2018 (3) TMI 1024 - HC - Income Tax

Non compliance with condition precedent u/s 179(1) - recovery of dues of the company from the directors - revision application u/s 264 rejected - attachment orders - Held that - The condition precedent to recover the dues from the Petitioner i.e. a Director of the defaulting company is that the Revenue cannot recover its tax dues from the Directors. Thus the condition precedent to recover the dues from the Petitioner i.e. a Director of the defaulting company is that the Revenue cannot recover its tax dues from the defaulting limited company. In an identical fact situation, this Court had in the Chintan A. Shah v/s. Income Tax Officer (2018 (3) TMI 959 - BOMBAY HIGH COURT) had allowed the Petition on 22nd February, 2018. The Petitioner is the brother of Mr. Chinan Shah above and Directors of the same defaulting private company. Therefore, we set aside the impugned orders dated 2nd March, 2016 and 13th June, 2017 passed by the Assessing Officer and the Commissioner of Income Tax. However, it is made clear that the attachment of bank account by an order dated 3rd August, 2015 of the delinquent private limited company, would continue.

Summary

Issues:
Challenge to orders under Section 179(1) of the Income Tax Act, 1961 and Section 264 of the Act.

Analysis:
The petition challenges orders dated 2nd March, 2016 and 13th June, 2017, concerning the recovery of dues from a defaulting company's directors. The petitioner contends that the orders proceed on a misconception that the revenue can recover tax dues from directors without recovering from the defaulting company first, which is a condition precedent under Section 179(1) of the Act. The petitioner, a director of the defaulting company, argues that the revenue cannot recover dues from directors before the company. Reference is made to a previous case where a similar petition was allowed, establishing a precedent in favor of the petitioner.

The court, considering the precedent set in a previous case, sets aside the impugned orders dated 2nd March, 2016 and 13th June, 2017. However, it clarifies that the attachment of the bank accounts by the delinquent private limited company, dated 3rd August, 2015, will continue. The court grants liberty to the Assessing Officer to pass a fresh order after providing an appropriate notice to the petitioner. The writ petition is allowed with no order as to costs, concluding the matter in favor of the petitioner.