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TMI Blog2017 (3) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs.Niketa B. Bhatt. Within a short span, on 20.3.2005 the petitioner was introduced as director of this company and the petitioner continued as such upto 5.9.2005. The petitioner presented the petition on the premise that though he was appointed as a director, in reality had not acted as such; neither he had made any signature in any affairs of the company nor on any financial statements, banks, income tax documents and except remaining as a director he was not in charge of the affairs of the company. He asserted in the petition that one Mr.Pratik R. Shah was managing the affairs of the company and he merely brought the capital in the form of shares. Except remaining as a director on the board of the company, he in reality had not acted as such and also contended that he had put the resignation on 5.9.2005. 2.2 The petitioner further contended that though the petitioner had resigned from the company, he served with a notice on 11.10.2013 issued under Section 179 of the Act whereby, an attempt was made to saddle with liability of the company. To the said notice, the petitioner gave reply on 17.10.2013 and thereafter, for a pretty long time for almost a period of one year, no resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. After such explanation, it appears from the record that on 14.12.2015 as well as on 18.12.2015, correspondence took place between the petitioner and the department and on 21.12.2015, last reply appears to have been given through tax consultant by the petitioner and clarified his position that there is no question of liability of the petitioner with respect to affairs of the company. 2.4 Said documents appear to have been examined by the authority and the authority on 31.3.2016, was pleased to pass an order in exercise of power under Section 179 of the Act and came to the conclusion that petitioner has failed to prove his gross negligence, misfeasance or breach of duty in relation to the affairs of the company and by lifting the corporate veil of the public limited company in question, all the three directors including the petitioner are held to be defaulters within the meaning of Section 179 of the Act. 2.5 It is against this order which has been passed finally on 31.3.2016 by the authority, the petitioner has filed the petition by invoking extraordinary jurisdiction of this Court. 3. Learned Senior Counsel, Mr.Saurabh Soparkar with learned advocate, Mr.J.R.Parikh for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling with the company and not the petitioner. It was contended that though adequate material qua that is produced even by the petitioner, the authority has assumed the jurisdiction to fix the liability of petitioner which action is bad in law, not permissible and therefore, same is required to be set aside. Learned counsel has further contended that though the lifting of corporate veil principle is vogue but, at the same time, the situation for that must be appearing on the record which is completely missing in the present case and therefore, it was not open for the authority to lift the corporate veil and pass an order. It was also contended that though the company was registered and incorporated as a public limited company, the authority has erroneously assumed as if it is akin to a private limited company and thereby, applied Section 179 of the Act. Ex-facie a bare reading of this statutory provision is meant for the private limited company and therefore, the action itself is beyond the scope of authority and therefore, deserves to be quashed and set aside. 3.1 Learned counsel for the petitioner has further contended that concept of vicarious liability cannot be inferred by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 179 of the Act, no liability can be fastened upon the petitioner and thereby, has requested the Court to grant the relief as prayed for in the petition. 4. To oppose this stand of the petitioner, learned Senior Counsel, Mr.M.R.Bhatt for the revenue has contended that there is a systematic design adopted by the petitioner and the company's name has been utilized which is for the purpose of seeking accommodation entries. Learned counsel for the revenue has submitted that simply because the petitioner is not a signatory to the documents of the company, is not sufficient enough to absolve him from responsibility and therefore, the order passed by the authority is just and proper. Learned counsel further submitted that the petitioner has joined the company in March,2005 and has remained upto September,2005 and in between, the holding of the share capital of the company in the hands of the petitioner was to the extent of 98.33% during the relevant year. It was submitted by the learned counsel that the record has sufficiently established that Hirak Biotech Company was formed with a view to provide accommodation entries in the form of bogus share capital and share premium and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t upon attachment through proceedings under Section 226(3) of the Act, it has been reported that balances of the company with respect to debtors or bank had zero balance and during the course of time, the property in question have been sold in the month of February,2009. There was a huge demand of other financial institutions as well and therefore, learned counsel for the revenue has submitted that entire affairs of the company was allowed by the petitioner in such a manner to be operated which may ultimately lead to huge scam and out of that affairs of the company, the total liability accrued to tax dues only of the company upon regular assessment to the extent of Rs. 240.08 lacs including penalty and subject to chargeability of interest under Section 220(2) of the Act and therefore, when such a huge claim of the department has remained outstanding for the relevant year in which the petitioner was a director, though silent is equally responsible for the ultimate outcome of the company and therefore, the authority has rightly passed an order under Section 179 of the Act and therefore, in this view of the matter, learned counsel for the revenue contended that no extraordinary jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est under section 220(2) of Income Tax Act. (2) When the Company came to be incorporated, shareholding was only to the extent of Rs. 5.00 lakhs i.e. 50,000 shares of Rs. 10/- each as on 31/3/2005. Suddenly in the meantime, within 2 and ½ months, one of the Directors, Mr. Ajay S. Patel, came to be introduced in the Company who brought sizable amount of shareholding. The Company had three Directors namely, Mr. Pratik R. Shah with a shareholding of 44,000 shares, Mr. Niketa Dave with only 1000 shares and Mr. Ajay Patel with a shareholding of 29,50,000 shares in the Company, which practically comes to 98.33%. (3) It is further emerging from the record that within a short span only, the petitioner came to be introduced as an additional director of the company and upon his induction, the share capital of the company shoot-up to Rs. 7 crores and out of said share capital holding, the petitioner has been inducted with a substantial holding to the extent of 98.33% and to that extent, the petitioner is the sole holder of this substantial chunk of capital of the company. (4) Another feature also appearing is that no public issue was advertised and no shares were issued to the public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod of one of the Directors, Mr. Ajay Patel from 20/3/2005 to 5/9/2005. (8) Practically, the Company though named as Hirak Biotech Limited has acted practically as a Private Limited Company altogether and the Directors appeared to have acted in such a detrimental way which falls within the purview of section 179 of the Income Tax Act. There were huge financial transactions, serious default, total non-cooperation in the Company and the Company appears to have been spearheaded by one of the Directors only. There were serious defaults in financial transactions with Jammu and Kashmir Bank as also with Ahmedabad People's Co-Op. Bank of huge amounts and therefore, all these combination of circumstances led us to believe that this is a fit case to resort to a principle of lifting of corporate veil. (9) Another surprising feature is that though persistently summons came to be issued to Directors, none of the Directors of the Company appeared on the date of hearing and another Director, Mr. Pratik R. Shah, who is said to have acted on behalf of the Company has also neither appeared nor filed any submissions and it appeared that by filing an affidavit, he appears to have shielded one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this main object of the company for which it has been set up, what is reflecting from the record is that the company has executed its business that of trading and distribution of ice-cream quite de-hors from the main object for which the company appears to have been set up and this trading and distribution business of ice-cream is the case of company itself as is reflecting from the assessment order as referred to above. Therefore, under the circumstances it appears that the company is set up for different purpose than which is posed before the authority at the time of incorporation. Therefore, the inference which has been raised by the department that company is set up essentially for the purpose of accommodation entries might not be ignored, though attempt is made to establish contrary. 6. The Memorandum of Association contains various clauses. Clause 13 thereof deals with the issue of debentures or debenture-stock etc. But correspondingly if we look at the Articles of Association which governs the affairs of the company and its working. Some of the clauses contained in Articles of Association are worth to be considered which are also very relevant incidentally to the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company which relates to further issue of share wherein, it has been mentioned that where at the time after the expiry of two years from formation of the company or at any time after expiry of one year from allotment of shares in the company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares whether out of the unissued capital or out of the increases share capital then, certain steps to be contemplated which reads as under : "Further issue of shares 13.1)Where at the time after the expiry of two years from the formation of the company or at any time after the expiry of one year from the allotment of shares in the company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares whether out of the unissued capital or out of the increased share capital then : (a) Such further shares shall be offered to the persons who at the date of the offer, the holders of the equity shares of the company, in proportion, as near as circumstances admit, to the capital paid up on tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company caused by the exercise of an option attached to the debenture issued or loans raised by the company; (i) To convert such debentures or loans into shares in the company; or (ii) To subscribe for shares in the company (whether such option is conferred in these Articles or otherwise). PROVIDED THAT the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term : (a) Either has been approved by the Central Government before the issue of the debentures or the raising of the loans or is in conformity with the Rules, if any, made by the Government in this behalf; and (b) In the case of debentures or loans or other than debentures issued to or loans obtained from Government or any institution specified by the Central Government in this behalf, has also been approved by a special resolution passed by the company in General Meeting before the issue of the debentures or raising of the loans." And this clause if we peruse would indicate that facts on hand have not clarified whether the same is complied with or not because the company has with the aid and assistance of petitioner has increased its share capital within two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2009 Against RC drawn by the TRO u/s 222 of the act, The company reported that the rectification is pending and as such RC is bad in law 12 24.03.2003 Application of stay of demand to be kept in abeyance field by the assessee before the AO. The assessee stated that it is high demand and appeal is pending before the CIT(A) 13 16.4.2009 Filed letter dated 16.04.2009 to the CIT-II, Ahmedabad Assessee requested to direct the AO not to take coercive action and demand may be stayed till disposal of appeal. 14 24.04.2009 Report submitted to the CIT, Ahmedabad. Against stay of demand the assessee took plea of harassment stating that RC draw u/s 222 is unjust. 15 07.05.2009 Letter dated 7.5.09 was written to the assessee In compliance to stay application dated 24.03.2009 referred to above, it was intimated to file reply on point wise additions made in the order u/s 143(3). An order u/s 220(6) of the Act was passed intimating to the company that stay application is not acceptable and it was requested to pay the demands 16 13.05.2009 Vide Letter dated 13.05.09 written to the CIT Allahabad. It was intimated that the rectification application u/s 154 has been disposed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has resigned from the company in September,2005 within a short span but, thereafter it appears that there is no substantial business of the company and after that only which is left there is huge accrual of debts of the company and for recovery of that, even the properties have been auctioned and sold away under the steps of Securitization Act and therefore, it appears that after resignation of the petitioner what has been left with the company is huge liabilities only. However, be that as it may, fact remains that huge demand to the extent of Rs. 240.82 lacs of the tax revenue remained outstanding and despite aforesaid vigorous steps, nothing is recovered from the company which has compelled the department to initiate action under Section 179 of the Act against all the responsible directors. 11. This factual background stated above which is reflecting from the record compels the Court to examine minutely the affairs of the company, the responsibility and role of the directors and the statutory provision which is resorted to by the department. The factual background is already narrated above and hence, no further analysis is required to be made in that context. However, in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the theory of department that company is essentially set up for accommodation entries appears to be significant. 12.1 Now, referring to the strenuous contention raised by learned counsel for the petitioner that except bringing share capital, the petitioner was not concerned with the affairs of the company and everything has been done by other directors. Now, to deal with this contention if we peruse the statutory provisions contained under Section 166 of the Companies Act, certain duties are spelt out with respect to the obligation of directors of the company. Perusal of this statutory provision would indicate that director of a company shall exercise his duties with due and reasonable care, skill and diligence, and shall exercise independent judgment and further, a director of a company shall not assign his office or any assignment so made, shall be void. Now, this statutory provision dealing with duty of the director has indicated that other director is supposed to take his office with due diligence on account of fiduciary obligation with the company. There are series of cases in which it has been held that the position of a director of a company is fiduciary relationship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the human resource management of the company, hence, he had no fraudulent intention to deceive the investors. We find it difficult to accept the contention. The appellant, admittedly, was a whole time Director of the company, as regards the preparation of the annual accounts, the balance-sheet and financial statement and laying of the same before the company at the Annual General Meeting and filing the same before the Registrar of the Companies as well as before SEBI, the Directors of the company have greater responsibility, especially when the company is a registered company. Directors of the companies, especially of the listed companies, have access to inside knowledge, such as, financial position of the company, dividend rates, annual accounts etc. Directors are expected to exercise the powers for the purposes for which they are conferred. Sometimes they may misuse their powers for their personal gain and makes false representations to the public for unlawful gain." 12.2 So, even in cases where director is leaving the matter to the discretion of other directors without supervision and also for making loans without inquiry for what purpose the loans were made and consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Though a defence is set up by the petitioner that everything has been done after his resignation but, upon examiation it appears that in a relevant year when substantial transactions and the huge cash deposits have come, can be said to be during the tenure of the directorship of the petitioner. 13. This well recognized principle of corporate veil can be lifted if the company is used as a means to evade tax or to circumvent the tax obligation and in that case, an individual shareholder may also be liable to pay the income-tax. The Supreme Court in case of Juggilal Kamlapat V/s. Commissioner of Income Tax, U.P., reported in 1964 (52) ITR 811 has held that the Court is entitled to lift the mask of corporate entity if it is used for tax evasion or to circumvent the tax obligations and therefore, in such a situation, the person concerned can be held to be liable for income-tax. In case of Commissioner of Income-tax V/s. Sri Meenakshi Mills, Madurai, reported in AIR 1967 SC 819, has also spelt out the proposition that the Court is empowered to lift the corporate veil if the company is used as a means to circumvent the obligation. 13.1 There are series of cases in which for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate veil as some times referred to as cracking the corporate shell, is applied by Courts sparingly and cautiously. It is however, recognised that boundaries of such principle have not yet been defined and areas where such principle may have to be applied may expand. Principally, the concept of corporate body being an independent entity enjoying existence independent of its directors, is a well known principle. Its assets are distinct and separate and distinct from those of its members. Its creditors cannot obtain satisfaction from the assets of its members. However, with ever developing world and expanding economic complexities, the Courts have refused to limit the scope and parameters or areas where corporate veil may have to be lifted. 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 enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt material and when both the conditions of meeting with the emergent need of the situation were held to be duly satisfied, double application of lifting of veil was permitted by the Court. This Court in the case of Special Civil Application No.10686 of 2013 with Special Civil Application No.10688 of 2013 in the case of Sandeep A. Mehta v. Income Tax Officer and another, decided on October 15, 2013, also had an occasion to refer to the decision in the case of Pravinbhai Kheni (supra). The facts somewhat similar to the present case were presented, wherein the petitioners were the directors of the Company, where the notice was issued to the Directors for recovery of demand under section 179 of the Act in their capacity as Directors. The Company admittedly was a public limited company since the year 1995 and the petitioners were appointed as directors of the Company in December, 2005. They were not even share holders at the time of conversion of the company from private limited company to public limited company. The request was also made by the Revenue to lift the corporate veil. On duly considering the judicial pronouncements on the said aspect and on considering the material on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the facts are eloquent enough in the instant case, where the petitioners were never concerned with the affairs of the Company until 28.12.2005 and the Company had already become Public Limited Company and by the time they became Directors, they were not even simple shareholders for the entire period till the year 2006, there does not arise any question of applying the ratio of decision of Pravinbhai M. Kheni vs. Assistant Commissioner of Income Tax and others (supra) or for that matter upholding the action of the respondents of invoking the provisions of section 179 of the Act. In the present case, as we can notice, the company M/s.Blue Information Technology is a Public Limited Company. It was incorporated as a Public Limited Company vide certificate of incorporation dated May 25, 1992. It came out with a public issue in June, 1996. The petitioner director of the said Company resigned on September 06, 1997. Admittedly, the dues are of the years 1995-96, 1996-97 and 1997-98. The notice was issued on October 14, 2001 under section 221(1) of the Act seeking to recover penalty for not having paid the dues of the company for the aforesaid years to the tune of Rs. 297 lakh. It is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the very action against the petitioner under section 179 of the Act, when would not lie, the petition, therefore, deserves to be succeeded." 15. Yet in another decision, observations were made by the Division Bench of this Court in case of this very Ajay S. Patel Vs. Income Tax Officer-Ward 4(3) reported in 2015(375) ITR 72 and some of the observations are worth to be taken into consideration and therefore, relevant extract of said decision incorporated in paragraph No.6 is reproduced hereinafter: "6. We may record that in the above referred decision of this Court in case of Pravinbhai M. Kheni (supra), while considering the case under section 179 of the Act itself, this Court at page 23 had concluded thus: "1) The respondent authorities did establish that it was not possible to recover the tax dues from the company. 2) The petitioner neither pleaded nor succeeded in establishing that such non recovery was not attributable to any gross neglect, misfeasance or failure in discharging duty on his part in connection with the affairs of the company. 3) Being a public company, ordinarily, provisions of section 179(1) of the Act cannot be applied. However, if the factors noted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efraud the revenue and shield the individual who behind the corporate veil is the real operator of the company and beneficiary of the fraud, the Courts cannot hesitate in ignoring the corporate status and strike at a real beneficiary of such complex design. The background of present fact is such that we are not hesitant in any way to apply this principle and are also in conformity with the decision of revenue in applying such a principle and pass a justified order. 16. A further proposition of law is also not possible to be ignored by the Court is that even in case of Tata Engineering & Locomotive Co. Ltd. as also in Life Insurance Corporation V/s. Hari Das Mundhra, reported in 1962 LawSuit (All) 30 as well as in PNB Finance Ltd. V/s. Shital Prasad Jain, reported in 1983 54 Company Cases 66 (Delhi), it has been held by all the Courts consistently that in a given case the Court may lift the corporate veil of a company where it appears that the company was formed only for some fraudulent purpose and to defraud the creditors or to avoid legal obligations. Now in the context of this proposition, if we look at and correlate the clauses contained in Memorandum of Association as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the company was set up. The corporate veil under the circumstance necessarily to be pierced and the members cannot be allowed to take shelter behind the corporate veil of the company. This proposition is fortified by a decision of the Supreme Court in case of Dr. A. Lakshmanaswami Mudaliar & Ors. V/s. Life Insurance Corporation of India & Anr., reported in AIR 1963 SC 1185. Relevant observations of the said decision are reproduced hereinafter : "15. The trust has numerous objects one of which is undoubtedly to promote art, science, industrial, technical or business knowledge including knowledge in banking, insurance, commerce and industry. There is no obligation upon the trustees to utilise the fund or any part thereof for promoting education in insurance and even if the trustees utilised the fund for that purpose, it was problematic whether any such persons trained in insurance business and practice were likely to take up employment with the Company. Thus the ultimate benefit which may result to the Company from the availability of personnel trained in insurance, if the trust utilises the fund for promoting education, insurance, practice and business, is too indirect, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid position prevailing on record takes us to another vital and important issue as to whether the authority was justified to treat the company akin to a private limited company while passing the order. Though it appears from the certificate of incorporation, the words 'private limited' are not used and therefore, it is to be treated as public limited company and therefore, contended to be treated beyond the scope of Section 179 of the Act. But on close look at the affairs of the company, the manner in which the affairs proceeded with, all indicate that in actual terms the company has not acted as a public limited company in true sense and for that purpose, if we analyze the record which indicates that the company was formed with a share capital of Rs. 5 lacs only and within a short span of two and half months only, sizable amount has been brought by the petitioner alone and that too, to the extent of 98.33% and then, chronologically if we see the record the substratum of the company disappeared after the resignation of the petitioner. It is also revealing from the record that during the tenure of the petitioner, huge cash flow is deposited and practically use of cash flow deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the record that though the company is set up with a minimum paid up capital of Rs. 5 lacs just to brand it as public limited as defined under Section 3(1)(iv) of the Act. But eventually, immediately after incorporation and commencement of the business, it has partake the character of a private limited company as public at all has not been invited to subscribe the capital of the company and there appears to be no transaction which can safely be said to be of a public limited company and therefore, the entire scenario which is reflecting from the record indicates that may be that company is set up as a public limited company, may be that every trouble has started after resignation of petitioner, further may be that Mr.Pratik R. Shah has taken all responsibilities on his shoulder by way of mere affidavit but, in reality these suspicious circumstances have rightly compelled the authority to lift the corporate veil to fix the liability and therefore, in a given circumstance, may be that to arrive at a conclusion the authority has not been able to assign cogent and accurate reasons but, substantially if the reasons are substantiating the ultimate conclusion then, simply because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner has remained dormant, cannot evade himself from the huge revenue demand which is faced by the company. Section 2(13) of the Companies Act defines word 'director' which indicates that any person occupying the position of a director by whatever name called. Thus, it is not the name by which the person is called but, a position he occupies and the functions and duties which he discharges that determine whether in fact he is a director or not. Simply because the petitioner has remained non-participative, cannot absolve himself from the ground reality which is faced by the company and therefore, looking to this overall situation of a legal position of director, it can thus be seen that simply because the word 'private limited' is not mentioned by the company claiming to be a director of a public limited company, the petitioner cannot shunt himself away from the responsibility which is crystallized against the company. There appears to be no cogent explanation reflecting about the procedure which is adopted by the company of induction of petitioner as a director in a short time contrary to norms as also about his outgoing from the company and therefore, when the petitioner is hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change in the facts, the same would make a world of difference in applying principle of law propounded in the decision and here, there is a substantial change in the fact which does not permit the Court to take assistance of the aforesaid decision cited by the learned counsel for the petitioner. 26. Relying upon another decision of this Court in case of Ram Prakash Singreshwar Rungta & Ors. V/s. Income Tax Officer, reported in 370 ITR 641, learned counsel for the petitioner contended that order in question is not in consonance with the law propounded in this case. In the said decision, the Division Bench of this Court has propounded that unless and until there is a gross negligence, misfeasance or breach of duty on the part of the petitioner, due to which the tax dues of the company could not be recovered, no resort to be made to Section 179 of the Act against the directors. But again we refrain from adopting said proposition basically in view of the fact that the fact situation contained in the said decision are quite distinct from what is on hand and therefore, we are of the opinion that this judgment can have no bearing on the central issue involved in the present petition. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd separate and distinct from those of its members. Its creditors cannot obtain satisfaction from the assets of its members. However, with ever developing world and expanding economic complexities, the Courts have refused to limit the scope and parameters or areas where 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 striking at the real beneficiaries of such complex design. 17. Section 179 of the Act itself is a statutory creation of piercing of corporate veil. Ordinarily, directors of a company e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aising several contentions why such principle could not be invoked. To our mind this would not cure the defect committed by the Assistant Commissioner. Firstly, the concept of post decisional hearing is not always accepted by the Courts and found to be rather unsatisfactory manner in which requirement of natural justice can be stated to have been fulfilled. Secondly even the Assistant Commissioner did not take into account such objections after passing his order and such objections thus remained pending. The petitioner did file revision against the order of the Assistant Commissioner and the Commissioner did examine his objections, however, there was no opportunity whatsoever to the petitioner to demonstrate before the authorities that the factors which have weighed with the Assistant Commissioner to invoke the principles of lifting the corporate veil do not arise at all. Thirdly, in the matter of this nature where due to its extreme complexity of the transactions and law required to be applied, it would be highly unsatisfactory manner of eliciting the response from a citizen and dealing with the same. In the context of conflicting theories of requirement of hearing before taking a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record." 28. On this issue of lifting of corporate veil, relying upon series of decisions including the Supreme Court, the Division Bench of the Delhi High Court in case of India Waste Energy Develoment Ltd. & Anr. V/s. Government of NCT of Delhi & Anr., reported in 2003 (114) Company Cases 82 (Delhi) has also held that even in a situation where exigency arises, in absence of any statutory provision also, the Court is entitled to lift the veil and therefore, few observations of the said judgment related to the issue in question are quoted hereinafter : "13. The subject and the concept of lifting the corporate veil has come up for consideration before the Supreme Court umpteen times but we do not propose to burden the judgment by making reference to all the decisions, relied upon by learned counsel for the parties. We will notice a few decisions which are directly on the point. "In Meenakshi Mills' case (supra), while dealing with a situation arising under the Income Tax Actt, which does not contain any specific provision regarding lifting of corporate mask, their Lordships of the Supreme Court observed that: "it is well established that in a matter of this descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the authority to lift the corporate veil. It is also found by the authority that at the relevant point of time, the company was of one man show and substantially managed and controlled by petitioner and that conclusion is arrived at on the basis of materials on record which are indicated specifically that substantial cash flow and substantial increase in capital is only after induction of petitioner as a director and certificate of commencement of business was obtained by the company only after petitioner being joined in the company. 30. After analyzing the definition of 'public limited company' coupled with definition of 'private limited company' defined under Section 3 of the Companies Act, the entire affairs upon examination by the authority has found that there appears to be of characteristic of Hirak Biotech Limited as defecto private limited company and therefore, simply because word 'private limited' is not mentioned, the petitioner cannot take shelter of 'public limited' nomenclature of a company. It is also found from the record that authority has not simply considered the substantial holding of the petitioner and then, assumed. The aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the relevant record and on the basis of this, we find that there is no irregularity and/or illegality of any nature which warrants this Court to exercise of extraordinary jurisdiction to arrive at this self-imposed restrictive scope of Articles 226 or 227 of the Constitution of India. Ample assistance is provided to this Court by following decisions of Apex Court which are sufficient enough to arrive at the conclusion which is arrived at by this Court in the present judgment. 32. Of course, the Division Bench of this Court, at the time of admission of the present petition in April,2016, has considered the judgment in case of Ram Prakash Singheshwar Rungta & Ors. V/s. Income-tax Officer, reported in 370 ITR 641 (Gujarat) as cited by the petitioner. But upon analysis in detail of the entire background of the facts, we feel that said decision in a straight jacket formula cannot be applied as also the decision in case of Radhey Mohan Sharma V/s. Deputy Income-tax Officer, reported in (2014) 44 Taxmann.com 66 (Gujarat). We reiterate that if there is a difference in facts and circumstances, the same would make a world of difference in apply the principle and therefore, on anal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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