TMI Blog2016 (10) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate veil in the context of Section 179 of the Act, it ought to have prima-facie sufficient material to confront the assessee on the issue and should have so confronted the assessee – petitioner calling upon him to show cause why such powers should not be invoked. Further as noted, the demand of ₹ 13.45 Crores with interest referred to in the notice has currently come down to ₹ 3.55 Crores. Under the circumstances, the impugned order is set aside leaving it open for the revenue, if it so desires, to take out fresh proceedings by issuing appropriate notice and taking further steps in accordance with law; bearing in mind observations made hereinabove. The petitions stand disposed of accordingly. It is clarified that all con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery Officer issued a notice dated 03.09.2008 to the petitioner why as a Director of the company in default, in terms of Section 179 of the Act, the recovery of ₹ 13.45 crores (rounded off) with interest should not be made against him. The petitioner replied to the said showcause notice under a letter dated 10.10.2008 raising multiple defences. The tax recovery officer under letter dated 18.11.2008 referred to the petitioner's defences that the company was not a private limited company and called upon the petitioner to furnish evidences to substantiate such a claim. Further pleas of the petitioner were ignored and the Assessing Commissioner passed the impugned order dated 05.03.2009 ordering recovery of such unpaid taxes of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Pravinbhai M. Kheni v. Assistant Commissioner of Income-tax and Others reported in 353 ITR 585 had recognised limited exceptions under which it may be possible for the revenue to apply Section 179 to the Directors of a public limited company by lifting the corporate veil. However, in the judgment itself, certain safeguards have been provided to avoid any possible misuse of such powers. The Court observed as under :- 15. From the above judicial pronouncements, it can be seen that the concept of lifting or piercing the corporate veil as some times referred to as cracking the corporate shell, is applied by courts sparingly and cautiously. It is, however, recognised that boundaries of such principle have not yet bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erable for the tax dues of the company. Under sub-section (1) of section 179 of the Act, however, subject to the satisfaction of certain conditions, the directions can be held jointly and severally liable to pay the dues of the company. 6. In the present case, the respondents have instead of confronting the petitioner with necessary material why the corporate veil should be lifted and Section 179 of the Act be applied to him, issued the notice dated 18.11.2008 and called upon the petitioner to substantiate the claim that the company is a public limited company. This fact is not even seriously in dispute. The revenue ought not to have questioned such a basic fact. If the revenue wanted to apply the principle of lifting the corporate veil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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