9911796707
TMI Blog2014 (4) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as "the company"). For the assessment year 1998-99, the return filed by the petitioners was taken in scrutiny and certain additions were made by the Assessing Officer. The assessment order though was carried in appeal, the Commissioner of Income-tax (Appeals) confirmed the order. No further appeal was carried by the company. Arising out of such assessment proceedings, the Income-tax Department had to recover a sum of Rs. 7,53,649 with interest. Despite several efforts for recovery, such amount could not be recovered from the company. The Income-tax Officer, therefore, issued show-cause notice to the directors on June 24, 2002, calling upon the petitioners why in terms of section 179(1) of the Act recoveries should not be made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be attributed to any gross neglect, misfeasance or breach of duty on their part in relation to the affairs of the company. The petitioners contended that in view of the facts narrated above, there was no gross neglect, misfeasance or breach of duty on their part in relation to the affairs of the company. It was also pointed out that the company had suffered total loss of Rs. 20.85 lakhs and the company had obtained loans from three directors to the tune of more than Rs. 17.85 lakhs. 2.3 Second reply was filed by the petitioners on October 21, 2002, before the Income-tax Officer in which similar contentions were taken. 2.4 The Income-tax Officer, however, was not convinced by such explanation and he passed the order dated July 1, 2003, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidation.-(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." Sub-section (1) of section 179, thus, empowers the Department to recover unpaid tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-recovery cannot be attributed to the three factors mentioned above. Thus the responsibility to establish such facts are on the director. However, once the director places before the authority his reasons why it should be held that non-recovery cannot be attributed to any of the three factors, the authority would have to examine such grounds and come to a conclusion in this respect. Significantly, the question of lack of gross negligence, misfeasance or breach of duty on the part of the director is to be viewed in the context of non-recovery of the tax dues of the company. In other words, as long as the director establishes that the non-recovery of the tax cannot be attributed to his gross neglect, etc., his liability under section 179(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner did not oppose the GSFC's auction sale is begging the question. GSFC had sold the property after several attempts through auction. It is not the case of the Department that proper price was not fetched." Reverting to the facts of the case, the company had run into losses. The company had substantial dues towards the State Bank of India from which it had taken loans and also enjoyed overdraft facility. Certain properties of the company were also mortgaged to the bank. To realise its dues, the bank filed a petition before the Debts Recovery Tribunal. Before the Debts Recovery Tribunal, the parties agreed to settle the total dues of the bank for Rs. 26 lakhs. The properties of the company were valued at Rs. 18 lakhs. The balance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .' From the above remarks and also on the basis of the facts of the case, the directors of the assessee-company were in knowledge of incidence of income-tax. Furthermore, the affairs of the company are audited by a leading chartered accountant firm, M/s. C. Patel and Co. Hence, the directors of the company are fully aware of their liability to pay tax on behalf of assessee-company. Hence, the director's contention as non-negligence on their part is not sustainable and accordingly rejected." It may be that the assets of the company may not have been mortgaged to the bank. Nevertheless, the Debts Recovery Tribunal in its order dated November 11, 1997, provided as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
