PANKAJ MORAKHIA V. ASSITANT COMMISSIONER OF INCOME TAX CIRCLE - 2(1)(2), 1ST FLOOR,

SCA/1374/2018

AI Insights

The case involves Prakash Sevantilal Morakhia, a director of M/s. Morakhia Copper & Alloy Private Limited, who challenged an order by the Assistant Commissioner of Income Tax, Ahmedabad, demanding payment of unpaid tax dues of the company. The order was based on the non-response of the petitioner to a show cause notice and the inability to recover dues from the company. The court found that the petitioners had not responded to the initial notice, which led to the order under Section 179 of the Income-tax Act, 1961. However, the court decided to set aside the order and allow the petitioners another opportunity to present their case, subject to certain conditions to ensure compliance and expedite the process.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 693542 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 17-04-2018
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: TUSHAR HEMANI
• Keywords: Director's Liability; Income Tax; Recovery Order; Tax dues
• Section: 179

Judgement Text

"C/SCA/1373/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION No. 1373 of 2018 With R/SPECIAL CIVIL APPLICATION No. 1374 of 2018 With R/SPECIAL CIVIL APPLICATION No. 1375 of 2018 ============================================================= PRAKASH SEVANTILAL MORAKHIA Versus ASSITANT COMMISSIONER OF INCOME TAX CIRCLE - 2(1)(2) ============================================================= Appearance : Mr TUSHAR HEMANI for Ms VAIBHAVI K PARIKH, Advocates for the PETITIONER Mrs MAUNA M BHATT, Advocate for the RESPONDENT ============================================================= CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI and HONOURABLE Mr. JUSTICE B.N. KARIA 17th April 2018 COMMON ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) These petitions arise in the common background. For convenience, we may refer to the facts from Special Civil Application No. 1373 of 2018. Petitioner is one of the Directors of M/s. Morakhia Copper & Alloy Private Limited. The petitioner has challenged an order dated 15th December 2017 passed by Assistant Commissioner of Income- tax, Ahmedabad asking the petitioner to pay-up unpaid tax dues of the Company. This is on the basis that the recoveries against the company could not be effected and the petitioner did not respond Page 1 of 4 C/SCA/1373/2018 ORDER to the show cause notice issued by the said officer. Under the circumstances, in exercise of power under Section 179 of the Income-tax Act, 1961 [“the Act” for short], the said order came to be passed. Having heard learned advocates for the parties, the following broad facts emerge - [i] though the competent authority had issued show cause notice to the petitioner before passing an order under Section 179 of the Act, the petitioners had not responded to such notice. The defence of the petitioners therefore could not be brought on the record; of course due to failure on the part of the petitioners to respond to the notice. [ii] Out of the many outstanding liabilities cited by the competent authority under the show cause notice and the final order of recovery, many of them are pending at the first appellate stage before the Commissioner [Appeals]. [iii] We are informed that the Department had taken certain post-dated cheques from the Company which have been honoured; as and when presented for encashment. [iv] Section 179 of the Act permits recovery of outstanding dues of a Private Limited Company from its Directors; subject to certain conditions. Besides, the prime condition for such dues not being Page 2 of 4 C/SCA/1373/2018 ORDER recovered from the company, another important condition is that the concerned Director of Sales has to prove that non-recoveries cannot be attributed to any gross negligence, misfeasance or breach of duty on his part in relation to the affairs of the Company. Considering such factual and legal position, we are inclined to allow the petitioners to represent their full cases before the competent authority. This, however, this cannot be done unconditionally since the petitioners have already missed the bus once. In the facts of the case, therefore, these petitions are disposed of with the following directions : [a] All the impugned orders are set-aside. [b] Proceedings are placed back before the competent authority for passing fresh orders in accordance with law, after enabling the petitioners to file their replies to the show cause notices and produce necessary documents and materials. [c] If this is done latest by 30th April 2018, the competent authority shall taken into account the said defense of the petitioners. [d] Latest by 15th May 2018, the petitioners or the Company shall deposit a further sum of Rs. 15 lakhs towards the outstanding tax liability. The petitioners shall also file an undertaking before Page 3 of 4 C/SCA/1373/2018 ORDER this Court latest by 20th April 2018 that this condition shall be satisfied. [e] That the Company may request the Commissioner [Appeals] before whom the relevant issues may be pending in appeals for expeditious disposal of such Appeals. The Commissioner, considering his workload, may grant priority to such Appeals. Nothing stated in this order will enable the Company to contend that no further recoveries by the Tax Department can be made against the Company. The Company shall file a list of its immovable properties before the Assessing Officer on or before 30th April 2018. Such list shall indicate which of these properties are encumbered and which are not. The petitioner shall file an undertaking before the Assessing Officer that now onwards no further encumbrance on any of the properties enlisted shall be created without prior permission of the Assessing Officer. With these directions, all these petitions stand disposed of. [Akil Kureshi, J.] [B.N Karia, J.] Prakash Page 4 of 4 "