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Kishan Lal and others Versus Union of India, etc.

2016 (9) TMI 911 - PUNJAB AND HARYANA HIGH COURT

Liability of directors of private company in liquidation - whether the company was converted into a public limited company for the purpose of avoiding statutory liability benefiting the petitioners - Held that:- We do not wish to express any opinion as to whether the corporate veil ought to be lifted in the present case even assuming that it is permissible to do so in matters under the Income Tax Act. Suffice it to state that even assuming that it is permissible to do so, there are several issue .....

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exist between the share-holders inter se. There are several other factors also which must be taken into consideration including as to whether the company was converted into a public limited company for the purpose of avoiding statutory liability benefiting the petitioners alone and/or conferring any other benefits upon the petitioners or any one or more of them alone. Lifting the corporate veil in a case such as this has drastic consequences. The impugned order does not consider the same in any .....

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71 of 2016 (O&M) - Dated:- 19-9-2016 - MR. S.J. VAZIFDAR AND MR. DEEPAK SIBAL, JJ. For The Petitioner : Mr. Anand Chhibbar, Senior Advocate with Ms. Riya Bansal, Advocate and Ms. Rinku Dahiya, Advocate For The Respondent : Mr. Yogesh Putney, Advocate S.J. VAZIFDAR, CHIEF JUSTICE: The petitioners have sought a writ of certiorari to quash an order dated 08.01.2016 passed under Section 179 of the Income Tax Act, 1961 holding them liable as directors of the assessee, namely, M/s Vikas WSP Limited, i .....

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92, the company became a public company under Section 43 of the Companies Act. 3. The company, admittedly, did not file its return of income for the Assessment Year 2013-14 within the period stipulated, namely, 30.11.2013. Respondent No.2 accordingly issued a notice under Section 221(1) read with Section 140A(3) requiring the company to show cause why penalty ought not to be imposed on it. Ultimately, by an order dated 10.12.2015, respondent No.2 imposed a penalty of about 23.77 crores. Several .....

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377; 105 crores as self-assessment tax under Section 140A. The assessee, however, neither filed a return of income nor discharged its liability towards self-assessment tax and interest thereon. 4. Thereafter, respondent No.2 issued a notice dated 05.01.2016 calling upon the petitioners to show cause why the provisions of section 179 of the Income Tax Act ought not to be invoked to hold them jointly and severally liable to pay the demand of ₹ 23.77 crores. 5. After setting out some of the a .....

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imited company and, therefore, the provisions of Section 179 were not applicable. It was contended that section 179 applies only to private limited companies. The only reasoning in the entire impugned order is as follows:- 4. Further, since the company has neither furnished its return of income for AY 2013-14 nor paid its self assessment tax of ₹ 105,04,96,130/-, there is apparent gross neglect or misfeasance or breach of duty on part of directors in relation to affairs of company. 7. Sect .....

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ing the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-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-sectio .....

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rder the directors holding is less than 25% of the entire issued, subscribed and paid up share capital. She stated that the balance shares are held by about 50,000 share-holders. Ms. Bansal contended that section 179 applies only to private companies and not to public companies. 9. Mr. Yogesh Putney, the learned counsel appearing on behalf of respondent No.2, on the other hand, submitted that the company is, in fact, a glorified partnership and that it is a fit case where the corporate veil ough .....

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. She submitted, for instance, that even as per the order the petitioners held less than 25% of the issued, subscribed and paid up equity capital of the company and that the remaining shares were held by about 50,000 share-holders. The company is listed on the stock exchange. 11. We do not wish to express any opinion as to whether the corporate veil ought to be lifted in the present case even assuming that it is permissible to do so in matters under the Income Tax Act. Suffice it to state that e .....

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