Dr Atul Magan V. Dy Commissioner Of Income Tax

WPMS/3271/2016

AI Insights

Dr. Atul Magan, the petitioner, sought to quash an order from the Deputy Commissioner of Income Tax demanding payment of `8.49 crores, alleging it was outstanding towards Yogi Pharmacy Ltd., a company in which the petitioner was formerly a director. The company underwent a search and seizure operation in 1997, leading to a block assessment. The company was later liquidated, and the petitioner, having ceased to be a director and lost all communication with the Income Tax Authorities, was surprised to receive a notice under Section 179(1) of the Income Tax Act in 2015. The court found that the petitioner had an alternative remedy under Section 264 of the Income Tax Act to contest the applicability of Section 179, which led to the closure of the writ petition.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 747473 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 07-12-2016
• Assessment Year: misc
• Laws Referred To: Companies Act, 1956, Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: HARIM BHATIA
• Assessee Lawyers: KARTIKEY GUPTA
• Keywords: Block assessment; Certiorari; Certiorari; Directors' Liability; Income Tax; Liquidation; Quashing
• Section: 143(3); 264; 158BC; 179

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition (M/S) No. 3271 of 2016 Dr. Atul Magan …….Petitioner Versus Dy. Commissioner of Income Tax ..…Respondent Mr. Kartikey Hari Gupta, Advocate for the petitioner. Mr. Harim Mohan Bhatia, Advocate for the respondent. Dated: 07.12.2016 Hon’ble V.K. Bist, J. Petitioner has approached this Court seeking the following relief: “(i) A writ order or direction in the nature of certiorari calling for the records and quashing the order/letter dated 20-08- 2015 passed by Ld. Dy. Commissioner of Income Tax-Circle, Haridwar under Section 179 of the Act (ANNEXURE NO.-1)”. 2. Briefly put, the case of the petitioner is as follows: Petitioner was one of the Directors of company, namely, Yogi Pharmacy Ltd. On 02.07.1986, the said company was incorporated under the provisions of Companies Act, 1956, as a Private Ltd. Company. It was converted into Public Ltd. Company on 22.05.1992. A search and seizure operation was carried out on 26.02.1997 in Yogi Group of Companies, including Yogi Pharmacy Ltd. Consequent thereto, assessments order under Section 158BC read with Section 143(3) dated 2 26.02.1999 was passed. According to the block assessment order, the company was assessed at an income of `6,41,24,395/- for the block period 01.04.1986 to 26.02.1997 by making various additions and disallowances. The said company preferred an appeal against the aforesaid assessment order before the Commissioner of Income Tax (Appeal). The said appeal was partly allowed by the Commissioner of Income Tax (Appeals) and the tax of `27,91,441/- was reduced from liability and tax of `3,66,56,822/- was directed to be reassessed. However, by an order dated 06.11.2008 of this Court, the company went into liquidation. Consequent to this, the official liquidator took control of the company and Board of Directors ceased to have any control or power on the company. In the year 1999, petitioner ceased to be a Director of the Yogi Pharmacy Ltd. (A Public Ltd. Company). After ceasing to be a Director and consequent to the company being in liquidation, the petitioner was having no communication whatsoever with the Income Tax Authorities. Surprisingly, the petitioner received a notice under Section 179(1) on 19.06.2015, whereby the petitioner was asked to show cause, why the demand of `8.49 crores, which was illegally shown as outstanding towards Yogi Pharmacy Ltd. despite the CIT (Appeals) order dated 31.03.2006, may not be recovered from the petitioner. Thereafter, vide letter dated 08.07.2015, petitioner informed the Ld. Dy. CIT that provisions of Section 179 applies for ascertaining the liability of Directors of Private Ltd. Company in liquidation. Since, M/s Yogi Leasing & Finance Ltd. is a Public Ltd. Company, incorporated 3 under the provisions of Companies Act, 1956, hence the provisions of Section 179 are not applicable. Thereafter, on 20.08.2016 the learned Deputy Commissioner, Income Tax passed the impugned order directing the petitioner to make payment of ` 8.49 crores. Hence, this writ petition. 3. A preliminary objection has been raised by Mr. H.M. Bhatia, learned counsel for the respondent regarding maintainability of the writ petition. He submits that the petitioner has an alternative remedy to file revision before the Commissioner under Section 264 of the Income Tax Act. 4. Besides above, learned counsel for the respondent also submits that the search was made in the premises of the company in the year 1997 and the block assessment was made for the block period 1986-97 and for some of the period the company was Private Ltd. and for some of the period the company was Public Ltd. The same argument has also been advanced by the learned counsel for the petitioner. He, therefore, submits that provisions of Section 179 are not applicable. 5. I have considered the submissions of the learned counsel for the parties. In my considered opinion, the petitioner has an alternative remedy to file a revision before the Commissioner under Section 364 of the Income Tax Act. The plea that the provision of Section 179 are not applicable in the case of the petitioner can be raised by the petitioner before the revisional authority. 4 6. In view of the above, the writ petition is closed with liberty to the petitioner to avail appropriate remedy under the law. (V.K. Bist, J.) 07.12.2016 Navin "