N. Gowrishankar, Bangalore V. ACIT, Bangalore

ITA 119/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60745 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-06-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 02-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G SARAVANAN
• Assessee Lawyers: R B KRISHNA
• Keywords: Application of stay
• Section: 143(3)

Judgement Text

PAGE 1 OF 8 ITA NOS.119 TO 12 1/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 119/BANG/2010 2001-02 SRI N GOWRISHANKAR, DIRECTOR, M/S KWALITY BISCUITS LTD., NO.289, NANJUNDA KRUPA, 7 TH MAIN, 4 TH BLOCK, JAYANAGAR, BANGALORE-11. PAN/GIR NO.K-501 ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-11(5), BANGALORE. 120/BANG/2010 2001-02 SRI T V VISHWANATH GUPTA, DIRECTOR, M/S KWALITY BISCUITS LTD., NO.8, SANNIDHI ROAD, BASAVANAGUDI, BANGALORE-4. PAN/GIR NO.K-501 -DO- 121/BANG/2010 2001-02 SRI N JAGANNATH, DIRECTOR, M/ S KWALITY BISCUITS LTD., NO.67, ANNAPOORNA, H B SAMAJA ROAD, BASAVAANAGUDI, BANGALORE-4. PAN/GIR NO.K-501 -DO- DATE OF HEARING : 07.06.2012 DATE OF PRONOUNCEMENT : 15.06.2012 APPELLANT BY : SHRI R B KRISHNA, ADVOCATE REVENUE BY : SHRI G SARAVANAN, JCIT OR DER PER GEORGE GEORGE K : THESE THREE APPEALS INSTITUTED BY THE ERSTWHILE D IRECTORS SHRI N.GOWRISHANKAR, SHRI T.V.VISHWANATH GUPTA AND N JAGANNATH, IN THEIR INDIVIDUAL CAPACITY OF M/S. KWALITY BISCUITS LIMIT ED [KBL], ARE DIRECTED PAGE 2 OF 8 ITA NOS.119 TO 12 1/BANG/2010 2 AGAINST THE CONSOLIDATED ORDER OF THE LEARNED CIT ( A)-I, BANGALORE DATED 10.12.2009. THE RELEVANT ASSESSMENT YEAR IS 2001-02 . 2. IN ALL THESE APPEALS, THE GROUNDS RAISED ARE I DENTICAL. FOR THE SAKE OF CONVENIENCE AND CLARITY, THEY ARE REFORMULATE D AS UNDER: (I) THAT THE CIT (A) MISDIRECTED HIMSELF IN ASSUMING TH AT THE ASSESSEES WERE NOT AGGRIEVED BY THE ORDER PASSED U/S 143(3) (SIC) 143 (3) R.W.S. 147 OF THE ACT IN THE CASE OF KBL AND, THUS, THE IMPUGNED ORDER REQUIRES TO BE QUASHED; & (II) THAT ONCE THE TAX DUE FROM KBL WAS SOUGHT TO BE RECOVERED FROM THE PRESENT ASSESSEES, THEY HAVE BECOME AGGRIEVED BY THE IMPUGNED ORDER PASSED. 3. AS THE ISSUES RAISED BY THE ABOVE MENTIONED ASS ESSEES BEING SIMILAR , THESE APPEALS WERE HEARD, CONSIDERED TOGE THER AND DISPOSED OFF IN THIS CONSOLIDATED ORDER. 4. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- ALL THE ABOVE NAMED ASSESSES WERE ERSTWHILE DIRE CTORS OF KBL AGAINST WHICH THE AO, FOR THE REASONS RECORDED IN H IS IMPUGNED ORDER FOR THE AY UNDER CONSIDERATION, RAISED A SUBSTANTIAL DE MAND OF RS.12,82,27,734/- BY HIS ORDER PASSED U/S 143(3) R.W .S 147 OF THE ACT DATED 28.12.2006 AND, IT APPEARS, SUBSEQUENTLY, MADE THE E X-DIRECTORS LIABLE TO PAY A PORTION OF TAX BY VIRTUE OF S.179 OF THE ACT. PAGE 3 OF 8 ITA NOS.119 TO 12 1/BANG/2010 3 5. APPREHENDING THIS, ALL THE ASSESSES HAVE APPR OACHED THE LEARNED CIT (A) FOR RELIEF. ALL OF THEM, IN THEIR IDENTICAL SUBMISSIONS HAVE PLEADED BEFORE THE LEARNED CIT (A) THAT - THEY WERE THE DIRECTORS OF KBL UPTO 5.12.2001 AND , SUBSEQUENTLY, THEY HAVE NO CONNECTION WITH ANY PROCEED INGS INITIATED AGAINST KBL AND THAT THEY WERE NOT APPRAIS ED OF THE ASSESSMENT MADE IN THE CASE OF KBL, DEMAND RAISED A ND THE ACTION INITIATED TO RECOVER SUCH LIABILITIES FROM K BL ETC., - THE REVENUE HAD INFORMED THE ERSTWHILE DIRECTORS OF KBL (THE PRESENT ASSESSES) VIDE LETTER DATED 31.3.2008 THAT GARNISHEE PROCEEDINGS HAVE BEEN INITIATED AGAINST THEM AS EX- DIRECTORS OF KBL, PRESUMABLY, BY INVOKING THE PROVISIONS OF S. 179 OF THE ACT; - WHEN CONTESTED THE SAME, THE INITIATION OF GARNI SHEE PROCEEDINGS AGAINST THEM, AS THE PROVISIONS OF S.17 9 CANNOT BE INVOKED AGAINST THEM ETC., ACCORDING TO THE ASSESSE ES, THE GARNISHEE PROCEEDINGS INITIATED WERE NOT PURSUED AN D, SUBSEQUENTLY WITHDRAWN; - APPREHENDING THAT THE THREAT OF THE PROVISIONS OF S.179 OF THE ACT CONTINUES AND THE LIABILITY OF KBL TO BE SADDLED ON THEM, THEY TOOK A VIEW THAT THEY WERE AGGRIEVED BY THE ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT PASSED IN THE CASE OF KBL. RELY ON THE FOLLOWING CASE LAWS : ADI PHEROZSHAH GANDHI V. H.M. SEERVANI AIR 1971 SC 385; BABURAM V. STATE OF U.P (1995) 2 SCC 689; & CIT V. N.CH.R.ROW (1983) 144 ITR 557 (CAL) 6. AFTER DUE CONSIDERATION OF THE SUBMISSIONS/CON TENTIONS OF THE ASSESSEES AND ALSO EXTENSIVELY QUOTING THE PROVISION S OF S.246A OF THE ACT, THE LEARNED CIT (A) HAD OBSERVED THUS: PAGE 4 OF 8 ITA NOS.119 TO 12 1/BANG/2010 4 5.1. THUS, THE CHARACTERISTIC OF BEING AGGRIEVED I S QUALIFIED BY THE WORDS ANY OF THE FOLLOWING ORDERS. THE LIST OF ORDER DOES NOT ENLIST AN ORDER PASSED U/S 1 79 OF I.T. ACT. THEREFORE, THE APPEALS DO NOT DESERVE TO BE ADMITTED AT ALL. 7. AGGRIEVED, THE ASSESSEES HAVE COME UP WITH THE PRESENT APPEALS. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL APPEARED FOR THE ASSESSEES REITERATED MORE OR LESS WHAT HAS BEEN REP RESENTED BEFORE THE FIRST APPELLATE AUTHORITY. IT WAS ARGUED THAT THE L EARNED CIT (A) HAD GROSSLY ERRED IN DISMISSING THE APPEALS AS NOT MAIN TAINABLE. TO DRIVE HOME HIS POINT, THE LEARNED COUNSEL HAD PLACED STRONG RE LIANCE ON THE RULINGS OF THE JUDICIARY CITED SUPRA. 8. ON THE OTHER HAND, THE LEARNED DR CONTENDED TH AT THE LEARNED CIT (A) WAS JUSTIFIED IN HIS FINDING WHICH REQUIRES NO INTERVENTION OF THIS BENCH . 9. WE HAVE DULY CONSIDERED THE RIVAL ARGUMENTS, DI LIGENTLY PERUSED THE RELEVANT CASE RECORDS AS WELL AS THE CASE LAWS ON WHICH THE ASSESSEES HAVE PLACED THEIR RELIANCE. IT IS AN UN-DENIABLE F ACT THAT THE ASSESSMENT IN THE CASE OF KBL WAS CONCLUDED U/S 143(3) R.W.S. 147 OF THE ACT, RAISING A SIZEABLE DEMAND OF RS.12.82 CRORES. SUBSEQUENTLY, A COPY OF THE LETTER DT.31.3.2008 WAS ISSUED INDIVIDUALLY ON THE ERSTWHIL E DIRECTORS OF KBL, NAMELY, THE PRESENT ASSESSEES, APPRAISING THEM, AMON G OTHERS, NON DISPOSAL OF APPEAL PREFERRED BY KBL BEFORE THE CIT (A) BY ORD ER OF 30.4.08, NO FURTHER REQUEST FOR SAY OF DEMAND WILL BE CONSIDERED UNLESS 50% OF THE DEMAND IS PAID BY 15.5.08. THIS CANNOT BE A SOLITAR Y GROUND FOR THE PAGE 5 OF 8 ITA NOS.119 TO 12 1/BANG/2010 5 ASSESSEES TO PRESUME THAT THEY ARE ENTITLED TO CHALL ENGE THE ORDER PASSED IN THE CASE OF KBL. 9.1 ON A PERUSAL OF THE IMPUGNED ASSESSMENT ORDER OF THE AO, WE FIND THAT A DEMAND OF RS.12.82 CRORES HAD BEEN RAIS ED IN THE CASE OF KBL. SUBSEQUENTLY, A LETTER DT.31.3.2008 WAS ISSUED BY THE AO TO THE PRINCIPAL OFFICER, M/S BRITANIA INDUSTRIES LTD., BANGALORE, I NFORMING THEM THAT THE BALANCE DEMAND IN THE CASE OF KBL WAS STAYED TILL 30 .4.2008 OR DISPOSAL OF APPEAL BY THE CIT (A) WHICHEVER WAS EARLIER ETC., A COPY OF WHICH WAS ALSO ENDORSED TO ALL THE ERSTWHILE DIRECTORS OF KBL. PE RHAPS, THIS HAD PROMPTED THE ASSESSEES TO CHALLENGE THE ASSESSMENT ORDER IN THE CASE OF KBL. HOWEVER, KBL ON ITS OWN HAD CHALLENGED THE ASSESSME NT ORDER BEFORE THE CIT (A) WHICH WAS, ACCORDING TO THE AO, IN ITS FINA L STAGE FOR DISPOSAL WHEN SUCH A COMMUNICATION SENT TO M/S BRITANIA INDUSTRIE S LIMITED REFERRED SUPRA. 9.2 FOR APPRECIATION OF FACTS, WE REPRODUCE THE P ROVISIONS OF S. 179 AS UNDER: 179.(1) NOTWITHSTANDING ANYTHING CONTAINED IN THE COMPANIES ACT, 1956 (1 OF 1956) WHERE ANY TAX DUE F ROM A PRIVATE COMPANY IN RESPECT OF ANY INCOME OF ANY PREVIOUS YEAR OR FROM ANY OTHER COMPANY IN RESPECT OF ANY INCOME OF ANY PREVIOUS YEAR DURING WHICH SUCH OTHE R COMPANY WAS A PRIVATE COMPANY CANNOT BE RECOVERED, THEN EVERY PERSON WHO WAS A DIRECTOR OF THE PRIVATE COMPANY AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR SHALL BE JOINTLY AND SEVERALLY LIABLE FOR THE PAYMENT OF SUCH TAX UNLESS HE PROVES THAT THE NON-RECOVERY CANN OT PAGE 6 OF 8 ITA NOS.119 TO 12 1/BANG/2010 6 BE ATTRIBUTED TO ANY GROSS NEGLECT, MISFEASANCE OR BREACH OF DUTY ON HIS PART IN RELATION TO THE AFFAIR S OF THE COMPANY. 9.3 THUS, THE PROVISIONS OF SECTION MAKE ABUNDANT LY EXPLICIT THAT EVERY PERSON WHO WAS A DIRECTOR OF THE PRIVATE COMP ANY AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR SHALL BE JOINTLY AND SEVER ALLY LIABLE FOR THE PAYMENT OF SUCH TAX UNLESS. HOWEVER, IN THE PRESENT APPEALS, NO SUCH SPECIFIC ORDER U/S 179 OF THE ACT HAS BEEN PASSED B Y THE ASSESSING OFFICER AGAINST THE PRESENT ASSESSEES, MAKING THEM LIABLE F OR THE PAYMENT OF SUCH TAX ETC., A MERE LETTER OF THE AO DATED 31.3.2008 INFORMING THE PRINCIPAL OFFICER OF BRITANNIA INDUSTRIES LIMITED THAT NO FURTHER REQUEST FOR STAY OF DEMAND WILL BE CONSIDERED UNLESS 50% OF THE DEMAND IS PAID BY 15.5.08 IN THE CASE OF KBL FOR THE AY 2001-02 AND A COPY OF WHI CH ENDORSED TO THE PRESENT ASSESSEES, IN OUR CONSIDERED VIEW, CANNOT B E ATTRIBUTED BY ANY STRETCH OF IMAGINATION THAT THE ASSESSEES HAVE BEEN MADE LIABLE TO PAY TAX DUE ON BEHALF OF KBL. MOREOVER, NO ORDER U/S 179 O F THE ACT HAS BEEN PRODUCED TO JUSTIFY THEIR CLAIM THAT THEY HAVE BEEN A GGRIEVED OF BY THE SAID ORDER. 9.4 IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERE D VIEW THAT THE APPREHENSION OF THE ASSESSEES THAT THEY HAVE BEEN MA DE LIABLE TO PAY A PORTION OF TAX U/S 179 OF THE ACT, IS UNWARRANTED A ND MISCONCEIVED. AS PER THE PROVISIONS OF THE INCOME-TAX ACT, NO PERSON CAN BE MADE LIABLE TO PAY ANY TAX FOR HIMSELF OR ON BEHALF OF ANY OTHER ENTITY FOR WHICH HE HAS BEEN ASSOCIATED UNLESS A SPECIFIC ORDER IS PASSED IN THE MATTER. IN THE PRESENT CASE, NO SUCH ORDER U/S 179 OF THE ACT HAS BEEN PAS SED. PAGE 7 OF 8 ITA NOS.119 TO 12 1/BANG/2010 7 9.5 MOREOVER, AS ON TODAY, THE DEMAND THAT IS RAIS ED AGAINST THE COMPANY M/S KWALITY BISCUITS LTD. IS NOT ENFORCEABLE SINCE THE THIRD MEMBER OF THE TRIBUNAL IN ITA NO.1223/BANG/2009 HAD DECIDED THE MATTER IN FAVOUR OF THE COMPANY AND HELD THAT THE CAPITAL G AINS IS NOT EXIGIBLE ON THE FACTS OF THE CASE. THEREFORE, SINCE NO DEMAND IS SUBSISTING AGAINST THE COMPANY AS ON DATE, THERE IS NO CAUSE OF ACTION THAT IS EXISTING FOR THE ERSTWHILE DIRECTORS OF THE COMPANY TO CHALLENGE THE ORDERS OF ASSESSMENT OF M/S KWALITY BISCUITS LTD. 9.6 TAKING INTO ACCOUNT ALL THE ABOVE RELEVANT F ACTS INTO CONSIDERATION, WE ARE OF THE FIRM VIEW THAT THE PRE SENT APPEALS PREFERRED BY THE ASSESSEES, AS RIGHTLY POINTED OUT BY THE LEARNE D CIT (A), ARE NOT ENTERTAINABLE WHICH HAVE BEEN, AS HIGHLIGHTED SUPRA , PREFERRED BASED ONLY ON PRESUMPTION, HYPOTHECATION, BUT, NOT AGAINST ANY SPEC IFIC ORDER(S) OF THE AUTHORITIES BELOW. 9.7 BEFORE PARTING WITH THE ISSUE(S), WE WOULD LI KE TO REITERATE THAT WITH DUE REGARDS WE HAVE PERUSED THE CASE LAWS RELI ED ON BY THE ASSESSEE AND TO AFFIRM THAT THEY ARE NOT DIRECTLY APPLICABLE T O THE FACTS OF THE ISSUE ON HAND AND THAT THEY ARE CLEARLY DISTINGUISHABLE. 10. IN THE RESULT, THE APPEALS PREFERRED IN ITA N OS. 119/10, 120/10 AND 121/10 BY THE ASSESSEES ARE DISMISSED AS NOT M AINTAINABLE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF JUNE, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER PAGE 8 OF 8 ITA NOS.119 TO 12 1/BANG/2010 8 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.