2016 (10) TMI 367

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....ence the facts may be recorded from Special Civil Application No.2647/2009. 2. The petitioner, an individual was the Director of a Public Limited Company called Yash Organics. He held such a position till 26.08.2000. Yash Organics faced income tax unpaid demand of Rs. 12.32 Crores (rounded off) for the block period from 02.08.1996 to 11.02.2000, pursuant to the order of assessment dated 22.02.2002 passed by the Assessing Officer under Section 158BC of the Income Tax Act, 1961 ('the Act' for short). 3. Against such an order of assessment, the company had preferred an appeal before the Appellate Commissioner which came to be dismissed on 04.03.2004. The company preferred further appeal before the Income Tax Appellate Tribunal which ....

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.... the Commissioner who substantially allowed the appeal of the company reducing the tax demand to Rs. 3.55 Crores (rounded off). Against such an order, both the Company as well as the Department have approached the Tribunal and the Appeals are pending. 5. The facts are not seriously in dispute. The stage of the assessment proceedings is not disputed by the revenue. It is also not in dispute that Yash Organics is a public limited company. Ordinarily, therefore in terms of Section 179 of the Act, the Director of such a company would not be answerable to unpaid taxes of the company. Section 179 of the Act pertains to a Director of a Private Limited Company and permits the revenue to recover unpaid taxes from the Director of such a company, sub....

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....s. Two situations where such principle is consistently applied are, one where the statute itself so permits or provides for and the second where due to glaring facts established on record it is found that a complex web has been created only with a view to defraud the revenue interest of the State. If it is found that incorporation of an entity is only to create a smoke screen to defraud the revenue and shield the individuals who behind the corporate veil are the real operators of the company and beneficiaries of the fraud, the courts have not hesitated in ignoring the corporate status and striking at the real beneficiaries of such complex design. 17. Section 179 of the Act itself is a statutory creation of piercing of corporate veil. Ordi....