Case Law Details
Raja Ram Dalmia Vs PCIT (Calcutta High Court)
High Court held that department has to first initiate proceedings against the defaulting private limited company and upon failure in their attempt to recover the tax dues power under section 179 of the Act could have been invoked. On facts it is clear that no such attempt was made by the department to recover the tax dues, which were stated to be in arrears for the assessment years 1983-84, 1985-86 and 1986-87. Admittedly, in the year 1990 the appellant had retired from his directorship and the company had changed hands and fresh set of directors had taken over the company, necessary formalities under the Income tax Act, 1956 was complied with and fresh certificate of incorporation incorporating the new name of the company was issued. The new set of directors carried on business till the year 1997 when the company went under liquidation. From the records placed before the Court, it is clear that the department has not taken any steps to recover the dues from the defaulting private limited company. It is nearly after 25 years the present attempt had been made by issuing garnishee notice on the appellant who is no more the director of the company ever since 1990. After the company had gone into liquidation, the department could have lodged a claim before the Official Liquidator. However, there is nothing on record to show that such a claim was made by the department before the Official Liquidator. This aspect is very crucial aspect which the learned Writ Court ought to have considered and the same cannot be brushed aside and a direction could not have been issued without reference to the said fact.
The learned standing Counsel for the respondent placed reliance on a decision in the case of Hardip Singh & Anr. Vs. The Income Tax Officer, Amritsar & Ors., AIR 1979 SC 1453. Firstly, the said decision arose out of a case under section 179 as it stood prior to the amendment. That apart, the private limited company in question was voluntarily liquidated by the directors. Considering these facts, the Court held that the directors had to be made liable to pay the arrears of tax to the Income tax department. Thus, the decision cited by the revenue is clearly distinguishable on facts.
Thus, in the light of the above discussion, we hold that the garnishee notices which were impugned in the writ petition are held to be wholly without jurisdiction and accordingly, they are quashed.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
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