1990 (6) TMI 221 - HC - Income Tax

Summary

Issues Involved:
1. Liability of the director under Section 179 of the Income Tax Act.
2. Whether the company was a public company within the meaning of Section 43(1A) of the Companies Act.
3. The applicability of Section 154 of the Income Tax Act for rectification of mistakes.

Detailed Analysis:

1. Liability of the Director under Section 179 of the Income Tax Act:

The first respondent initiated proceedings under Section 179 of the Income Tax Act to recover tax dues from Rajmohan Cashews Ltd. for the assessment years 1977-78 to 1982-83. The petitioner, a director of the company, argued that the non-recovery of tax dues was due to factors beyond the company's control, such as fluctuations in the international cashew market, restrictions on raw cashew procurement by the State Government, and financial crisis. Despite these objections, the first respondent found the petitioner jointly and severally liable for the tax arrears, a decision confirmed by the second respondent.

2. Whether the Company was a Public Company within the Meaning of Section 43(1A) of the Companies Act:

The petitioner contended that the company had become a public company as of 1st October 1975, under Section 43(1A) of the Companies Act, due to its annual turnover exceeding one crore rupees. This argument was raised for the first time in the application under Section 154 of the Income Tax Act. The documents supporting this claim were produced only with the Section 154 application and were not part of the original assessment records. The court noted that the records of the assessment proceedings did not indicate that the company was treated as a public company during the relevant period. The Department suspected manipulation of the document (Ext. P1) presented by the petitioner and indicated a need for further investigation.

3. The Applicability of Section 154 of the Income Tax Act for Rectification of Mistakes:

Section 154 of the Income Tax Act allows for the rectification of any mistake apparent from the record. The court emphasized that a mistake must be obvious and patent, not one that requires a long drawn process of reasoning or debate. The court found that the alleged mistake regarding the company's status as a public company was not apparent from the record, as the relevant documents were not part of the original assessment proceedings. The court cited precedents (Venkatachalam vs. Bombay Dyeing & Mfg. Co. Ltd., Satyanaranyan vs. Mallikarjun, and T.S. Balaram ITO vs. Volkart Bros.) to support its conclusion that the mistake claimed by the petitioner did not qualify for rectification under Section 154.

Conclusion:

The court concluded that the petition under Section 154 was rightly rejected, as the mistake claimed was not apparent from the record. Additionally, the court found no grounds to interfere with the findings of the recovery officer and the CIT that the petitioner was jointly and severally liable for the tax dues of the company. The petitioner's arguments regarding the company's status and her liability were not substantiated by the records or evidence. Consequently, the Original Petition was dismissed, with no order as to costs.