9911796707
TMI Blog2011 (7) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... e House", 79/21 Latouch Road, Kanpur, have challenged the recovery of trade tax dues against the company and the notices served upon on them on March 28, 2004 for the assessment year 1999-2000. A sum of Rs. 3,78,544 and further sum of Rs. 5,95,698 and interest from February 6, 2002 at 18 per cent per annum is sought to be recovered vide recovery notice by attachment, sale or arrest of the petitioners as directors of the company. Sri Praveen Kumar, learned counsel for the petitioners, submits that the company suffered business losses, and referred itself for registration as a sick industrial company under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985, with the Board of Industrial and Financial Reconstruction (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by the counsel for the petitioners that no investigation has been carried out to ascertain the circumstances necessary for lifting of corporate veil and for reaching to a conclusion that the petitionersdirectors of the company are hiding behind mask, to avoid the recoveries. There is no such averment in the counter-affidavit that the petitioners have played fraud, to initiate proceedings against them. In paras 4, 7 and 8 of the counter-affidavit, filed in the connected writ petition No. 494 of 2004 it is stated that trade tax dues can be recovered from the directors, who act for the company behind the corporate veil. In the counter-affidavit, Sri R. C. Gaur, Deputy Commissioner (Assessment) 9th, Trade Tax, Kanpur, has relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of the court in Naresh Chander Gupta's case [2003] 22 NTN 358 and Adesh Kumar Jain v. U.P.S.E.B. [1998] All C.J. 266]. It was held that the judgment in Naresh Chander Gupta [2003] 22 NTN 358 cannot be said to be a precedent for holding that whenever the tax dues are to be recovered from a company, its director would be personally responsible even though there is no such provision in the relevant statute. In Adesh Kumar Jain's case [1998] All C.J. 266, electricity dues were sought to be recovered from him. It was held in that case that : ". . . In the instant case, there is an agreement between the parties and also the statutory provisions under which the only consumer company is liable for payment of the arrears of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine. Initial burden for application of the doctrine of 'piercing of veil': 78. Whether in respect to tax dues or other public revenue or in other cases, if one has to discard the corporate personality, then the initial burden would lie upon it to place on record relevant material and facts to justify invocation of doctrine of lifting of veil and to plead that the corporate shell be not made a ground of defence. A personality conferred by the statute cannot be overlooked or ignored lightly and in a routine manner or on a mere asking. In fact whenever the veil is to be pierced, it would mean that somebody, individual or group of individuals, have obtained the shell of corporate personality as a pretext or mask to cover up a transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies (Special Provisions) Act, 1985. The findings necessary, to proceed against the assets of the directors of the company for lifting of corporate veil, would have required investigation into the affairs of the company. In the aforesaid facts, the writ petition is allowed. The impugned notice dated March 28, 2004 for the assessment year 1999-2000 for recovery of trade tax dues is quashed to the extent that recovery be not forced against the assets of the directors of the company. It will be open to the Department to proceed against the assets of the company, or apply before the BIFR where the proceedings are still pending. It will also be open to the Department to carry out investigation to find out if the directors of company have playe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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