Court Quashes Tax Arrears Demand on Heir's Share - Liability Clarified The court allowed both writ petitions, quashing the impugned notices demanding tax arrears and encumbrance on the petitioner's share of the subject ...
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The court allowed both writ petitions, quashing the impugned notices demanding tax arrears and encumbrance on the petitioner's share of the subject property. It was held that the petitioner, not being a director or shareholder of the company in arrears, should not be held liable for the company's tax debts solely based on being an heir of directors. The court emphasized the petitioner's lack of involvement in the company post-directors' demise and ownership of a 1/4 share in the property. Legal action against the company for arrears was permitted, but the encumbrance on the petitioner's share was directed to be removed.
Issues: 1. Impugned notice demanding tax arrears and threatening property attachment. 2. Encumbrance over subject property and partition deed dispute.
Analysis: 1. The judgment concerns two writ petitions challenging notices issued by the tax department. The first petition is against a notice demanding tax arrears from the petitioner and threatening property attachment. The second petition challenges a notice informing the petitioner about tax arrears and encumbrance on the subject property. Both petitions are disposed of together due to similar issues.
2. The petitioner, not a director or shareholder of the company in arrears, argues against being held liable for the company's tax debts. The petitioner's father and grandfather purchased the subject property, later divided into four equal shares among family members. The department's auction proceedings for the entire property are contested as infringing on private rights due to the pending partition suit.
3. The government pleader asserts the petitioner, as a legal heir enjoying benefits from deceased directors, is aware of the company's tax arrears. The department initiated action to attach the subject property to recover tax arrears, complying with relevant tax laws. The government argues the petitioner cannot evade the company's legal dues derived from properties inherited from the petitioner's father, a company director.
4. The court notes the petitioner's lack of involvement in the company post-directors' demise and ownership of a 1/4 share in the subject property as per a partition deed. The court emphasizes that a person not connected with a company should not be held liable for company affairs solely based on being an heir of directors, unless involvement is proven. The court quashes the impugned proceedings, directing the removal of encumbrance on the petitioner's 1/4 share while allowing legal action against the company for arrears.
5. In conclusion, both writ petitions are allowed without costs, with the court quashing the impugned proceedings and directing the removal of encumbrance on the petitioner's share. The judgment clarifies that the order does not prevent legal action against the company, its directors, or shareholders to recover arrears.
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