TMI Blog1998 (4) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... t years 1978-79 to 1988-89, the company was due income-tax to the Department of Income-tax. There was also a settlement before the Settlement Commission under the Income-tax Act. The board of directors who assumed office after the resignation of the petitioners agreed before the Settlement Commission for a total tax liability of Rs. 64,27,371 for the assessment years 1978-79 to 1988-89. Pursuant to the agreement before the Settlement Commission proceedings were initiated for recovery of the said amount against the company and the said proceedings are pending. However, by the impugned proceedings dated February 10, 1998, the Assistant Commissioner of Income-tax issued a notice under section 179 of the Income-tax Act proposing to recover the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Uttar Pradesh, on March 22, 1990. He, therefore, submitted that it is not a case where this court could interfere under article 226 of the Constitution of India. From the counter it is clear that the proceedings against the company have not yet been concluded and they are pending. In this context, it is necessary to refer to the language used in section 179 of the Income-tax Act : " 179. Liability of directors of private company in liquidation.---(1) Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and surety, the liability of the surety is co-extensive with that of the principal debtor and, therefore, both the principal debtor and the surety can be proceeded against simultaneously. Whereas under section 179 of the Act it is only in case the tax cannot be recovered from the company that the liability of the director arises or the liability itself arises for the director. After that liability arises, the liability is joint and several amongst the directors and it is not a liability joint and several with that of the company. Therefore, before the Assessing Officer proceeds against the directors personally he has to give a finding that the income-tax due for the previous year cannot be recovered from the company. In the absence of gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany 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 years shall be jointly and severally liable for the payment of such taxes 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. In this connection, a notice under section 179 was issued to the above-mentioned directors fixing the dates of hearing to November 24, 1997, and November 28, 1997, calling for the objections if any. None of the directors except Sri K. V. Reddy and Smt. K. Malleswari Reddy ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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