9911796707
TMI Blog2017 (7) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... private company. She has challenged an order dated 26.03.2017 passed under section 179(1) of the Income Tax Act ['the Act' for short] seeking recovery of a sum of Rs. 23,45,790/- by way of unpaid tax of the said company for the assessment year 2004-05 and further a sum of Rs. 12,49,050/- towards penalty under section 271(1)(c) of the Act of the same company for the assessment year 2004-05. 2. The company had filed the return of income for the assessment year 2004-05 declaring total income of Rs. 21,06,990/-. Assessment under section 143(3) of the Act was framed on 29.03.2007. Such assessment was, however, set aside by CIT (Appeals) as time barred. Notice of reopening was issued on 13.03.2008 and order of re-assessment was passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - of the pending tax; (iii) Notice dated 10.04.2014 raising demand of unpaid penalty of Rs. 12,49,050/- with interest of Rs. 3,62,224/-. All these notices are issued to the company and none of these notices are to any of the directors. 5. On the basis of such materials on record, learned advocate Mr. Darshan Patel for the petitioner submitted that the action of the department is wholly illegal. Without a show-cause notice or hearing or citing reasons, the authority has passed order under section 179(1) of the Act which is not sustainable. None of the petitioners, were visited with any show cause notice why the recovery of the unpaid tax and penalty of the company should be made from the directors. He further pointed out that the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-recovery cannot be attributed to any gross negligent, misfeasance or breach of duty on his part in relation to the affairs of the company. The recovery of any paid dues of the company, therefore, can be resorted to, provided the company happens to be a private company and the person, who is director during any period of the relevant previous year, fails to establish that nonrecovery cannot be attributed to any gross negligent, misfeasance or breach of duty on his part in relation to the affairs of the company. 8. It is therefore, not correct to suggest that the moment the tax dues of a private company remain unpaid, the consequence under section 179(1) must follow against each of the directors. Before such an order can be passed, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, we do not find a single notice on record issued to any of the directors why order under sub section (1) of section 179 should not be passed for whatever reasons that may be available at the command of the income tax authority. The notices, which we have referred to, are all issued to the company. These notices are in the form of recoveries or reminders of unpaid tax or penalty. None of these notices contain even a reference to any recoveries being made personally from the directors for the failure of the company to discharge its tax dues. 10.This apart even the order under section 179(1) of the Act is completely silent on the requirements of the statute being satisfied. We may reproduce the order: "In exercise of power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and rest of the amount can be paid jointly. All the payment is hereby ordered to be paid within 10 days from the receipt of this order." 11. Perusal of the order would demonstrate total disregard of the authority towards the requirement of section 179(1) of the Act. He merely proceeds on the basis that the tax and penalty have not been paid so far and therefore, "whole directors of the company shall be jointly and severally liable to pay the outstanding demands." He accordingly, orders such directors to pay the said sum within ten days of the receipt of the order. This order betrays certain misconception about the requirement of section 179(1) of the Act. If one reads the order, it seems to be suggesting that the sole requirement of appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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