Sonal Nimish Patel Vs ACIT (Gujarat High Court)
In the given case the subject matter of challenge in this writ-application at the instance of the writ-applicant is an order passed by the respondent under section 179 of the Income-tax Act, 1961. In the case of M/s. Tirupati Proteins Pvt.Ltd demand of Rs. 9074.34 lakhs is outstanding. The said demand has not been paid till date. Despite being given a number of opportunities, the company did not make the payment of outstanding demand.
At the relevant point of time the directors of the assessee company were Smt. Sonal Nimish Patel and Smt. Ashita Nilesh Patel. Further, it is noticed from the records of the company that there are no recoverable assets in the name of assessee company. In such circumstances, proceedings under section 179 of the I.T. Act were initiated by way of issuing of notice to the then Directors and all the directors were requested to show cause vide notice u/s. 179 of the Act as to why they should not be treated as jointly and severally liable for the payment of such tax and why an order u/s. 179 of the Income-tax Act, 1961 should not be passed against them. In terms of the said notice the directors were to attend the office of the undersigned on 10-11-2017 with explanation. But no compliance was made in response to the said notice. It is noticed that neither the Directors or any of their authorized representatives attended nor any written submission was furnished.
There is no escape from the fact that the perusal of the Notice under section 179 of the Act, 1961, reveals that the same is totally silent as regards the satisfaction of the condition precedent for taking action under section 179 of the Act, 1961, viz. that the tax dues cannot be recovered from the Company. In the show-cause notice, there is no whisper of any steps having been taken against the Company for recovery of the outstanding amount. Even in the impugned order, no such details or information has been staled.
In such circumstances, the question is, whether such an order could be said to be sustainable in law. The answer has to be in the negative. At the same time, in the peculiar facts and circumstances of the case and more particularly, when it has been indicated before us by way of an additional affidavit-in-reply as regards the steps taken against the company for the recovery of the dues, HC would like to give one chance to the department to undertake a fresh exercise so far as section 179 of the Act, 1961, is concerned. If the show-cause notice is silent including the impugned order, the void left behind in the two documents cannot be filled by way of an affidavit-in-reply. Ultimately, it is the subjective satisfaction of the authority concerned that is important and it should be reflected from the order itself based on some cogent materials. However, with a view to protect the interest of both, the writ applicant as well as Revenue, HC are inclined to quash the impugned order and give one opportunity to the Revenue to initiate the proceedings afresh by issuance of fresh show-cause notice with all necessary details so that the writ-applicant can meet with the case of the Revenue. HC are inclined to adopt such measure keeping in mind the statement made by the learned counsel that till the fresh proceedings are not completed, his client will not operate the bank account.
In view of the above, this writ-application is partly allowed. The impugned notice as well as the order is hereby quashed and set aside. It shall be open for the respondent to issue fresh show-cause notice for the purpose of proceeding against the writ-applicant under section 179 of the Act, 1961. HC would like to give a time bound program so that the proceedings may not go on for an indefinite period. HC are also issuing such direction because of the statement being made that the writ-applicant will not operate the bank account till the fresh proceedings are initiated and completed. In such circumstances, HC grant two months’ time from the date of receipt of the writ of this order to the Department to initiate fresh proceedings and pass appropriate orders in accordance with law. Till the final order is passed, the writ-applicant shall not operate the bank account concerned.
With the above, this writ-application stands disposed of.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Rule returnable forthwith. Mrs. Mauna Bhatt, the learned standing counsel waives service of notice of rule for and on behalf of the Revenue.
2. By this writ application under article 226 of the Constitution of India, the writ-applicant has prayed for the following relief(s):—
“7(a) quash and set aside the impugned order at Annexure-A to this petition;
(b) Pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the order at Annexure-‘A’ to this petition.
(c) any other and further relief deemed just and proper be granted in the interest of justice;
(d) to provide for the cost of this petition.”
3. The subject matter of challenge in this writ-application at the instance of the writ-applicant is an order passed by the respondent under section 179 of the Income-tax Act, 1961 (for short the “Act,1961”). The impugned order reads thus:—
“ORDER U/S.179 OF the Income-tax Act, 1961
In the case of M/s. Tirupati Proteins Pvt.Ltd (PAN-AABCT8423E) demand of Rs. 9074.34 lakhs is outstanding as on date and the breakup of the demand as mentioned is given as under:-
