9911796707
TMI Blog2012 (7) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... stice. 3. The facts leading to this petition are as under: ( a) The petitioner was till his verification on 29th April, 1994 a nonexecutive Director on the Board of Directors of M/s. Metroni Drugs Pvt. Ltd. ( hereinafter referred to as "said company"). He contends that he was not involved with the day to day management of the company and was never informed of any tax demands or that the tax dues of the said company were outstanding. (b ) On 27 September, 2006, the Income Tax officer by notice called upon the petitioner to show cause as to why, an amount of Rs.2.19 crores being the tax dues of the said company for the Assessment years 198687 to 199394 should not be recovered from him under Section 179 of the said Act. The petitioner responded to the above notice pointing out that he was a nonexecutive Director of the said company and had resigned as far back as April 1994. Further as he was not looking after the day to day management of the said company he could not be liable for any neglect, malfeasance or breach of duty and therefore the notice should be withdrawn. (c ) By an order dated 25th January, 2007, the Income Tax Officer confirmed the show cause notice dated 27th Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner was called to pay the said tax dues along with interest thereon within seven days. (g) On 21st December 2009 the Petitioner addressed a communication to the Income Tax Officer reiterating his earlier contention and sought inspection of the records of the case available with him and information about the action taken against other Directors of the said company and the amounts, if any, realized from them. (h) The petitioner was thereafter awaiting an appointment for inspection of records and a date for personal hearing, when he was shocked to receive the impugned order dated 6th January 2010 passed under Section 179 of the said Act by the Income Tax Officer. By the above order the Petitioner as a Director of the said company, was held liable under Section 179 of the said Act, to pay the tax dues of Rs.2.19 crores along with interest thereon payable by the said company during the financial years 1st April, 1985 to 31st March, 1993 and assessment years 198586 to 199394. The aforesaid order was passed without giving the petitioner any inspection of the records nor an opportunity of a personal hearing. (i ) Being aggrieved by the order dated 6th January, 2010, the petitioner pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 6th January, 2010 was passed in total disregard of the order dated 5th November, 2007 of Commissioner of Income Tax which had directed him to give a personal hearing to the petitioner before passing of any order under Section 179 of the said Act; and c) inspection asked for by the petitioner was not given and yet the order dated 6th January 2010 relies upon evidence in the form of the report dated 9th November 2009 pointing out why recovery is allegedly not possible from the said company. He submits therefore that the orders be set aside and the matter be remanded for de novo adjudication by the Income Tax Officer after following the principles of natural justice. On merits, he submitted that Section 179 of the said Act, would not apply in the case of a nonexecutive Director on the Board of the company and particularly in view of the fact that failure to pay tax or the outstanding tax demands was never brought before the Board of Directors with the result that in such a case a nonexecutive Director not being aware of the non payment of taxes cannot be held liable for any neglect or breach of any duty in relation to the affairs of the said company. 5. As against the above su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Commercial Tax Department, Works Contract and Leasing v. Shukla and Brothers, (2010) 4 SCC 785, at page 790 has described the ingredients of the Rule of Audi alteram partem as under : "The doctrine of audi alteram partem has three basic essentials. Firstly, a person against whom an order is required to be passed or whose rights are likely to be affected adversely must be granted an opportunity of being heard. Secondly, the authority concerned should provide a fair and transparent procedure and lastly, the auAswale thority concerned must apply its mind and dispose of the matter by a reasoned or speaking order. This has been uniformly applied by courts in India and abroad." Therefore a fair hearing postulates making known to the other side the evidence being relied upon in support of the notice. In fact the Supreme Court in the matter of Natwar Singh v. Director of Enforcement, (2010) 13 SCC 255, at page 269 : "The right to fair hearing is a guaranteed right. Every person before an authority exercising the adjudicatory powers has a right to know the evidence to be used against him. This principle is firmly established and recognised by this Court in Dhakeswari Cotton Mills Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Commissioner of Income Tax respectively. In the first round of the proceedings under Section 179 of the said Act, the Commissioner of Income Tax by order dated 5th November, 2007 set aside the order dated 25th January, 2007 of the Income Tax Officer. However whist setting aside the order, the Commissioner of Income Tax directed the Income Tax officer that before any order under Section 179 of the said Act is passed against the petitioner, the Assessing Officer must give a specific finding to the effect that efforts made to recover the tax dues from the said company had failed and that the petitioner should be heard before any order is passed under Section 179 of the Income Tax Act. It is pertinent to note that before passing the order dated 6th January, 2010 the petitioner was never informed of the efforts made by the department to recover the amounts from the said company. In the order dated 6th January, 2010 reliance is placed upon a report dated 9th November 2009 of the Tax Recovery Officer submitting a detailed report of the efforts made to recover the tax dues from the said company and the results of that effort. However, no copy of the said communication of the Tax R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soever brief, should be indicated even in the order affirming the order under challenge as it would ensure due application of mind. However, as observed by the Supreme Court in the matter of Divisional Forest Officer, Kothagudem v. Madhusudhan Rao, (2008) 3 SCC 469, at page 473 : "It is no doubt also true that an appellate or revisional authority is not required to give detailed reasons for agreeing and confirming an order passed by the lower forum but, in our view, in the interests of justice, the delinquent officer is entitled to know at least the mind of the appellate or revisional authority in dismissing his appeal and/or revision. It is true that no detailed reasons are required to be given, but some brief reasons should be indicated even in an order affirming the views of the lower forum." Similarly in the matter of Chairman, Disciplinary Authority, Rani Lakshmi Bai Kshetriya Gramin Bank v. Jagdish Sharan Varshney, (2009) 4 SCC 240, at page 242 "In our opinion, an order of affirmation need not contain as elaborate reasons as an order of reversal, but that does not mean that the order of affirmation need not contain any reasons whatsoever. In fact, the said decision in Prabh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
