Thumpudi Srikant Bhagavat V. Union of India Ministry of Finance Department of Revenue and The Deputy Commissioner of Income Tax Circle - 1(2), Pune

WP/45503/2018

AI Insights

The case involves Thumpudi Srikanth Bhagavat, a non-executive Director of M/s.DSK Southern Projects Pvt. Ltd., who challenged an order under Section 179 of the Income Tax Act, 1961. This order was issued due to tax defaults by M/s.DS Kulkarni Developers Ltd. for the Assessment Year 2016-17. The Income Tax Department sought to recover these dues from the petitioner, asserting that the company was in default. The core legal issue was whether the personal liability of the director under Section 179 could be invoked without a finding that the tax dues from the company were irrecoverable. The court referenced a previous case, A.S.Chinnaswamy Raju and Another v. Union of India, to emphasize that such a finding is essential before proceeding against a director personally.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 828022 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-01-2026
• Assessment Year: misc
• Other Referred Cases: A.S.Chinnaswamy Raju and Another v. Union of India, Ministry of Finance and Others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: Y V RAJ
• Assessee Lawyers: S S NAGANAND
• Keywords: Director's Liability; Income Tax; Non-recovery of Tax; Section 179
• Section: 226(3); 179

Judgement Text

" - 1 - HC-KAR NC: 2026:KHC:242 WP No. 45503 of 2018 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF JANUARY, 2026 BEFORE THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 45503 OF 2018 (T-IT) BETWEEN: 1. THUMPUDI SRIKANTH BHAGAVAT AGED 51 YEARS S/O TKK BHAGAVAT R/ # 4072, 30TH CROSS, BANASHANKARI 2ND STAGE, BENGALURU - 560 070 … PETITIONER (BY SRI. S.S. NAGANAND, SENIOR ADVOCATE FOR SMT. SUMANA NAGANAND., ADVOCATE) AND: 1. UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI - 110 001 THROUGH THE SECRETARY 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 1(2), PUNE 2ND FLOOR, A WING, ROOM NO.204, PMT COMMERCIAL COMPLEX, Printed from counselvise.com Digitally signed by PRAKASH N Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:242 WP No. 45503 of 2018 SHANKAR SETH ROAD, SWARGATE PUNE - 411 037 … RESPONDENTS (BY SRI. Y.V. RAVI RAJ, ADVOCATE) THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER DATED 29.08.2018 (ANNEXURE-A) PASSED BY THE 2ND RESPONDENT AND ETC. THIS PETITION COMING ON FOR HEARING THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV ORAL ORDER The present petition has been filed by the petitioner who was non-executive Director of subsidiary company viz., M/s.DSK Southern Projects Pvt. Ltd., challenging the validity of order dated 29.08.2018 passed by the second respondent whereby the order was passed under Section 179 of the Income Tax Act, 1961 (\"the Act\", for short). 2. The facts that are made out are that M/s.DS Kulkarni Developers Ltd., was in default to the Department of tax and interest upon assessment for the Assessment Year 2016-17. 3. It is further made out that notice under Section 226 (3) of the Income Tax Act, 1961 was issued to the Printed from counselvise.com - 3 - HC-KAR NC: 2026:KHC:242 WP No. 45503 of 2018 company requesting to pay the Income Tax Department, any amount due from the Company held on account of assessee M/s.DS Kulkarni Developers Ltd. The order was passed directing the petitioner to pay outstanding taxes immediately, failing which coercive steps will be taken. Thus, it is becomes clear that insofar as tax due from M/s.DS Kulkarni Developers Ltd., proceedings under Section 179 were initiated against the Director of M/s.DSK Southern Projects. 4. Without entering into the merits, a perusal of Section 179 would be of relevance. Section 179 of the Income Tax Act, 1961 reads as follows: 179. Liability of directors of private company — (1) Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), [where any tax due from 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 other 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 Printed from counselvise.com - 4 - HC-KAR NC: 2026:KHC:242 WP No. 45503 of 2018 such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. (2) Where a private company is converted into a public company and the tax assessed in respect of any income of any previous year during which such company was a private company cannot be recovered, then, nothing contained in sub-section (1) shall apply to any person who was a director of such private company in relation to any tax due in respect of any income of such private company assessable for any assessment year commencing before the 1st day of April, 1962.] [Explanation.—For the purposes of this section, the expression “tax due” includes penalty, interest or any other sum payable under the Act.] 5. It is the contention of learned Senior Counsel appearing on behalf of the petitioner that before Section 179 is invoked, it is necessary that there has to be an affirmative finding that tax dues \"cannot be recovered\" and only upon such contingency having occurred, proceedings could be initiated Printed from counselvise.com - 5 - HC-KAR NC: 2026:KHC:242 WP No. 45503 of 2018 under Section 179 against every person who was the Director of the company at any time during the relevant previous year. 6. It is further submitted that liability under Section 179 as regards the Director vis-à-vis Company is not co-extensive liability of the Director but liability that is contingent upon inability to recover from the company and only under such circumstances that the proceedings could be proceeded against the Director. 7. Reliance has been placed on the order of the Coordinate Bench in the case of A.S.Chinnaswamy Raju and Another v. Union of India, Ministry of Finance and Others reported in ILR 2015 KAR 1050. The observation at paragraph 5 would be of relevance and reads as under: \"5. Section 179 of the Act imposes a personal liability on the Directors of a Private Company in respect of the Tax due from the company in the circumstances referred to therein. As could be seen from the impugned orders, nowhere respondent No.3 has referred to any of the proceedings initiated against the company to show that it is not possible to recover the tax due from the company. In the absence of such a finding, no liability could Printed from counselvise.com - 6 - HC-KAR NC: 2026:KHC:242 WP No. 45503 of 2018 be fixed on the Directors under Section 179 of the Act to pay the tax due. Hence, the impugned orders and the consequent demand notices are liable to be set aside and are accordingly set aside. The matter is remitted to respondent No. 3 for reconsideration in accordance with law after affording an opportunity of hearing to the petitioners. All contentions of both the parties are kept open.\" 8. Perused the impugned order. 9. There is no finding recorded regarding inability to recover from the Company which is an Assessee in default. Unless there is a finding recorded that dues cannot be recovered from the company, the question of proceeding against the Directors of the Company as contemplated under Section 179 of the Act does not arise. Accordingly, on such sole ground, the order at Annexure-A is set aside. 10. Needless to state that during the course of recovery of tax dues from the Company, if the pre-condition of tax dues not being able to be recovered is satisfied and circumstances so arise for invocation of Section 179, it is open to invoke such power strictly as per law. Printed from counselvise.com - 7 - HC-KAR NC: 2026:KHC:242 WP No. 45503 of 2018 11. Accordingly, the petition is disposed of. All other contentions of the petitioner are kept open if required to be raised in any proceeding. Sd/- (S SUNIL DUTT YADAV) JUDGE NP Printed from counselvise.com "