Kushal Vinodchandra Mehta vs The Income Tax Officer, Ward … on 2 May, 2023
Bench: Honourable Justice Ashutosh Shastri
R/SPECIAL CIVIL APPLICATION NO. 12634 of 2019
Facts
The petitioner in this case was appointed as the director of ‘Annapurna Polymers Pvt. Ltd.’ Later on, he sold his shares and resigned from the post. The company later on went into liquidation and an Official Liquidator was appointed. Then, after an unreasonable period, a show cause notice in exercise of power under Section 179 of the Income Tax Act came to be issued to the petitioner calling upon the petitioner to show cause why an order should not be made against him for the pending tax dues of ‘Annapurna Polymers Pvt. Ltd,’ for the Assessment Year 2011-12 amounting to Rs.1,16,58,350/-.
The provisions of Section 179 of the Income Tax Act, 1961 provides that if any tax due 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
The petitioner responded to the notice starting that the tax dues relate to a disputed issue which is under litigation and the notice does not state any efforts undertaken to recover money from the Company itself and further non-recovery of said dues does not amount to breach of duty in the affairs of the Company and as such the notice is vague. Due to this reason, the petition has been brought before the High Court
The advocate appearing for the petitioner contended that the notice itself is vague, without reflecting any condition precedent as mentioned in Section 179 of the Income Tax Act and by issuing such vague notice, the petitioner has been deprived of making effective representation which thereby violated a well-recognized principle of natural justice.
The advocate appearing for the authority opposed this petition by submitting that the notice which had been issued was very well reflecting circumstance regarding the reasons the petitioner called upon under Section 179 of the Income Tax Act and as such, in no circumstance, the notice can be said to be vague
Judgement
The Court held that, from the perusal of the Notice under Section 179 of the Act, 1961, it was revealed that the notice was totally silent as regards to the satisfaction of the condition precedent for taking action under Section 179 of the Act as the notice did not specify the steps that were taken against the company for recovery of the outstanding amount
The court therefore set aside the order and quashed the notice issued and held that it did not adequately satisfy the ingredients of section of 176 thereby allowing the petition. It also directed the respondent authority to re- consider and pass a fresh order
JUDGEMENT REVIEWED BY AMIT ARAVIND
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