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TMI Blog2022 (7) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... eds to be understood that recovery procedure u/s 179 against the directors is not to be resorted to casually and only because it is convenient to do so for affecting recovery of the tax dues. With a view to show that the respondent No.1 had mechanically resorted to the provisions of section 179 of the Act, the petitioner has relied upon an order of attachment, dated 6th March 2019, whereby the Tax Recovery Offcer-2, Thane has ordered the attachment of land at Village Kalivali, Taluka Panvel, Dist. Raigad to show that if respondent had made an effort, the tax dues could be recovered from the company. An additional affidavit has also been filed by the petitioner. In response to this additional affidavit, an affidavit in reply has also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 220(2) of the Act which was otherwise due and payable by the company, CPML. The demand outstanding against CPML was for the assessment year 2010-11. 2. Briefly stated the material facts in the light of which the present controversy has arisen are as under :- (a) A Show Cause Notice dated 24th January 2018 was served upon the petitioner by the Assistant Commissioner of Income Tax, Circle 9(2)(2), Mumbai informing the petitioner that tax dues for an amount of Rs.3,88,19,430/- were outstanding against M/s. Crest Paper Mills Ltd. for the assessment year 2010-11 and that the same had not been paid by the assessee company so far. The petitioner therefore was asked to show cause as to why proceedings under section 179 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esorted to against the directors of the assessee company being a public company, it was held that no evidence had been furnished by the petitioner to prove that it was a public company. 7. It was further held that the assessee company having been delisted from the stock exchange as a penal measure for failure to comply with the requirements of the Listing Agreement did not not warrant that the benefits attached to a public company should be accorded to the assessee company. 8. It was further held that assuming the assessee was a public company, yet by lifting the corporate veil, even the directors of such companies could be brought within the purview of section 179 especially where the affairs of the company were not conducted as a pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence the present petition. Scope and ambit of section 179 : 11. Before we proceed to deal with the issues raised during the course of hearing and the arguments in support thereof, it would be beneficial to briefly refer to the provisions of section 179 of the Act which envisages that if the tax dues from a private company, in respect of any income of any previous year cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that 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. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he directors, the extent of control exercised by them regarding the affairs of the company and the extent of their representation on the board of directors. It would also be necessary to consider the Articles of Association of the company and any other agreements that may exist between the share-holders inter se. There are several other factors also which must be taken into consideration including as to whether the company was converted into a public limited company for the purpose of avoiding statutory liability benefiting the petitioners alone and/or conferring any other benefits upon the petitioners or any one or more of them alone. Lifting the corporate veil in a case such as this has drastic consequences. The impugned order does not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the tax dues cannot be recovered from the private company. To justify that the tax dues cannot be recovered, the Assessing Officer has to enumerate the steps taken towards recovery of tax dues from the company. For example, attachment of the accounts of the company as also, its movable and immovable assets, efforts made by the Assessing Officer in identification of the various movable and immovable assets of the company, and so on and so forth. The Show cause notice under section 179 of the Act, dated 24th January 2018, on the other hand, reads as under :- 1 In the case of M/s. Crest Paper Mills Limited (PAN : AAACCC4343D), the demand of Rs. 3,98,19,430/- is outstanding. 2 The aforesaid demands have been raised vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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