9911796707
TMI Blog2013 (12) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 22.9.2006 of the only residential flat of the petitioner situate at B-10/4 IInd Floor, Ramesh Nagar, New Delhi (Annexure-9-A to this writ petition). (v) issue any other writ, order or direction, which this Hon'ble Court may deem fit and proper in the facts and circumstances of this case ; (vi) award the cost to the petitioner." 2. Briefly stated the facts of the present case are that the petitioner was Director in M/s. Sri Ganesh Chemicals (P.) Ltd. (the company) which is a Private Ltd. Company incorporated under the Companies Act, 1956. The petitioner undisputedly resigned from the Directorship vide letter dated 20.10.1983 submitted to the Board of Directors of the Company. A search was conducted on 17.6.1985 at the office premise of the Company and its then Directors. Thereafter, the assessment orders in respect of the Company was passed and certain demands were created for the assessment years 1984-85 to 1988-89. Proceeding under Section 179 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was initiated by the DCIT (Investigation Circle), Muzaffarnagar against the petitioner and her husband Sri Santosh Kumar Garg who was also Director of the company. The DC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 15.3.2004 passed by the ACIT, Muzaffarnagar was endorsed to Smt. Pratibha Garg, this endorsement raises the presumption that a copy of the order was communicated to her. Whenever, a copy of a Govt. order is endorsed to an individual, it raises a strong presumption that a copy of the order was dispatched to the individual concerned. b. The plea of Smt. Pratibha Garg regarding non receipt of order under Section 179 for two years is further weakened by the fact that Smt. Pratibha Garg had participated in the proceedings under Section 179 and replies were filed by Smt. Pratibha Garg which was considered by the ACIT in his order dated 15.3.2004. Consequently, this also raises the presumption that Smt. Pratibha Garg would have taken notice of the order u/s. 179 which was consequent to her participation in the proceedings thereof. c. I also take notice of the fact that this is an old case relating to AY 1984-85 and Smt. Pratibha Garg has been adopting various dilatory tactics with a view to depriving the exchequer of the tax etc. demand raised by the Revenue against her. ii. The fact that she had resigned from the Directorship of the company, has already been taken cognizance of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the company. The ACIT in his order dated 15.3.2004 has stated as under : "The efforts made for recovery of demands in these cases were fruitless. The bank accounts of the company which were attached by the department had hardly any funds, hence the demands could not be recovered. Further, the latest return of the company reveals a paltry bank balance, hence recovery cannot be made therefrom. Moreover, the business of the company is virtually closed." 7. In light of the above discussions, I see no merit in the application under Section 264 and accordingly reject the same." 4. Aggrieved with the above order the CIT dated 29.3.2007, the petitioner has filed the present writ petition. 5. We have heard Sri Shakeel Ahmed, learned counsel appearing for the petitioner and Sri Dhananjay Awasthi, learned counsel appearing for the respondents. Submission on behalf of petitioner 6. Sri Shakeel Ahmed, submits that : (i) In the impugned order the CIT has admitted that the petitioner was an inactive Director. Thus the stand of the petitioner that she was name sake Director stands accepted. In view of this, it stands proved that non recovery of tax due against the company was not attri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order passed by the authorities are wholly valid and they do not suffer from any infirmity. In support of his submissions Sri Dhananjay Awasthi has relied on the following judgments: (i) (1998) 229 ITR 570 (Alld), Roop Chandra Sharma v. Dy. Commissioner of Income Tax (Assessment). (ii) (2010) 320 ITR 49 (Ker) Alex Cherian Vs. Commissioner of Income Tax, Ernakulam. Discussions and findings 9. We have considered the submissions of learned counsel for the parties. We find that the following questions arise for adjudication in this case : (1) Whether the word "tax due" used in Section 179 of the Act would include penalty and interest ? (2) Whether the petitioner has established that the recovery 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? (3) Whether the CIT has correctly held that tax dues of the company are liable to be recovered from the petitioner as Director for the AY 1984-85? (4) Whether the orders passed under Section 179 of the Act against the petitioner is liable to be set aside on the ground of violation of principles of natural justice ? 10. Question No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as under : " "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date [and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under Section 115 WA]" 14. From a reading of Section 2(43) of the Act it is clear that tax under the Act does not include penalty and interest. For the purposes of notice of demand, Section 156 specifically authorises the Assessing Officer to issue it for any tax, interest, penalty, fine or any other sum payable in consequence of any order passed under the Act. The explanation added to section 179 of the Act by Finance Act 2013 w.e.f. 1.6.2013 also clearly indicates that for the purposes of Section 179 penalty and interest has been included w.e.f. 1.6.2013 within the expression "tax due". Prior to 1.6.2013 there was no provision under the Act to include penalty and interest within the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under :- 18. In the order dated 15.3.2004 the ACIT while considering the submission of the petitioner for recovery from the assets of the company, observed as under : "The efforts made for recovery of demands in these case were fruitless. The bank accounts of the company which were attached by the department had hardly any funds, hence the demands could not be recovered. Further, the latest return of the company reveals a paltry bank balance, hence recovery cannot be made therefrom. Moreover, the business of the company is virtually closed. For the above reasons the demand in arrears could not be recovered from the company. Accordingly with a view to recover the aforesaid arrear demands from the then directors of the company during the period from 84-85 to 88-89 (to which these demands relate) notice u/s. 179 of the Act were issued upon the following directors of the company on different dates by registered post. 1. Sh. Santosh Kumar Garg, B-2/14, Rajouri Garden, New Delhi. The notices u/s. 179 were served by registered post. 2. Smt. Pratibha Garg B-2/14, Rajouri Garden, New Delhi. Replies of Smt. Pratibha Garg in compliance to the notice u/s: 179 of the Act were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT has completely ignored the findings of ACIT with regard to recovery from the shares seized from the premises are trade debtors. The view of the ACIT that the debtors of the company had not filed their return in this circle and hence it is not possible to know their financial status, is wholly misconceived. There is no restriction under the Act that such amount cannot be recovered where debtor is not within the territorial jurisdiction of the assessing authority of the assessee in question. The respondents should have inquired and should have made efforts to recover the tax due from the company to the extent possible and merely for the balance amount which could not be recovered from the company, the proceeding could be initiated against the Directors in view of Section 179 of the Act. 21. The other contention of the department that the grounds raised in the writ petition were not raised before the CIT, is incorrect inasmuch as the CIT has noted in brief the written submission of the petitioner in paragraph 5 of the order as under : "5. Smt. Pratibha Garg has raised the following points in her application under Section 264 and in her written submission : i. The order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Awasthi has heavily relied the judgment of this Court in the case of Roop Chandra Sharma (supra) and the judgment of Kerala High Court in the case of Alex Cherian (supra) to contend that the tax dues of the company are recoverable from the petitioner. In the case of Roop Chandra Sharma (supra) this Court has held that the Directors of a private company though not under liquidation may be liable for the dues which is pending against the company. In the present case, the controversy is different. The stand of the petitioner is different inasmuch as the petitioner has firstly denies her liability and alternatively her stand is that "tax dues" for the purposes of Section 179 of the Act for the AY 1984-85 shall not include penalty and interest. The judgment in the case of Alex Cherian (supra) also has no application on the facts of the present case as in that case it was found that the concerned authority has recorded satisfaction that there exists basic ingredients of section 179 i.e. whether the amount can be recovered from the company or not and whether the non recovery was because of gross neglect, misfeasance or breach of duty attributable to the Director concerned. 25. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
