2020 (9) TMI 1135 - HC - Income Tax

Action against the Principal officer of the company - identifying a person who is in a position to prepare and submit a return on behalf of the Company. - Direction to treat the petitioner herein as a Principal Officer as defined under Section 2(35)(b) of the Income Tax Act, 1961, the petitioner herein, who had acted as a Director of the Company for a short period between 01.04.2010 and 14.10.2010 - HELD THAT - This Court is of the view that when there were acting Directors of the Company, who are said to be still continuing as the Directors of the Company, the department could have proceeded against any one of such acting Directors for the reassessment proceedings and could have treated any one of them as the Principal Officer. Petitioner claims that he is in possession of the details of the acting Directors during the relevant Assessment Year. If such details are directed to be furnished to the respondent department and thereafter a decision could be taken, it would be more appropriate and convenient for the further assessment proceedings - since effective proceedings may not be possible with the petitioner as the Principal Officer, who had acted for a very short period as a Director and had retired thereafter. Impugned order treating the petitioner namely, Suvendra Kumar Panda as a Principal Officer is set aside. Consequently, the petitioner is directed to furnish the details of the acting Directors of the Company during the Financial Year 2011-2012 to the respondent herein, by way of a reply.

Summary

Issues:
1. Whether a retired Director of a Company can be treated as a Principal Officer under the Income Tax Act, 1961.
2. Whether the department's order treating the petitioner as a Principal Officer is justified.
3. The appropriate course of action when there are acting Directors in a Company.

Analysis:
Issue 1: The petitioner, a retired Director of a Company, contested being treated as a Principal Officer under the Income Tax Act, 1961. The petitioner argued that the intention behind designating a person as a Principal Officer is to ensure the submission of accurate returns on behalf of the Company to protect revenue interests. Citing a precedent from the Andhra Pradesh High Court, the petitioner claimed that treating a retired Director as a Principal Officer was unwarranted.

Issue 2: The Court refrained from definitively determining the department's right to designate a retired Director as a Principal Officer. However, the Court noted that in cases where there are acting Directors still in office, the department could have pursued reassessment proceedings against any of them and designated one as the Principal Officer. Acknowledging the petitioner's possession of details regarding the acting Directors during the relevant Assessment Year, the Court deemed it more appropriate for the department to seek these details from the petitioner for further assessment proceedings rather than treating the petitioner as the Principal Officer.

Issue 3: In light of the above considerations, the Court set aside the department's order designating the petitioner as a Principal Officer. The petitioner was directed to provide details of the acting Directors of the Company during the relevant Financial Year to the department within 15 days. The department was granted the liberty to proceed against any of the acting Directors as the Principal Officer as per Section 2(35)(b) of the Income Tax Act, 1961. The Court disposed of the Writ Petition with these directions, closing the connected Miscellaneous Petitions without imposing any costs.