2011 (7) TMI 187 - HC - Income Tax

Demand - Ap0plication for stay of recovery of demand - It is stated that notice dated 27th September, 2007 under Section 179 (1) of the Act was served upon the petitioner in his capacity as a director of M/s Sarvodhya Realtors (P) Ltd. at 81-D, Dila Ram Bazar, Rajpur Road, Dehradun - There is a dispute regarding service of notice dated 27th September, 2007 - It is not clear and there is no material/evidence whether the order under Section 179 of the Act dated 14th November, 2007 was ever served on the petitioner - The refunds due to the petitioner will also not be paid till the proceedings under Section 179 of the Act are disposed of and will be subject to the outcome of the said proceedings - The writ is accordingly disposed of

Summary

Issues:
1. Impugning an order under Section 179 of the Income Tax Act, 1961.
2. Quashing of recovery proceedings for outstanding demand.
3. Stay of recovery of demand amount.
4. Allegation of lack of notice and violation of principles of natural justice.
5. Applicability of Section 179 of the Act.
6. Dispute regarding the service of notice.
7. Setting aside the impugned order and directing a fresh order under Section 179.

Analysis:
The petitioner challenged an order passed under Section 179 of the Income Tax Act, 1961, seeking to quash recovery proceedings for an outstanding demand of Rs. 28,71,84,883. The Income Tax Department claimed the amount from a company where the petitioner was a director. The petitioner alleged lack of awareness of the proceedings and non-receipt of the notice. The main grievance was the violation of natural justice principles due to the absence of a show cause notice and hearing. The court examined the contentions, focusing on the applicability of Section 179 and the service of notice.

The court noted discrepancies in the communication process, as the petitioner claimed ignorance of the proceedings until later notifications. Despite the respondent's assertion of attempting to contact the petitioner through another letter, no evidence of further correspondence was presented. The court highlighted the lack of clarity on whether the order under Section 179 was served to the petitioner and observed the absence of recovery steps post-order. Consequently, the court decided to set aside the impugned order and directed a fresh hearing for the petitioner to file a reply to the notice under Section 179. The court emphasized the need for a fair hearing and timely resolution of the proceedings, restricting the petitioner's dealings with immovable properties and withholding refunds until the matter's conclusion.

In conclusion, the court disposed of the writ, refraining from imposing any costs. The judgment aimed to rectify procedural irregularities, ensure adherence to natural justice principles, and facilitate a just resolution under Section 179 of the Income Tax Act within a specified timeframe.