Court partially grants writ-applicant relief, quashes freeze notices, allows fresh proceedings to safeguard fair hearing.

The court partly allowed the writ-application, quashing the impugned order and related bank account freeze notices. The Department was given two months to initiate fresh proceedings under Section 179, ensuring the writ-applicant's right to a fair hearing. The writ-applicant agreed not to operate the bank account until the completion of the fresh proceedings.

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Issues Involved:
1. Legality of the impugned order under Section 179 of the Income Tax Act, 1961.
2. Adequacy of steps taken by the Department to recover tax dues from the company before proceeding against the Directors.
3. Validity of the show-cause notice and subsequent actions under Section 179.
4. Freezing of the writ-applicant's bank account under Section 226(3) of the Act.

Detailed Analysis:

1. Legality of the Impugned Order under Section 179 of the Income Tax Act, 1961:
The writ-applicant challenged the order passed under Section 179 of the Income Tax Act, 1961, holding the directors of a private company liable for outstanding tax dues. The impugned order stated that the directors were jointly and severally liable for the payment of Rs. 9074.34 lakhs, as the company had no recoverable assets and failed to pay the tax despite multiple opportunities. The court noted that Section 179 allows holding directors liable if the tax cannot be recovered from the company, unless the directors prove that the non-recovery was not due to their gross neglect, misfeasance, or breach of duty.

2. Adequacy of Steps Taken by the Department to Recover Tax Dues from the Company:
The writ-applicant argued that the Department did not demonstrate the steps taken to recover dues from the company. The show-cause notice and the impugned order lacked material particulars regarding the recovery efforts. The court emphasized that the Department must establish that it exhausted all recovery avenues against the company before proceeding against the directors. The additional affidavit submitted during the hearing detailed the steps taken but was deemed insufficient to fill the void left in the original notice and order.

3. Validity of the Show-Cause Notice and Subsequent Actions under Section 179:
The court found that the show-cause notice and the impugned order were silent on the steps taken to recover the dues from the company. This omission rendered the order unsustainable. The court highlighted that the subjective satisfaction of the authority must be reflected in the order based on cogent materials. Consequently, the court quashed the impugned order and directed the Department to issue a fresh show-cause notice with all necessary details, allowing the writ-applicant to respond adequately.

4. Freezing of the Writ-Applicant's Bank Account under Section 226(3) of the Act:
The writ-applicant's bank account was frozen following the impugned order. The court noted that the freezing of the bank account was a direct consequence of the flawed order under Section 179. Given the decision to quash the impugned order, the court also set aside the notices issued under Section 226(3) to the banks, thereby lifting the freeze on the writ-applicant's account.

Conclusion:
The court partly allowed the writ-application, quashing the impugned order and the related bank account freeze notices. It provided the Department with two months to initiate fresh proceedings under Section 179, ensuring the writ-applicant's right to a fair hearing. The writ-applicant agreed not to operate the bank account until the completion of the fresh proceedings.

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