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TMI Blog2014 (3) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... to by this Court in case of Pravinbhai M. Kheni [2012 (12) TMI 494 - GUJARAT HIGH COURT] The order u/s 179 of the Act set aside – Decided in favour of Assessee. - Special Civil Application No. 11658 of 2004,Special Civil Application No. 11659 of 2004 to 11662 of 2004 - - - Dated:- 19-2-2014 - Akil Kureshi And Sonia Gokani,JJ. For the Appellants : Mr. BS Soparkar And Mrs. Swati Soparkar, Advs. For the Respondent : Mr. Mauna M. Bhatt, Adv. JUDGMENT (Per : Honourable Mr. Justice Akil Kureshi) These petitions involve similar question of facts and law, therefore, are disposed of by this common judgment. Facts may be noted from Special Civil Application No. 11658 of 2004. The petitioner has challenged order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable for recovery of tax, interest and penalty demands for the A.Ys 1996-97; 1997-98 and 1998-99. The petitioner unsuccessfully challenged the said order before the Commissioner. He, therefore, filed the present petition. Having heard learned counsel for the parties and having perused the documents on record, it emerges that the company was initially incorporated as a private company in September 1991. Such company was converted into a public limited company on 5th April 1995. Only thereafter, the petitioner became its director on 9th March 1996. Section 179 (1) of the Act permits recovery of taxes due from the director of a private limited company under certain circumstances, when it is found that such dues from the company cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not answer in this petition. This is so because even assuming for a moment that it was so, the Revenue had to lay a foundation of facts to come to the conclusion, as canvassed before us by the counsel that despite its lag of a public limited company, for the purpose of the Companies Act, in reality the said company was a closely held company with all its characters of a private limited company. Even for lifting of the corporate veil as within the narrow confines permitted in the case of Pravinbhai M. Kheni [Supra], the foundational facts must be found in the notice giving sufficient opportunity to the assessee to deal with the allegations and present his own material to convince the Assessing Officer to hold otherwise. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here corporate veil may have to be lifted. 16. Howsoever cautiously, the concept of piercing of corporate veil is applied by the Courts in various situations. Two situations where such principle is consistently applied are, one where the statute itself so permits or provides for and second where due to glaring facts established on record it is found that a complex web has been created only with a view to defraud the revenue interest of the State. If it is found that incorporation of an entity is only to create a smoke screen to defraud the revenue and shield the individuals who behind the corporate veil are the real operators of the company and beneficiaries of the fraud, the Courts have not hesitated in ignoring the corporate status and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company were held by them and not by any members of the public. The directors had amassed huge wealth in the form of immovable property. The Assistant Commissioner therefore, was of the opinion that the company was only a conduit for creation of unaccounted money and appropriating in directors. 19. If these facts are duly established, we have no hesitation in holding that principle of lifting the corporate veil should be applied. By application of section 179 of the Act, the recovery of the tax dues of the company can be sought from the directors. In the result, subject to above observations, writ petitions are allowed. Impugned orders under Section 179 of the Incometax Act, 1961 and the further revision orders are quashed. Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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