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TMI Blog2012 (10) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... t the first Respondent had computed the outstanding tax liability of the company at Rs. 28,71,84,883/-, and proposed that the refund payable to the petitioner, be set off with the tax liability of the company. The writ Petitioner wrote a letter to the ACIT, Dehradun, on 23rd March, 2010, and inspected the record in Delhi; he claims that at this stage, he became aware of the Income tax liabilities of the company, and the order made against him on 14th November, 2007, under Section 179 of the Act. The petitioner felt aggrieved by the order and the move to recover the arrears of the company's taxes and related liabilities, from him. He preferred a writ petition before this Court. That petition was disposed of in the following terms: "5. We have examined the said contentions. We have also looked at the quantum of demand and the legal issues raised by the petitioner. Keeping in view the aspects and questions raised, we feel that it will be appropriate and proper if the petitioner is given a hearing, and a fresh order under Section 179 of the Act is passed. There is a dispute regarding service of notice dated 27th September, 2007. The respondent in the counter affidavit has stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second impugned order dated 2.7.2012, enhanced the outstanding dues of the company, and consequently, of the petitioner to Rs. 35,13,35,804/-. The increase was on account of interest due under section 234A and section 234B, and penalty leviable under section 271(1)(b)/(c) of the Act. 5. The petitioner contends that the outstanding dues of the company were in the form of interest and penalties. He contended that "tax due" under Section 179 does not include within its ambit interest and penalty. It is submitted that the language of the provision is clear, and has to be construed in its terms; the Act makes a clear distinction between taxes, penalties and interest, which are distinct liabilities. Learned counsel relied on the definition of "tax" under Section 2(43) of the Act. Further, reliance was placed on the decision of the Bombay High Court in Dinesh T. Tailor v. Tax Recovery Officer [2010] 326 ITR 85 (Bom.), H. Ebrahim & Ors. v. Dy. CIT & Anr. [2011] 332 ITR 122 (Karn.), Harshad Shantilal Mehta v. Custodian [1998] 231 ITR 871 (SC) and Pratibha Processors v. Union of India, [1996] 11 SC 101. 6. Ms. Rashmi Chopra, counsel for the revenue, on the other hand, urged that a purposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe of the provisions of Section 179. Section 179(1), as it exists at present, reads as: "(1) Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company." This provision, prior to its amendment, read as under: "179. Notwithstanding anything contained in the companies Act, 1956 (1 of 1956), when any private company is wound up after the commencement of this Act, and any tax assessed on the company, whether before or in the course of or after its liquidation, in respect of any income of any previous year cannot be recovered, then, every person who was a director of the private company at any time during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or profession is carried on has been discontinued or where an association is dissolved, the Assessing Officer has to make an assessment of the total income, as if no such discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions with respect to levy of a penalty or "any other sum" chargeable under the Act are to apply. Section 177 (3) mandates that every person who was, at the time of such discontinuance or dissolution, a member of an association of persons and a legal representative of any such person who is deceased "shall be jointly and severally liable for the amount of tax, penalty or other sum payable". This again is wider than what is provided for under Section 179 (1). Section 188A, prescribes that every person who was, during the previous year, a partner of a firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other sum payable by the firm for the assessment year. Section 189 too uses the same terms, i.e. "amount" of tax, penalty or other sum payable in respect of a firm (while creating liability of every partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol evasion of tax. The Explanation has reference to the point of time at two places: the first one has been stated as "at the end of the previous year" and the second, which is in issue, is "in the course of such previous year". Counsel for the Revenue has emphasised upon the feature that in the same Explanation reference to time has been expressed differently and if the legislative intention was not to distinguish and while stating "in the course of such previous year" it was intended to convey the idea of the last day of the previous year, there would have been no necessity of expressing the position differently. There is abundant authority to support the stand of the counsel for the Revenue that when the situation has been differently expressed the legislature must be taken to have intended to express a different intention. 'Course' ordinarily conveys the meaning of a continuous progress from one point to the next in time or space and conveys the idea of a period of time; duration and not a fixed point of time. "In the course of such previous year" would, therefore, refer to the period commencing with the beginning of the previous year and terminating with the end of the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, the words and phrases "interest", "tax" and "penalty" fell for consideration and the Apex Court has observed thus: "In fiscal statutes, the import of the words 'tax', Interest', penalty', etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforced by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty - which is penal in character." Having regard to the decisions referred to above in relation to the import of words 'tax' interest and 'penalty' which would operate in different concepts, I am of the view that the said contention of Mr. Shankar is required to be accepted, inasmuch as, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Sub-section (2) of Section 3 to the Central Government or to any State Government or Local Authority have to be paid or discharged in full. The Supreme Court considered as to whether the expression "tax" under Section 11(2)(a) would include interest or penalty under the Income Tax Act, 1961. This question was answered in the negative: "38. One other connected question remains: whether "taxes" Under Section 11(2)(a) would include interest or penalty as well? We are concerned in the present case with penalty and interest under the Income Tax Act. Tax, penalty and interest are different concepts under the Income Tax Act. The definition of "tax" Under Section 2(43) does not include penalty or interest. Similarly, Under Section 157, it is provided that when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand as prescribed. Provisions for imposition of penalty and interest are distinct from the provisions for imposition of tax. Learned Special Court judge, after examining various authorities in paragraphs 51 to 70 of his judgment, has come to the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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