9911796707
TMI Blog2000 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... nd expired on May 22, 1988, at Calcutta. The petitioner's husband was one of the directors in Friends United Investors (P.) Ltd. (hereinafter referred to as "the company"). The husband of the petitioner was the director of the company and resigned from the directorship on April 4, 1974, and that resignation was accepted and communicated by the Assistant Registrar of Companies vide his letter dated May 23, 1974. Thereafter, the petitioner's husband has nothing to do with the company. In 1985, the husband of the petitioner, Shri D. M. Gupta, was served with a notice under section 226(3) of the Act of 1961 for recovery of the tax liabilities of the company for the assessment years 1968-69 to 1974-75. The petitioner's husband, Shri D. M. Gupta, challenged that notice of recovery proceedings on the ground, inter alia, that the amendment made in 1975 in section 179 has no application in the assessment years prior to 1975 and no opportunity was given to the appellant/petitioner's husband for hearing before the order under section 179 was passed. Though the petition was dismissed a direction was given that the Income-tax Officer should give the opportunity and pass a fresh order under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court has been dismissed by the apex court. He further submits that even this court in the case of the petitioner's husband, in the order dated February 17, 1986, has taken the view that the amendment that came into force on October 1, 1975, cannot be invoked to make the petitioner liable for tax liability against the company uptill assessment year 1974-75. Learned counsel for the Revenue submits that the decision of the Bombay High Court has been set aside by the Division Bench of the Bombay High Court in the case of Union of India v. Manik Dattatreya Lotlikar [1988] 172 ITR 1 and the decision of the Kerala High Court was not on the amendment made in section 179, in the year 1975 but when the section itself was introduced. Therefore, that has no application on the facts of this case. Heard learned counsel for the parties. The facts are not in dispute that the petitioner's husband, Shri D. M. Gupta, was one of the directors of the company. He resigned from the directorship of the company in the year 1974. A demand notice of the tax liability for recovery was served on the husband of the petitioner for the outstanding tax liability of the company. That demand notice, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." Prior to the amendment in 1975, the director was liable under section 179 jointly and severally for the payment of his company's tax arrears only if the company had been wound up, but after the amendment in section 179 in the year 1975, section 179 provides that where any tax was due from a private company which could not be recovered from the company every person who was a director of the company is jointly and severally liable for the payment of such tax unless he proves that the non-recovery could not be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company meaning thereby if the company has gone into liquidation or not the ex-director is also liable to pay the tax arrears due against the company. The case of the petitioner is that her husband was a director before this amendment and when the amendment has no application, the director who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling with the issue this court has observed as under : "It is not necessary to refer to these judgments because no effective answer to this argument could be advanced on behalf of the respondents. It is well settled that any amendment which is in force at the beginning of the relevant assessment year must govern the case though the amendment is made after the income under assessment is earned. The company's previous year was the financial year. The petitioner ceased to be a director of the company after the financial year 1974-75 for which the relevant assessment year is 1975-76. The law applicable to the assessment of the income of the company for the financial year 1974-75 will be the Incometax Act as it stood on April 1, 1975. The amendment that came into force with effect from October 1, 1975, cannot be invoked to make the petitioner liable for the income-tax dues of the company for the financial year 1974-75 or any earlier year." When this court in the case of the appellant's husband has taken the view that the amendment in section 179 of the Act has no retrospective effect, how that can be ignored by the Income-tax Officer in giving effect to the order of the High Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to come to the conclusion that the company has gone into liquidation. When the company has not gone into liquidation, whether non-recovery of tax is on account of negligence of any director or not is irrelevant in cases of assessments prior to the assessment year 1974-75. When the Commissioner of Income-tax has not brought any material on record to hold that the company has gone into liquidation, he has no justification to set aside the order of the Income-tax Officer under section 263 of the Act. When the company has not gone into liquidation nor, the amendment in section 179 made in 1975, has retrospective effect, we found no error in the order of the Income-tax Officer dated March 4, 1987, passed under section 179 of the Act. When the order of the Income-tax Officer dated March 4, 1987, is not erroneous and is passed in compliance with the direction of this court dated February 17, 1986, there is no error in that order that the petitioner's husband is not liable for the tax dues against the company when the order is not erroneous. The Commissioner has wrongly invoked the provision of section 263 of the Act of 1961. In the result, the order of the Commissioner of Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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