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of <h1>Liability of directors for company tax in liquidation and limits on attaching directors bank accounts pending relief</h1> Liability of directors for corporate tax in liquidation is addressed with emphasis on control by the liquidator and availability of company funds for ... Liability of directors for tax of company in liquidation - Liability in case of company in liquidation - Liquidators appointment and control of company affairs - Writ jurisdiction of High Court - Attachment of bank accounts in recovery proceedings - Section 88(3) of the respective GST enactments - HELD THAT:- According to the petitioner, they are no longer associated with the said Company under liquidation, as, the said Company is in charge of the fourth respondent, who was initially appointed as Interim Resolution Professional by order dated 08.09.2017 and later on, appointed as a Liquidator of the said Company by order dated 06.02.2019. The facts on records also reveal that tax amount has also been recovered from the credit ledger maintained by the said Company and that the said Company is in arrears of interest and penalty as confirmed by orders passed by the Assessing Officer. There is no justification on the part of the respondent-Income Tax Department to attach the respective petitioner's Bank account, who are the individual Directors of the said Company under liquidation for the mandate of Section 88(3) of the respective GST Enactments. Therefore it is open for the petitioner to move suitable application before the respondents Nos.1 and 2 to extricate themselves from the liability in the impugned order. The petitioners are therefore given liberty to file suitable application within 15 days from the date of receipt of a copy of this order. The attachment of the petitioner’s bank account(s) shall also stand vacated subject to the order to be passed. Writ Petition is disposed of. Issues: Whether the attachment of the petitioners' bank accounts and the imposition of liability on the petitioners, who were directors of a company in liquidation, under Section 88(3) of the GST enactment was justified and whether the petitioners could be permitted to seek relief from such liability and attachment.Analysis: Section 88(3) of the GST enactment imposes joint and several liability on persons who were directors of a private company during the relevant period for recovery of tax, interest or penalty where such amounts cannot be recovered from the company, subject to proof that non-recovery is not attributable to gross neglect, misfeasance or breach of duty by the director. The record shows that tax has been recovered from the company's credit ledger and that liquidation proceedings were in effect with an appointed liquidator. The available material does not establish that the petitioners, as individual directors, cannot seek to displace liability by making an application under the statutory framework; procedural opportunity to investigate and determine whether non-recovery is attributable to gross neglect, misfeasance or breach of duty remains available to the assessing authority. The impugned attachment was executed without final adjudication of the directors' personal liability under the statutory test and without affording the procedural opportunity contemplated by the statute.Conclusion: In favour of the Assessee. The petitioners are entitled to file a suitable application to the respondents to seek exclusion from liability under Section 88(3); the attachment of the petitioners' bank accounts is to stand vacated subject to the outcome of the application, and the respondents are to decide the application on merits after hearing the petitioners within the directed timeframe.
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