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TMI Blog2014 (4) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... er referred to as "Act") calling upon the petitioner to show cause as to why the recovery of the tax liabilities of the company of Rs.3,61,84,806/- be not made from the petitioner by holding her responsible being the Director on 18.09.2003. It contends that various efforts made for recovering the demand have failed. The petitioner in reply to the said show-cause notice has contended that she was an employee of Indo American Optic Limited Company, a group company of M/s Asian Finstock Limited getting salaried income only. She also further contended that she resigned from the company on 19.08.1997 and therefore, there was no question of invoking such provisions of Act for default made by the company. She also contended that she was never the Director nor Managing Director of the company and her signature was once obtained on certain papers purportedly for the work of the company, of which she was unaware and therefore, this was a case of fraudulently obtaining her signature 1.3 On 09.03.2004, she further supplemented her reply with copies of various documents obtained from the Assistant Registrar of Companies and raised the additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and implementation of the impugned notices u/s 226 (3) of the Act dated 17.12.2004 at Ann. 'B' to this Petition ; (c) any other and further relief deemed just and proper be granted in the interest of justice ; (d) to provide for the cost of this petition. 4. We have heard Mr. Tushar Hemani, learned counsel for the petitioner who has raised 3 contentions essentially before us in his challenge to the demand raised by the Revenue. Firstly, that the company is a public limited company and provisions of Section 179 of the Act would not be applicable. Secondly, that no attempts were made for recovery of income tax from the company, and therefore, the condition precedent required for raising any demand against the Director has not been fulfilled and thirdly, there was absence of any gross negligence, misfeasance or breach of duty etc. on the part of the Director. He has urged that all these contentions have not weighed with the Revenue Authority while passing the order under Section 179 of the Act and the said order therefore, deserves to be quashed with all consequential proceedings. 5. Learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y income of such private company assessable for any assessment year commencing before 1st day of April, 1962." 7. Sub-section (1) and Sub-Section (2), when read together, Sub-Section (1) brings within its sweep Directors of the private company and Sub-Section (2) confers power on the Revenue to recover tax arrears from the Directors of private company. 8. Thus, Section 179 of the Act applies to a case of private company. In the event of any tax due from a private company in respect of the income of any previous year or of other company in respect of any previous year during which such company was a private company, all those persons who were the Director of the company at the relevant point of time, are responsible for payment of such arrears of the tax unless the person concerned proves that the non-recovery cannot be attributed to any gross negligence, misfeasance or breach of duty in his part in relation to the affairs of the company. 9. Sub-section (2) of Section 179 of the Act makes it amply clear that where a private company converts into public company and the tax assessed of any previous year or during which such company was a private company, cannot be recovered, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No.10688 of 2013 in case of Sandeep A Mehta v. ITO [decided on 15.10.2013], has held thus : "23. From the ratio discussed hereinabove, it needs to be examined whether any of the two situations specified in the said decision exist on the record. Firstly, whether the statute itself so permits or provides for lifting of veil and secondly, whether the facts are so glaringly emerging on record whereby it can be found that with a view to defeat the interest of the Revenue, attempt is made by creating complexity of the facts. In the instant case, therefore, in other words, what needs to be examined is whether with a view to defeat the interest of the State some of the real beneficiaries have created complex design and web and have chosen to hide behind the corporate veil. Section 179 of the Act itself is a creation of the statute whereby the corporate veil can be pierced and original Directors of the Private Limited Company could be held liable for the outstanding tax dues of the Company. The statute, however, has created a situation whereby they can be jointly and severally held liable. In the instant case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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