2015 (4) TMI 434 - AT - Income Tax

Director's Appeal Dismissed for Penalty Not Personally Liable

The appeal filed by the Managing Director of a company against a penalty imposed was deemed not maintainable as the director was not personally liable for ... Penalty u/s 271(1)(c) - application filed in the case of M/s. Suvistas Software Pvt. Ltd. (company) seeking rectification of the appellate order dismissed - maintainability as per the provisions of section 253 of the I.T. Act, 1961 - Held that:- The term ‘assessee aggrieved’ used in S.253(1), being a person competent to file an appeal before the Tribunal, is only the person who is an aggrieved party liable to pay tax in terms of the order against which the appeal is to be preferred. As already discussed by us, there is no tax payable by the appellant in the present case as a result of the impugned order passed by the learned CIT(A), and consequently, he cannot treated as an ‘aggrieved party’. We, therefore, hold that the appellant is not entitled to file the present appeal against the impugned order passed by the learned CIT(A) confirming the penalty imposed by the Assessing Officer under S.271(1)(c) on the company and consequently the present appeal, being not maintainable, is liable to be dismissed in limine. We accordingly dismiss this appeal holding the same to be not maintainable. - Decided in favour of assessee. Issues Involved:1. Maintainability of the appeal by the appellant under Section 253 of the Income Tax Act, 1961.2. Definition and applicability of the term 'assessee' under Section 2(7) of the Income Tax Act, 1961.3. Liability of directors under Section 179 of the Income Tax Act, 1961.4. Interpretation of 'assessee aggrieved' under Section 253 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Maintainability of the Appeal:The primary issue was whether the appeal filed by Mr. R. Subba Rao, the Managing Director of M/s. Suvistas Software Pvt. Ltd., against the order of the CIT(A) confirming the penalty imposed under Section 271(1)(c) on the company, was maintainable under Section 253 of the Income Tax Act, 1961. The Tribunal referred to its previous decision in ITA.No.1475/Hyd/2014, where it was held that the appellant was not entitled to file an appeal against the impugned order passed by the CIT(A). The Tribunal reiterated that the appellant, in his individual capacity, could not be considered an 'assessee aggrieved' by the order, thus making the appeal not maintainable.2. Definition and Applicability of 'Assessee':The Tribunal examined the definition of 'assessee' under Section 2(7) of the Income Tax Act, 1961, which includes any person by whom any tax or any other sum of money is payable under the Act. The appellant contended that he should be considered an assessee since the penalty amount was payable by him as per a letter from the Assessing Officer. However, the Tribunal found that the letter merely requested the appellant to arrange for the payment of the penalty due from the company and did not indicate that the penalty was recoverable from the appellant personally.3. Liability of Directors under Section 179:The appellant argued that under Section 179, as a director of a private company, he was jointly and severally liable for the tax dues of the company. The Tribunal clarified that Section 179 applies only to directors of private companies in liquidation. Since M/s. Suvistas Software Pvt. Ltd. was not in liquidation, the appellant could not be held liable for the company's penalty. The Tribunal also referred to judicial precedents, including the Hon'ble Bombay High Court's decision in Union of India V/s. Manik Dattatreya Lotlikar, which held that directors are liable for tax dues but not for penalties imposed on the company.4. Interpretation of 'Assessee Aggrieved':The Tribunal discussed the term 'assessee aggrieved' under Section 253, which allows an appeal to the Tribunal. Judicial precedents, such as the Hon'ble Bombay High Court's decision in Kikabhai Abdulali V/s. ITAT & Ors, were cited to explain that the right of appeal is for those liable to pay tax due to an order. Since the appellant was not liable to pay the penalty confirmed by the CIT(A), he could not be considered an 'assessee aggrieved.' The Tribunal also referred to other cases, including CIT V/s. Ambala Flour Mills and MICO Employees Association V/s. ACIT, to emphasize that only those directly liable for tax or penalties can appeal.Conclusion:The Tribunal concluded that the appellant, being the Managing Director of the company and not personally liable for the penalty, could not be considered an 'assessee aggrieved' under Section 253. Therefore, the appeal was dismissed as not maintainable. The Tribunal's decision was consistent with its earlier ruling in ITA.No.1475/Hyd/2014, reinforcing the principle that directors cannot appeal against penalties imposed on their companies unless they are personally liable.Order:The appeal was dismissed as not maintainable, and the order was pronounced in the open court on 27.03.2015.