Akhilesh Kumar Bhatra Vs ITO (Rajasthan High Court)
In the case of Akhilesh Kumar Bhatra Vs. ITO (Rajasthan High Court), the issue revolved around whether outstanding tax dues under the Income Tax Act could be recovered from a director of a public limited company under Section 179 of the Act. The petitioner, a non-executive director of M/s. Pinky Auto Finance Limited, later renamed M/s. Golden Future Capital Limited, faced a recovery notice issued by the Income Tax authorities under Section 179. The tax demand arose for the Assessment Year 2007-08, but after the company failed to pay, the authorities sought to recover the amount from the petitioner, citing his position as director.
The core of the petitioner’s argument was that Section 179 only applied to private limited companies, not public ones. The Rajasthan High Court accepted this argument, highlighting that Section 179 does not apply to public limited companies as per its wording and previous judicial interpretations. The Court referred to several precedents, including the Supreme Court ruling in M. Rajamoni Amma Vs. Deputy Commissioner of Income Tax and judgments from the Gujarat and Madras High Courts, which established that the liability under Section 179 for recovery of dues applies only to private companies. As such, the Court quashed the notices and orders issued under this section against the director, stating that such proceedings are barred when the company in question is a public limited company. The Court further clarified that while the authorities could still proceed against the company itself for the recovery of dues, no action could be taken against the directors under Section 179 in this case.
