Therefore before considering the merits of the matter viz. whether Section 179 of the said Act, is at all applicable in respect of the nonexecutive Director on the board of a Private Limited Company it would be appropriate to consider whether there has been any failure in the decision making process which would render the impugned orders dated 6th January 2010 and 30th March 2011 bad in law. 7. One of the fundamental principles of Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rime, might make it impossible to obtain certain clauses of essential information at all in the future. Besides the order passed consequent to the hearing should be an order with reasons i.e. speaking order. In fact in the matter of Shukla Brothers(supra) the Apex Court has observed as under: At the cost of repetition, we may notice, that this Court has consistently taken the view that recording of reasons is an essential feature of dispensation of justice. A litigant who approaches the court with any grievance in accordance with law is entitled to know the reasons for grant or rejection of his prayer. Reasons are the soul of orders. Nonrecording of reasons could lead to dual infirmities; firstly, it may cause prejudice to the affected party and secondly, more particularly, hamper the proper administration of justice. The principles which can be culled out from the above decisions are as under: (a) Notice be given to the other side and also the evidence being relied upon in support of the notice be made known to the other side ; (b) Personal hearing be given to the affected party; and (c) An order be passed with reasons i.e. speaking Order. 8. Keeping in mind the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available and no efforts have been made to recover the same. 9) Further the giving of a personal hearing in the facts of the present case would not be an empty formality. Therefore the contention of the Respondent that no prejudice was caused to the petitioner due to non giving of a personal hearing cannot be countenanced. 10) In the circumstances, the order dated 6th January, 2010 is an order which has been passed not only on the basis of the material viz. Tax Recovery Officer's letter/report dated 9th November, 2009 that was not disclosed to the petitioner, but also passed without a personal hearing, as directed by the order dated 5th November, 2007 of the Commissioner of Income Tax. Therefore the order dated 6th January 2010 is liable to the quashed and set aside and the matter ought to be remanded to the Tax Officer for de novo adjudication. 11) The order passed by the Commissioner of Income tax on 30th March, 2011, under Section 264 of the said Act, is an order without reasons. The order has been reproduced in its entirety above and it speaks for itself. However the advocate for the respondents may be correct in her submission that an order in revision while affirming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the order dated 6th January, 2010 passed by the Income Tax Officer as well as the order dated 30th March, 2011 passed by the Commissioner of Income Tax under Section 264 of the said Act. However, we remand the matter to the Assessing Officer for a fresh consideration of the show cause notice dated 20th July, 2009 after giving the petitioner a copy of the Tax Recovery Officer's report dated 9th November, 2009 and any other relevant evidence. Further, the Income Tax Officer shall also furnish an opportunity to the petitioner to inspect the records available w+ith the respondents with regard to the said company, so as to enable the petitioner to make the submissions in response to the show cause notice dated 20th July, 2009. Needless to mention, the Income Tax Officer shall pass an order on the show cause notice dated 20th July, 2009 after following the principles of natural justice including granting the petitioner a personal hearing. 13) In view of the above, the petition is made absolute in terms of prayer clause (a). However, the respondents are at liberty to fresh adjudicate de novo upon the show cause notice dated 20th July, 2009 after following the principles of natural j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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