Case Law Details
Jagesh Savjani Vs Union of India (Bombay High Court)
Bombay High Court held that material on record doesn’t satisfy that all the steps for recovering the tax dues from the company, accordingly, action under section 179 of the Income Tax Act against the directors for recovering the tax dues is unjustified.
Facts- This is a writ petition filed under Article 226 of the Constitution of India seeking the quashing and setting aside of show cause notices u/s. 179 of the Income Tax Act,1961, and order dated 14.12.2020 issued by the respondent No.2, as being contrary to law.
It is the petitioner’s case as averred in the petition, that he had received show cause notices from the respondent No.2 purportedly invoking powers u/s. 179 of the Act. He further avers that the issuance of a similar notice dated 15.10.2019 also impugned herein by the respondents came to his knowledge from the reply filed by the respondents, which notice he claims, was never served upon him. The petitioner has averred that he had filed an affidavit-in-reply dated 19.03.2020 to the income tax authorities stating therein that the petitioner had not attended any Board meetings of M/s. White Water Park India Private Ltd. during F.Y. 2006-07 till date, nor handled any income tax assessment of the said company for the A.Y. 2007-08 as its Director. He claims that under the provisions of Section 283 of the Companies Act, 1956, as also under the provisions of Section 167 of the Companies Act, 2013, since, he has not attended three consecutive meetings of the Board of Directors of the said company or for that the matter, all meetings of Board of Directors during the period of 12 months without seeking leave, he is deemed to have vacated the Office of Director of the said company. According to the petitioner, as he was not the Director of the Company, he was not liable to receive any notice u/s. 179 of the Act, which provision can be invoked only against a Director of a private Company.
Conclusion- A perusal of the impugned order dated 14/12/2020 discloses that it does not record any of the material which formed the basis for the Assessing Officer to conclude that all steps have been taken to recover the tax dues from the Company. Further, the impugned order does not refer to the Assessing Officer’s subjective satisfaction based upon material before it, to conclude that all steps had been taken to proceed against the delinquent Company and such steps had failed. This being a sine qua non for proceeding further, and for assuming jurisdiction under Section 179 of the Act, failure to disclose this material and to record the satisfaction of the Assessing Officer in the manner required by the provisions of Section 179 of the Act renders the impugned show cause notices and the impugned order dated 14/12/2020 unsustainable at law.
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