TMI Blog2020 (1) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... the condition precedent for taking action under Section 179 of the Act, 1961, viz. that the tax dues cannot be recovered from the Company. In the show -cause notice, there is no whisper of any steps having been taken against the Company for recovery of the outstanding amount. Additional affidavit- in- reply as regards the steps taken against the company for the recovery of the dues, we would like to give one chance to the department to undertake a fresh exercise so far as Section 179 is concerned. If the show -cause notice is silent including the impugned order, the void left behind in the two documents cannot be filled by way of an affidavit- in- reply. Ultimately, it is the subjective satisfaction of the authority concerned that is important and it should be reflected from the order itself based on some cogent materials. However, with a view to protect the interest of both, the writ applicant as well as Revenue, we are inclined to quash the impugned order and give one opportunity to the Revenue to initiate the proceedings afresh by issuance of fresh show-cause notice with all necessary details so that the writ- applicant can meet with the case of the Revenue. We are inclin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the writ- applicant is an order passed by the respondent under Section 179 of the Income Tax Act, 1961 (for short the Act,1961 ). The impugned order reads thus: ORDER U/S.179 OF the Income Tax Act, 1961 In the case of M/s. Tirupati Proteins Pvt.Ltd (PAN AABCT8423E) demand of ₹ 9074.34 lakhs is outstanding as on date and the breakup of the demand as mentioned is given as under: No. A.Y. Demand (Lakhs) Nature of Demand (Tax/Interest /Penalty) 1 2011 -12 7983.85 Tax + Interest 2 2012 -13 782.36 Tax 3 2013 -14 292.99 Tax 4 2014 -15 15.14 Tax Total 9074.34 2. The said demand has not been paid till date. Despite being given a number of opportunities, the company did not make the payment of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 179 of the IT Act should not be used more vigorously and frequently in such instances. Instruction No.1519 vide F.No.404/110/82 ITCC dated 20.07.1983 OF the CBDT states that the AO can proceed u/s. 179 simultaneously against company directors and it is not necessary that action against the company should be exhausted. 7. Thus, from all the angles, the assessee company falls within the ambit of Section 179 of the I.T. Act. Smt.Sonal Nimish Patel and Smt. Ashita Nilesh Patel, were the directors of the company for the period under consideration during which demand was raised an the default of nonpayment of tax occurred. In response to the proceedings initiated u/s. 179(1) of the IT Ac, the directors failed to furnish any reply to the notice u/s. 179(1) of the I.T.Act. It is therefore, presumed that the directors have no objection for passing order u/s. 179 of the I.T.Act. In light of the discussion made in the foregoing paragraphs, since the demand is not recoverable from the assessee company, responsibility is fixed upon the then directors u/s. 179(1) of the IT Act and they will be treated as assessee in default in respect of tax, interest and penalty recoverable fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not able to recover such tax from the company, then every person being a Director of the private company at any time during the relevant previous year can be held jointly and severally liable for the payment of such tax, unless the Director proves that the nonrecovery of tax due against the company could not be attributed to any gross negligence, misfeasance or breach of duty on their part in relation to the affairs of the company. 6. According to Mr.Soparkar, just because the Department failed in recovering the dues towards the tax from the company, it could not have proceeded to seek such recovery from the properties of the writ-applicant. It is also the case of the writ- applicant that she had resigned as a Director of the Company long time back, and therefore, could not have been fastened with any liability. 7. Mr.Soparkar has invited the attention of this Court to the show -cause notice dated 02.09.2017. According to Mr.Soparkar, the show -cause notice is bereft of the material particulars as regards the steps said to have been taken by the Department for the purpose of recovering the tax from the company. It is submitted that it is obligatory on the part of the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords, according to the Mr.Bhatt, there is a charge of one institution or the other on the assets of the company. However, Mr.Bhatt very fairly pointed out that the show -cause notice as well as the impugned final order is silent so far as the steps taken by the Department against the company is concerned. 14. Today, when the matter is taken up for further hearing, an additional affidavit- in- reply, duly affirmed by the Deputy Commissioner of Income Tax, Circle 4(1)(2), Ahmedabad, is being tendered to indicate the steps taken against the company for the recovery of the dues. A copy of the same has been furnished today to Mr.Soparkar, the learned counsel appearing for the writ- applicant. The additional affidavit- in- reply is ordered to be taken on record. 15. Over and above the same, there is an affidavit-in- reply on record dated 26.06.2019. 16. Mr.Bhatt would submit that there is quite a sizable amount in the bank account of the writ-applicant maintained with the HDFC Bank Limited. As the Department has not been able to recover anything from the Company, the only hope for the Department is now to recover some of the dues by attaching the bank accounts of the Directors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company itself. Such requirement is held to be a pre requisite and necessary condition to be fulfilled before action under Section 179 of the Act can be taken. In the context of Section 179 of the Act, 1961, this Court held that before recovery in respect of the dues from a private company can be initiated against the directors, to make them jointly and severally liable for such dues, it is necessary for the Revenue to establish that such recovery cannot be made against the company and then alone it can reach to the directors who were responsible for the conduct of the business during the previous year in relation to which liability exists. 21. There is no escape from the fact that the perusal of the Notice under Section 179 of the Act, 1961, reveals that the same is totally silent as regards the satisfaction of the condition precedent for taking action under Section 179 of the Act, 1961, viz. that the tax dues cannot be recovered from the Company. In the show -cause notice, there is no whisper of any steps having been taken against the Company for recovery of the outstanding amount. Even in the impugned order, no such details or information has been staled. 22. In such ci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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