9911796707
TMI Blog1997 (7) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1962-63 to a total tax liability of Rs. 1,34,705. The company was ordered to be wound up by this court on March 22, 1968, in Civil Original No. 33 of 1966 and was dissolved by the order of this court passed under section 481 of the Companies Act in Company Petition No. 56 of 1974. Prior to the winding up of the company, proceedings under section 179 of the Income-tax Act, 1961, (hereinafter to be referred as "the Act"), were commenced against the aforesaid directors by issuing notice thereunder by the concerned Income-tax Officer, holding them liable to discharge the liability of the company for payment of the due arrears of income-tax, mentioned above. The directors of the company filed reply to the notice issued to them under section 179 of the Act. The Income-tax Officer rejected the pleas of the directors by his order dated December 31, 1970. Thereafter, the directors filed a revision before the Commissioner of Income-tax, which was also rejected on January 30, 1972. After the revision was decided by the Commissioner of Income-tax, proceedings were initiated for realisation of the income-tax arrears aforesaid against the directors of the company when the directors approached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efaulter assessees until and unless a demand notice is issued to them under the provisions of section 156 of the Act, as provided in sub-section (4) of section 220 of the Act. Since, the petitioner was not an assessee in default, hence he could not be proceeded against, nor could his property be sold in pursuance of any recovery certificate which has been issued by the Tax Recovery Officer, Income-tax. The petitioner prayed for quashing of proclamation of sale (annexure P-3) and order (annexure P-2) passed by the Tax Recovery Officer, rejecting his prayer and to stay recovery proceedings till a demand notice is served on him. The respondents filed written statement in the aforesaid writ petition (No. 556 of 1979), wherein they contended that the service of demand notice under section 156 of the Act had been effected on Sandhu Bus Service (Pvt.) Ltd., the company. The demand was not paid by the company and orders under section 179 of the Act were passed by the Income-tax Officer on December 31, 1970, holding the petitioner, S. Basant Singh and S. Hardeep Singh, ex-directors of the company, jointly and severally liable to pay the tax demand outstanding against the company. It was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a director of the company only if the company has become a defaulter and the money cannot be recovered from it and the directors are held liable for that default. For the purpose of the provisions of section 220(4) of the Act, the learned single judge held that the person held liable under section 179 of the Act to pay the tax liability of the company would be deemed to be a defaulting assessee in terms of section 220(4) of the Act. Consequently, both the writ petitions were held to be without any merit and were dismissed. The appellant, Basant Singh in the meantime died and his heirs and legal representatives, namely, Hardip Singh, Harbhajan Singh, Satnam Singh, Sarbjit Singh and Amritpal Singh were impleaded, vide order dated September 13, 1986, by this court in C.M. No. 3397 of 1986. We have heard learned counsel for the appellants and learned counsel for the respondents. We have carefully perused the judgment under appeal. The main contention of learned counsel for the appellants is that the directors of the company, since liquidated, cannot be held to be assessees in default within the meaning of section 220(4) of the Act unless and until a notice of demand as envisag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot come into force and, as such, they were not liable jointly and severally for the amount of arrears of income-tax under section 179 of the Act. As mentioned above, the matter was contested upto the Supreme Court, which finally rejected the plea of the directors of the company. The decision of the case itself is in S. Hardip Singh v. ITO [1979] 118 ITR 57. This matter thus, stands finally decided between the parties that the directors of the company are jointly and severally liable for payment of the arrears of income-tax outstanding against the company, which was not paid by the company. The Income-tax Recovery Officer commenced the recovery proceedings and issued order of attachment and summoned Hardeep Singh with accounts to appear before the concerned authority in connection with the recovery of the arrears of income-tax. The directors of the company filed their reply and raised a plea that the arrears of income-tax outstanding against the company could not be recovered from them and they could not be treated as defaulting assessees within the meaning of section 220(4) of the Act until and unless a demand notice is served upon them as required by section 156 of the Act. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ognised as an entity, the existence of partnership firm in the eyes of law in so far as it being a juristic person is concerned, is that it can neither sue nor be sued. The suit has to be filed by or against the partners of the partnership firm. On the other hand, the company incorporated under the Companies Act is a juristic entity and it can sue and be sued. Once the partnership firm is dissolved, the partners of the firm are to be proceeded against. The partnership firm is no longer in existence and that is why before the partners of the firm can be treated as assessees in default, they are individually to be served with notice of demand under section 156 of the Act. On the other hand, directors of the private company, incorporated under the Companies Act, can be proceeded against for the tax due from the company under section 179 of the Act, which specifically provides as under : "179. (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, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be declared a defaulting assessee in terms of section 220(4) of the Act unless a demand notice is served upon him under section 156, and unless a demand notice is served on a defaulting assessee, the coercive process of recovering the tax liability from him by issuing a tax recovery certificate under section 222 cannot be resorted to." After going through the aforesaid observations of the learned single judge, it would be abundantly clear that he has dealt with the relevant provisions of the Act right from the service of a demand notice under section 156 of the Act up to the assessees being declared defaulting assessees and necessitating issuance of coercive process for recovery of the tax liability from him by issuing a tax recovery certificate under section 222 of the Act. This, however, is not a finding regarding facts of the instant case. The finding of the learned single judge regarding the facts of the instant case is contained in the subsequent para, which reads as under : "So far as the order that is passed under section 179 of the Act is concerned, the same is not appealable. Therefore, the first underlying necessity of issuance of the notice under section 156 is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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