TMI Blog2022 (12) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... e demand raised in the assessment order to get stay from the appellate authority, the petitioners cannot be said to be negligent and respondent no.1 cannot therefore, invoke jurisdiction under section 179. - Honourable Mr. Justice N.V.Anjaria And Honourable Mr. Justice Bhargav D. Karia For the Petitioner(s) : Mr. Jaimin R Dave For the Respondent(s) : Mr Nikunt Raval For Ms Kalpana K Raval CAV JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.Heard learned advocate Mr.Jaimin Dave for the petitioners and learned advocate Mr. Nikunt Raval for the respondents. 2.The petitioners have challenged the order dated 26.10.2017 passed by respondent no.1 under section 179 of the Income Tax Act, 1961 (For short the Act ) fastening the liability upon the petitioners to pay the outstanding dues of M/s. Nakoda Syn-tex Private Limited (here-in-after referred to as the said company ) as the petitioners are the Directors of the said company for the assessment year 2014-2015. The petitioners have also challenged order dated 29.01.2018 passed under Rule 48 of the Second Schedule to the Act attaching the residential property of the petitioners and notice of dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are attached by the respondents. 5.Learned advocate Mr. Jaimin Dave for the petitioners submitted that the impugned order passed under section 179 of the Act and consequential orders are without jurisdiction as the basic condition for invoking section 179 of the Act are not satisfied in the facts of the case. 5.1) It was submitted that for invoking jurisdiction under section 179 of the Act, twin conditions with regard to the amount of tax dues from a private limited company which is not recovered from such company is attributable to the gross neglect, misfeasance or breach of duty of the Director, is not satisfied in the present case. It was submitted that in the facts of the case there is nothing on record to suggest that the respondent authorities have been satisfied before invoking powers under section 179 of the Act vis-a-vis the recovery of the outstanding dues of the private limited company and there is no finding that such non recovery of taxes is attributable to the gross neglect, misfeasance or breach of duty of the petitioners. It was submitted that except issuance of recovery notice dated 9.02.2017, respondent no.1 has neither issued any notice of demand nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2) Learned advocate Mr. Raval in support of his submissions relied upon the following averements made in the affidavit in reply: 11. Further from the balance-sheet of the assessee, it is seen that its investment was mostly in Nakoda Limited. From the submission of the assessee dated 22/02/2017 (Annexed herewith and marked as Annexure : RV Colly. is copies of Submission) it was seen that huge income tax demand in the case of Nakoda Limited was also outstanding and no recovery was possible from this company also. Nakoda Limited is also assessed in this Range. From the record of this case it is seen that this company has closed down its business and E.D has registered a case of money laundering against this company. Moreover from the income-tax record of the assessee company it is seen that no business activity in the assessee company from F.Y.2014-15 onwards. In this case, ample opportunity was given to the assessee to make payment of the demand but no payment was made by the assessee and even attachment of the bank account did not yield any result. Further, the assessee company is not doing any business activity. From the annual account of the assessee and outcome of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x demand was made in the books of the company. Nothing submitted before the AO to prove that the directors made any effort for the payment of outstanding demand. In view of the above all the conditions for passing order u/s.179 of the income-tax act was full filled, therefore the action of AO for passing order u/s.179 of the income-tax act is justified. 16. In view of the above facts, it is very much clear that the Assessing Officer had taken various steps to recover the outstanding demand from the assessee company. But due to non-cooperation or complete negligence by the assessee company and its directors, the recovery in this case could not be made. Therefore there was no option left but to make recovery from the director of the assessee company. So proceeding u/s.179 of the Income-Tax Act was initiated and after providing sufficient opportunity of being heard and considering the reply of the assessee order u/s.179 was passed against the directors of the assessee. 6.3) In support of his contention that despite all possible efforts, entire outstanding tax dues could not be recovered from the company leaving department with no option but to recover the same from the Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised in the assessment order to get stay from the appellate authority, the petitioners cannot be said to be negligent and respondent no.1 cannot therefore, invoke jurisdiction under section 179 of the Act. 9.This Court in case of Sadhna Ramchandra Jeswani v. Income Tax Officer (supra) in similar situation has held as under : 8. Reverting back to the facts of the case, we notice that in showcause notice the Assessing Officer has not laid down sufficient foundation for invoking section 179 of the Act leave alone broadly pointing out he has not even alleged that non-recovery was on account of gross negligent, misfeasance or breach of duty on part of the petitioner in relation to the affairs of the company. His final conclusions in the impugned order are therefore based on the material at his command which was never shared with the petitioner. 9. In the result, impugned order is set aside only on this ground making it clear that nothing stated in the order would prevent the Assessing Officer from initiating fresh exercise for the same purpose, if so advised and, if the material at his command is sufficient to permit him to do so. 10. Similar view is also taken in decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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