2018 (6) TMI 1517 - HC - Income Tax

Recovery proceedings - Invocation of the provisions of Sections 230 and 179 - Liability of directors of private company in liquidation - Appellant was detained when Section 179 proceedings were initiated and proceeded with - Held that - Time frame of six weeks has been granted for conclusion of the proceedings under Section 179 and further time of four weeks with respect to an order under Section 230. In such circumstances, we would issue specific orders fixing the time within which a notice has to be served, appearance has to be made and orders passed. We are also of the opinion that Exhibits P13 and P8 orders have to be quashed; but, however, with a restriction that the order not to travel outside India as is seen from Exhibit P8 shall continue till fresh orders are passed. It is so ordered. The appellant is directed to appear before the 2nd respondent on 29.06.2018, on which date he shall be issued with a fresh notice under Section 179 and under Section 230.

Summary

Issues:
1. Red corner notice issued through Interpol.
2. Bail conditions, surrender of Passport, and restriction on leaving India.
3. Waiving of bail conditions by Sessions Court.
4. Order under Section 230 of the Income Tax Act, 1961.
5. Liability under Section 179 of the IT Act for assessment years 2009-10 to 2015-16.
6. Challenge to assessment and penalty orders passed against the Company.
7. Interpretation of Section 230 of the IT Act.
8. Application of tax arrears exceeding &8377; 10 lakhs for Tax Clearance Certificate.
9. Applicability of Explanation under Section 179 for assessment years prior to its introduction.
10. Validity of the appellant's intention to travel abroad for medical treatment.
11. Quashing of orders under Sections 179 and 230.
12. Directions for re-hearing under Sections 179 and 230.
13. Continuation of the restriction on travel outside India.
14. Timeframe for conclusion of proceedings under Sections 179 and 230.

Analysis:
1. The appellant faced a red corner notice and was arrested upon returning to India. He was on bail with conditions including surrendering his Passport and restriction on leaving India. The Sessions Court later allowed waiving these conditions for specific reasons.

2. An order was issued under Section 230 of the Income Tax Act, 1961, citing outstanding liability for assessment years 2009-10 to 2015-16. The appellant contested the demand, stating it was stayed on payment of 20% of the amount.

3. The appellant challenged an order under Section 179 of the IT Act, arguing lack of notice and resignation from the Company's directorship in 2009. The Department highlighted financial irregularities and unpaid tax and penalty amounts.

4. The Department justified the orders under Sections 179 and 230 based on the appellant's liability, even after resignation. Legal arguments were presented citing relevant case laws and circulars.

5. The High Court directed re-hearing under Sections 179 and 230, with a timeframe for conclusion. The appellant's travel restriction was maintained pending fresh orders, considering attached properties to satisfy demands.

6. The Court disposed of the appeal, emphasizing the need for a fair re-hearing process and the appellant's right to present arguments. The Registrar of Companies was instructed to assist in providing relevant documents for the proceedings.