Dr Atul Magan V. Dy Commissioner Of Income Tax

WPMS/3275/2016

AI Insights

The case involves Dr. Atul Magan, a former director of Yogi Leasing & Finance Ltd., who challenged an order from the Deputy Commissioner of Income Tax demanding payment of `8.49 crores. The company, initially a Private Ltd. and later converted to a Public Ltd., was under liquidation, and the official liquidator had taken control. The petitioner argued that Section 179 of the Income Tax Act, which pertains to the liability of directors of a company in liquidation, did not apply as the company was a Public Ltd. at the time of the relevant financial dealings. The respondent contested the maintainability of the writ petition, suggesting that the petitioner had an alternative remedy through a revision under Section 264 of the Income Tax Act.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 756447 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 07-12-2016
• Assessment Year: misc
• Laws Referred To: 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; Director; Liquidation; Quashing; Public Ltd. Company; Private Ltd. Company
• Section: 143(3); 264; 158BC; 179

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition (M/S) No. 3275 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 Leasing & Finance Private Ltd., which was incorporated as Private Ltd. Company on 27.05.1993 and later it was converted into Public Ltd. Company. It was a Public Ltd. Company at the time of the assessment, which is clearly evident from two facts, one Assessment Order dated 26.02.1999 and the Official Liquidator letter dated 16.12.1997. A search and seizure operation was carried out on 26.02.1997 in Yogi Group of Companies including Yogi Leasing & Finance Ltd. Consequent thereto, an assessment order, under Section 158BC read with Section 143(3) dated 26.02.1999 was passed. According to the block assessment order, the company was assessed at an income of `5,99,76,759/- for the block period 01.04.1986 to 26.02.1997 by making 2 various additions and disallowances. The said company preferred an appeal against the aforesaid assessment order before the Commissioner of Income Tax (Appeal). However, meanwhile, the company went into liquidation by the order dated 15.04.1997 of Hon’ble High Court at Allahabad, which has been recorded in the letter of the Official Liquidator dated 16.12.1997. Consequent to the order of liquidation, the official liquidator took control of the company and Board of Directors ceased to have any control or power on the company. The appeal against the block assessment order is still pending before the Commissioner of Income Tax (Appeals). In the year 1996, the petitioner ceased to be a Director of the Yogi Leasing and Finance 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) dated 19.06.2015, whereby the petitioner was asked to show cause, why the demand of `3.90 crores, which was outstanding towards Yogi Leasing & Finance Ltd., may not be recovered from the petitioner. Thereafter, vide letter dated 08.07.2015, the petitioner informed the Ld. Dy. CIT that provisions of Section 179 applies for ascertaining the liability of Directors of Private Limited Company in liquidation. Since M/s Yogi Leasing & Finance Ltd. is a Public Ltd. Company, incorporated 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 3 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. 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 "