Padma Sree Chisurupati V. Union of India, Ministry of Finance, Income Tax Department and Tax Recovery Officer, TRO, PCIT, Hyderabad and Income Tax Officer, Ward 17(1), Hyderabad

WP/29787/2024

AI Insights

The case involves Padma Sree Chisurupati, the widow of the former director of Dhanvanthri Core Education Pvt. Ltd., who challenged the orders issued by the Income Tax Department under Section 179 of the Income Tax Act, 1961. These orders held her liable for the tax dues of the company for the assessment years 2013-14 and 2014-15. The petitioner argued that she was not given any notice before the issuance of the orders, which led to her being unaware of the proceedings and unable to defend herself. The court examined whether the principles of natural justice were followed in the issuance of these orders and found that they were not, leading to the setting aside of the orders.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 803859 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 12-12-2024
• Assessment Year: misc
• Other Referred Cases: Sri Subba Rao Pavuluri v. Assistant Commissioner of Income Tax, Susan Chacko Perumal v. Assistant Commissioner of Income Tax, Mehul Jadavj Shah v. Deputy CIT
• Laws Referred To: Income Tax Act, Income Tax (Certificate Proceedings Rules) - 1962, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: GADI KUMAR; MURALI
• Assessee Lawyers: SWAROOP INDUKURU
• Keywords: Director's Liability; Income tax assessment; Natural Justice; Tax Recovery; Writ of Certiorarified Mandamus
• Section: 133(6); 226(3); 179

Judgement Text

"I [ 34301 HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (SPecial Original Jurisdiction) THURSDAY ,THE TWELFTH DAY OF DECEMBER TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE DR. JUSTICE G.RAOHA RANI WRIT PETITION NO..29787 0F 2024 Between: AND 1 2 Padma Sree Chisurupati,.W/o' Late Mr' Javaram Cn'n'J:?S:'; ^%T \"R|1:b-?9 6;;'.b;;:- Eutlneds Havins her residential. .. a 2g3l82lN77oE, Plot No. iiot, n\"'o -Noa+''t'oite\" Hills' Hvderabad - 500033. ...PET|TIoNER Union of lndia, Ministry of Finance, lncome Tax Department' New Delhi - 100 5t1.\" ot the Tax Recovery Officer, TRO' PCIT-- ?' Hvderabad' Signature rowers. sv. No. 6(P), K[n;;;;' tv*.*g J'te;' K6tnaouda' opposite Botanicat Gardens, seririnJaili'alrv il;\"d;l nisii6aov' H'derabad - 500 3?1;\" \"t rhe lncome Tax officer, ward 1_7(1), Hyderabad, Sisnature Towers' [x;.:ng(*,,;5:[',T,,ydtul\"*,3],'ni,lllrs\"\"t1'o9t83'd!?\"o'u\"'\"u' ...RESPONDENTS J Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith' the High Court may be pleased to issue writ or direction or order more particularly in the nature of a writ of certiorarified mandamus calling for the records and quashing the (i) lmpugned Order dated 17.10.2024, bearing DIN and Letter No' ITBA/COM/F/1712024- 25t1005744878(1) issued by the 2nd Respondent in Form No' ITCP 16 under lncome Tax (Certificate Proceedings Rules) - 1962 (ii) lmpugned Noticedated 26lOSt2O22 bearing DIN and Order No- ITBA/RCV/S/226(3)'112022- 23t1043186111(1) passed by Respondent No' 3 under Section 226(3) of the lncome Tax Act and (iii) lmpugned letter dated 11'06'2024' bearing DIN and letter No- ITBA/COM/F/1 7t2024- 2511065538571(1) issued by Respondent No 2 I i under Section 133(6) of the lncome Tax Act as being illegal, arbitrary, barred in law, in excess of jurisdiction and in violation of principles of natural justice, and, consequently, restraining the Respondents from taking any steps or coercive action or otherwise proceeding against the Petitioner, N4r. Jayaram Chigurupati or the legal heirs of lvlr. Jayaram Chigurupati or any of their assets, whether movable/immovable, that they already own or acquire ownership of hereafter, in any manner whatsoever, pursuant to the alleged tax dues of M/s. Dhanvanthri Core Education Pvt. Ltd for AY 20'13 - 2O14 and AY 2014 -2O15 lA NO: 2 OF 2024 Petition under Section 15'l CPC praying that in the circumstances slated in the affidavit filed in support of the writ petition, the High Couft may be pleased be pleased to suspend all further proceedings pursuant to (i) lmpugned Order dated 17 .1O.2024, bearing DIN and Letter No. ITBA/COM/F/I 712024- 2511069744878(1)issued bythe 2nd Respondent in Form No. ITCP 16 under lncome Tax (Certificate Proceedings Rules) - 1962; (ii) lmpugned Notice dated 26.05.2022 bearing DIN and Order No- ITBA/RCV/S/226(3)-112022- 23110431861'1 l('1 ) passed by Respondent No. 3 under Section 226(3) of the lncome Tax Act; and (iii) lmpugned letter dated 11.06.2024, bearing DIN and letter No- ITBA/CON//F/1712024- 25l1065538571(1 ) issued by Respondent No. 2 under Section 133(6) of the lncome Tax Act, and restrain the Respondents from taking any coercive steps or otherwise proceeding in any manner against the Petitioner or [ /r. Jayaram Chigurupati or the legal heirs of [t/r. Jayaram Chigurupati, or any of their assets, whether movable/immovable, or that they already own or acquire ownership of he reafter, pu rsua nt to income-tax assessments passed in the case of Dhanvantri Core Education Pvt. Ltd. for Assessment years 2013-14 and 2014-15 in the interest ofjustice lA NO: 3 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the writ petition, the High Court may be pleased to grant a stay of the operation of the (i) lmpugned Order dated 17.10.2024, bearing DIN and Letter No. ITBA/COM/F/I 712024-2511069744878(1) issued by -.----;r-_=;},8:P3*-*--,{ I a the 2nd Respondent in Form No. ITCP 16 under lncome Tax (Certificate Proceedings Rule). - 1962; (ii) lmpugned Notice dated 26.O5.2022 bearing DIN and Order No- |TBAJRCV131226(3)_112022- 2311043186111(1) passed by Respondent No.3 under Section 226(3) of the lncome Tax Act; and (iii) lmpugned letter dated 11.06.2024, bearing , DIN and letter No- ITBA/C OM|Fl1712024-2511065538571(1) issued by Respondent No. 2 under Section 133(6) of the lncome Tax Act; in the interest of lustice lA NO:4 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the writ petition, the High Court may be pleased to direct the Respondents to lift/cancel the atlachments made under ('1 ) lmpugned Order dated 17.1O.2024, bearing DIN and Letter No ITBAICOM/F/1 712024-2511069744878(l) issued by the 2nd Respondent in Form No. ITCP 16 under lncome Tax (Certificate Proceedings Rules) - 1962; and (ii) lmpugned Notice dated 26.05.2022 bearing DIN and Order No- ITBtuRCV/S/226(3)-112022-23110431861'1 1(1 ) passed by Respondent No. 3 under Section 226(3) of the lncome Tax Act; and further restrain the Respondents from interfering in the peaceful ownership, possession and operation of the assets therein and all other assets, whether movable/immovable, of the Petitioner, the legal heirs of Mr. Jayaram Chigurupati and Mr. Jayaram Chigurupati,in the interest of justice Counsel for the Petitioner: SRI SWAROOP M'V.REP Ms. MYTRI INDUKURU Counsel forthe Respondent No.1: SRt GADI PRAVEEN KUMAR Dy. SOLICITOR GEN. OF INDIA Counsel for the Respondent Nos. 2&3: SRI MURALI KRISHNA SENIOR SC FOR INCOME TAX The Court made the following: ORDER I THE HONOI'RABLE SRI JUSTICE SUJOY PAUL . AND THE HONOURABLE DR. JUSTICE G'RADIIA RANI WRIT PETITION No.29787 oF 2024 ORDER: (per Hon'bLe Srt Justice Sujog Paul) Sri Swaroop M V , learned counsel represents on behalf of M/ s.Mytri Indukuru, learned counsel for the petitioner and sri Murali Krishna, Iearned Senior Stalding counscl for ltrcome Tax Department, appears for respondent Nos'2 and 3' 2. With the consent, finallY heard 3. This petition hled under Article 226 of the Constitution of India takes exception to the order dated 26 'O5 '2022 and the consequential attachment order, dated 7 '1O'2O24 ' whereby invoking Seclion 179 of the Income ,I.a-x ACt, I961 (for short .the Act,), the petitioner-widow o[ the former Director is saddled with the liability' 4. Learned cour-rsel for the petitioner submi[s thzrt only upon receiving the saici attachment order' the petitioner came to know about the original order dated 26 05 '2022 Beforc issuing the order' dated 26.05.2 O22, Lhe petitioner was never put to notice He placed reliance on a rccent judgment of this Court in Sri Subba Rao Pavuluri v. Assistant Commissioner of Income Taxr and urged that in the manner section 179 of the Act is worded' this Court opined that thc petitioner must be put to notice to enztble her to take necessary defcni:e and prove that she is not 1iab1e to shoulder the burO_gn i_ 'w.p.No.8369 of 2023. dated ot.lo.2o24 r_ /_ ,, '..; . 2 5. Learned Senior Standing Counsel for Income Tax Department supported the impugned order, but, on a specihc query from the Bench could not apprise the Court that before issuance of the impugned order, dated 26.O5.2022, the petitioner was put to notice in the proceeding under Section 179 of the Act. This Court in Sri Subba Rao (supra) held as under:- \"8. Before dealing with rival contentions, it is apposite to reproduce Sub-section 1 of Section 179 of tl:,e Act, which reads thus: \"section 179: LiabilttY of directora of orivetc cot! vln liquidatioa:- Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), lwhere any tax due from a private company in respect of any income of a.ty previous year or from any other company in respcct of any income of any previous year during which such other company was a private companyl cannot be recovcred, then, every person who was a director of the private company at any time during the relevant previous year shatl be jointly and severally liable for the Payment of such tax unless he proves that the non-recovery cannot be atttlbuted to any gross neglict, misfeasance or breach of duty otr his part in relation to the affairs of the comPanY.\" (EmPhasis SuPPIied) g. On a specifrc query from the Bench, learned Senior Standing Counsel fairly admitted that before passing the impugned order dated 07.O3.2O23, the petitioner was not put to noiice. It is seen that the counter is drafted in an artistic manner still it is clear that all the notices issued were issued to the Company and not to the Director. Thus, pivotal question before us is, whether in a case of this nature, where impugned order is passed against the Director, whether Director was required to be put to notice. 10. As noticed above, learned Senior Standing Counsel submits that there was no need of providing opportunity' We are unable to persuade ourselves w.ith this line of argument of learned Senior Standing Counsel, in view of the language employed in Section 179 of the Act. A plain reading of which shows that such tax can be fastened or directed to be shouldered by the Director, unless, he proues that rrorr- recovery cannot be attributable to any gross neglect' misfeas'ance or beach of duty on li.s part in relation to the affairs of the company. I 1. We hnd substantia-l force in the argument of learned counsel for the petitioner that the petitioner could have proved the aforesaid ingredients and discharge reverse burden on him only when he was put to notice and given an opportunity +'o I Ii il { 3 orove it. Thus. in the manner sub Section 1 of Section 179 of iil'i,., t.';;;;,\";i i;\" p,\"i\"';pr\"\" or.natural ''',\"-ti:: \"' 'o b\" ;;iil;\"d;1,.o\"i=io\"' ^ The principles o[ natural jtrstice u'cre read into in vluirlus taxation'statutes by the Supreme Court' i.;;;;; ;^j L\" ..,ad\" lo j\"ag,\"\"'t= i1^tt.cases of c'B' Ail;;.'Gion of India aii o-tt'\"r= (1ee3) 1 scc 78' FAG preclsion BearinEs ,. s\"i\"\" tax olficer (l) 1\"d Another ;ti;;;i-; s<,c lao, Sahara India (Firml' Lucknow v' Bo--r\"\"rorr., ot rntoi\" Tax' Central--I- \"ld Another Irrooal 14 SC]C 151 ,t'd iesar Enterprises Limited v' State lliil.Il. p*aesh and others l(201 I ) 13 SCC 733 12. In the instant case, the petitioner was. admittedly' not pri to '\"\"ii.\" and the. itp\"g\"\"a order which entails civil consequences ls passeo \"gi\"\"\"t him .It.runs. contrary to the \".i\".rit\" ot natural ju\"ii-t\" The similar view is taken bv [\":\".Ii-rr*n c,rurt iri susan chacko Perumal v' Assistant Commlssioner of Income Tax {(2O 17) 249 Taxman 50 1 (Guj)|. Relei ant portion reads as under: (EmPhasis siuPPlied) 13. Sc, lar argument of the learned Senior Standing C-or.\"\"t-f,.,. the reslpondent that the petitioner after getting the i.rt..r- order in this matter could not establish that non- ;;;;;;; ,,\";,rot be attributed to him is concerned' sufhce it to \"\"r aft\", the scope of judicial review in this peLition under niii\"i\" i.lo uf tt \" co.titit , tion is regarding decision making ;;;\";;\" adopted by the respondents' This Court at this stage i\" rnde. no obligalion to eiamine whether on merits the non- ;;;a can be attributed to the conduct of the petitioner' Since de<,i\"ion making process is found to be faulty and runs contrary to the principles of natural justice, the proper course is to sei aside Ge order ald permit the Revenue to follow the p.i.r\"ipt\"\" o[ natura] justice and proceed in accordance with law. 14. In casc of Mehul Jadavj Shah v' Deputy CIT [2018 SCC Onl-int: Borr.. 21261}, a Division Bench of Bombay High Court set aside a ltnal order against a Director passed under { f h of dLt t- 7S t1t of the Act be r)assed , ThiS td ndcr 1 eflectivc order u te of h other requL rerncnL can bc fullilled of only after hear u rng the director the requircment IT 1 dcspitc repeated e onlv one element of the requircment of sub section ( 1) of section 179 The c()nccrned. An advt'rse civil ord olhcr vicw would amount to eliminating ol hearinll and lollowrng the Principles of natural justice bcfore an er that may be Passed.\" 4 Section 179(1) of the Act despite the fact that the petitioner therein was put to show cause notice before passing the final order. Since show cause notice was not coniainin6fadequate details, interference was made. In the instant case, admittedly directly a final order is passed without putting the petitioner tL notice. 15. In view of th9 foregoing discussion, the impugned order dated 12.O3.2023, is liable io be jettisoned.,, 6. This Court in Subba Rao (supra) followed the view taken by Gujrat High Court and came to hold that in a case of this nature, considering the language employed in Section 179 of the Act, the petitioner should be put to notice. Admittedly, the impugned order dated 26.O5.2022 is passed unilaterally without hearing the petitioner. Resultantly, the order dated 26.05.2022 and consequential attachment order dated 17.10.2024 are set aside. Liberty is reserved to the respondents to proceed against the petitioner by issuing notice. In that event, it will be open to the petitioner to take all possible defence in the reply. 7. With aforesaid and without expressing any opinion on merits of the case, the writ petition is disposed of. No costs Interlocutory applications, if any closed. pending, shall also stand SD/.L. VIJAYA ASSISTANT REGI SECTION OFFICER MI RAR //TRUE COPY// 1 The Union of lndia, Ministry of Finance, lncome Tax Department' New Delhi - 100 01 1 o?Yc['oi ft,\" Tax Recovery officer, TRo, Pg.lI.- ?' Hyderabad ' Signature ilffi; s;: N;. diFi, x\";oip\"'. sv. rlo sz11l' Kotrasuda' opposite -^^ e\"il;iii'ri6J.l:,;rid, serilingafrpirii urrnoir,'nunsareday, Hyderabad - 500 3?1i\" \"t rn\" rncome Tax officer, ward 17(1), Hyderabad, signature Towers, 5i,x; jisllf :s:*,'J-;u:::;lHu:\",:rt';',i,,?Pi'\",T:333'J;T' 2 3 To, 1 Qn\" CC to Ms MyTRt |NDU{URU, Advocare tOpUCl 5 g_ry cc to sRt GAD| PRAVEEN KUMAR, Dr.SOirCiron cEN, oF tNDtA loPUCl 6 9_L\" CC to SRI MURALT KR|SHNA, SENTOR SC FOR TNCOME TAX loPUCl 7. Two CD Copies BIM BS Yr { HIGH COURT DATED:1211212024 ORDER WP.No.29787 ol 2024 DISPOSING OF THE WRIT PETITION WITHOUT COSTS I I ( 1:ii. e J c o 2 D L:\" 'illl a 4' /:'..-- -^. --_---_,_-2 o.coPl* Xr\" "