TMI Blog2014 (4) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... a case of Director of a public limited company, the provisions of Section 179 cannot be made applicable – thus, the issuance of show cause notice and the consequently proceedings u/s 179 is not valid - Decided in favour of Assessee. - SCA 7759 of 2005 With SCA 16910 of 2004,16909 of 2004 - - - Dated:- 19-2-2014 - MR. AKIL KURESHI AND MS SONIA GOKANI, JJ. For the Petitioner : Tushar P. Hemani, Adv. For the Respondent : Mrs. Mauna M. Bhatt, Adv. JUDGMENT Ms. Sonia Gokani, J. 1. All the three petitions raise identical question of facts and law and therefore, they are decided by way of this common judgment. Facts for the purpose of deciding these petitions are derived from Special Civil Application No.7759 of 2005. 1.1 The petitioner was a Director of the company M/s Asian Finstock Limited which incorporated on 05.12.1994 as a public limited company. The company was assessed to Income tax for the Assessment Year 1996 - 1997 and along with interest and penalty, the demand rose to Rs.3,61,84,806/-. Such income tax liability remained unpaid. 1.2 A notice was issued under Section 179 of the Income Tax Act, 1961 (hereinafter referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds raised earlier, the factum of M/s. Asian Finstock Limited not being a private company. A contention was raised that this being a public limited company, Section 179 of the Act would not be applicable. 3. Pending such revision, a notice under Section 226(3) of the Act had been issued attaching the bank accounts of the petitioner and therefore the petitioner approached this Court under Article 226 of the Constitution of India to set aside the orders of attachment and also of demand of Income tax and in this petition, following reliefs are sought : (a) Command the Respondent to quash and set aside the impugned order u/s 179 dated 24.09.2004 at Ann. A' to this Petition and quash and set aside the impugned notices u/s 226 (3) of the Act dated 17.12.2004 at Ann. 'B' to this Petition ; (b) Pending the admission, hearing and final disposal of this petition, stay operation and implementation of the impugned order u/s 179 dated 24.09.2004 at Ann. 'A' to this Petition and stay operation and implementation of the impugned notices u/s 226 (3) of the Act dated 17.12.2004 at Ann. 'B' to this Petition ; (c) any other and furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any income of any previous year during which such other company was a private company cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. (2) Where a private company is converted into a public company and the tax assessed in respect of any income of any previous year during which such company was a private company cannot be recovered, then, nothing contained in sub-section (1) shall apply to any person who was a director of such private company in relation to any tax due in respect of any income of such private company assessable for any assessment year commencing before 1st day of April, 1962. 7. Sub-section (1) and Sub-Section (2), when read together, Sub-Section (1) brings within its sweep Directors of the private company and Sub-Section (2) confers power on the Revenue to recover tax arrears from the Directors of private company. 8. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll need to be regarded that in a case of Director of a public limited company, the provisions of Section 179 cannot be made applicable. Such being a factual matrix in the instant case, we uphold the version of the petitioner that the issuance of show cause notice and the consequently proceedings under Section 179 in case and all the petitions must surely fail. 11. It could be noticed from the record that the demand of Rs. 3.61 crores (rounded off) is for A.Y. 1996 - 1997 and whereas the company is converted into a public limited company from 09.12.1994 which is the date of registration, therefore, all the petitions deserve to be allowed on this count alone. 12. This Court in a similarly situated circumstances in case of Special Civil Application No.10686 of 2013 with Special Civil Application No.10688 of 2013 in case of Sandeep A Mehta v. ITO [decided on 15.10.2013], has held thus : 23. From the ratio discussed hereinabove, it needs to be examined whether any of the two situations specified in the said decision exist on the record. Firstly, whether the statute itself so permits or provides for lifting of veil and secondly, whether the facts are so glaringly e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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