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TMI Blog2013 (6) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... de interest and penalty also in the expression 'tax due' as decided in Ratanlall Murarka And Others Versus ITO [1980 (7) TMI 60 - KERALA HIGH COURT]. The director may be considered an assessee under section 2(7) of the Act which provides that assessee means a person by whom any tax or any other sum of money is payable under the Act. However, the same must be qua the tax of the company which was due and remained unpaid. By virtue of section 179(1) of the Act the director cannot be held liable for interest and penalty and thereupon be treated as an assessee under section 2(7) of the Act as a person by whom any tax or any other sum of money is payable under the Act. Against revenue. - SPECIAL CIVIL APPLICATION NO. 2700 of 2013 - - - Dated:- 1-4-2013 - AKIL KURESHI AND MS. SONIA GOKANI, JJ. For the Appellants : Tushar P. Hemani and Ms. Vaibhavi K. Parikh. For the Respondent : Manav A. Mehta. ORDER:- Akil Kureshi, J.- Heard learned counsel for the parties for final disposal of the petition. Petitioner has challenged a notice dated 13.02.2013 at Annexure A to the petition issued by the respondent-Income Tax Officer, Surat under section 179 of the Income-tax Act,19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all income tax, interest, penalty etc. pertaining to A.Y. 1988-89 which have been raised so far and may be further raised in future. Therefore, since the demand is not recoverable from the Company and since Shri Kantilal Sakarlal Gandhi was the director of the Company, the liability for payment of tax as mentioned above is fixed upon Shri Kantilal Sakarlal Gandhi u/s. 179(1) of the I.T Act and he will be treated as assessee in default in respect of tax, interest and penalty recoverable from the assessee as included in the aforesaid demand." 2.4 These notices are challenged by the petitioner in the present petition on one single ground viz. that under Section 179 of the Act, the respondent has no authority to seek recovery against the petitioner and the dues of the said company arising out of the penalty order under Section 271 (1)(c) of the Act. 3. Such issue is no longer res integra by a decision of Division Bench of this Court in case of Maganbhai Hansrajbhai Patel v. Asstt. CIT [2012] and connected petition. It was held and observed as under: 6. From the submissions made before us following three questions need to be answered : (2) Whether under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Taxes which are not legally assessed or assessments which have not become final and binding on the assessee, are not covered under Section 11(2)(a) because unless it is an ascertained and quantified liability, disbursement cannot be made. In the context of Section 11(2), therefore, "the taxes due" refer to "taxes as finally assessed"." 11. We are conscious that such interpretation was rendered in the background of the Special Court (Trial of offences relating to transactions in Securities) Act, 1992 and not in the context of section 179 of the Act. However, the above observations throw much light on the interpretation which we are trying to make. Bombay High Court in case of Dinesh T Tailor (supra) had occasion to consider the decision in case of Harshad Mehta (supra) in context of the question whether penalty imposed under section 271(1)(c) of the Act can be part of "tax due" under section 179(1) of the Act. It was held and observed as under : "7. The first submission which has been urged on behalf of the petitioner is that as a director of the company until 14 October, 1989, he cannot be held liable in respect of the penalty that was imposed on the company under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a (supra), Bombay High Court in case of Manik Dattatreya Lotlikar (supra) had held that the term 'tax due' under section 179(1) of the Act would include interest and penalties also. We may also notice that Kerala High Court in case of Ratanlall Murarka and others v. Income tax Officer, "A" Ward, Companies Circle, Ernakulam, and others reported in [1981] 130 ITR 797(Ker) had taken a similar view making following observations : "The only other question in the case relates to the petitioner's challenge of the levy of interest on the tax for the year 1963-64. Counsel for the petitioner maintained that the Act draws a distinction between tax and interest as appears from Section 156, that tax does not take in interest and that as Section 179 is silent about interest the demand for interest is unsustainable. The contention overlooks the petitioner's position and the consequences of his default. It is admitted in the original petition that a notice had been served on the company demanding arrears of tax for the years 1959-60, 1960-61 and 1963-64, as early as April 1, 1969, long before the order, Ex. P-7. The company was thus liable for interest under Section 220(2). The liability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA." 17. Term 'penalty' has not been defined. Term 'interest' is defined in section 2(28A) of the Act but is in context of interest payable in any manner in respect of any moneys borrowed or debt incurred and has no relation to interest chargeable under various provisions of the Act on tax arrears. We may however, notice that as observed by the Apex Court in case of Harshad Mehta (supra), the Act uses the term 'tax', interest and penalties at various places having different connotations. Section 156 which pertains to notice of demand provides that where any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Assessing Officer shall serve upon the assessee a notice of dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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