TaxTMI 
TaxTMI 
2023 (6) TMI 885
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....ation Pvt. Ltd. ("KAPL" for short) for Assessment Year 2008-09 & 2009-10 and (b) Order dated 18th March 2019 passed by Chief Commissioner of Income Tax (OSD) holding charge of Pr. Commissioner of Income Tax-10, Mumbai, under Section 264 of the Act in Petitioner's revision against aforesaid order dated 22nd December 2017. Petitioner is also seeking a writ of mandamus directing Respondents to withdraw, revoke and cancel the said impugned orders. 3. Heard Mr. Mistry, learned senior counsel for Petitioner and Mr. Suresh Kumar for Respondents - Revenue. Perused the record. CASE 4. Petitioner has come with following case : 4.1) Petitioner is a mechanical Engineer who had developed a smart card based ticketing solution in the year 2000, which could be used for various public transport like BEST and suburban trains on both central and western railway-lines of Mumbai. It was agreed between Petitioner and said transport organisation that he would run a test project to check its utility and viability. After the successful trial run, BEST as well as Central Railway gave their consents to go ahead with implementation of the smart card ticketing system on built, operate and transfer ....
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....t was the status of KAPL and its main Directors. Petitioner was never given any access to KAPL-assessee company's premises, data or any thing else associated therewith including accounts, audits and income tax filing etc. 4.4) It is specific case of Petitioner that during the time when he was Director of Company, there were no outstanding demand of tax / duty from Income Tax Department. It is contended that after a long period of 8 years, Petitioner was served with a show cause notice dated 12th January, 2017 directing him to reply as to why proceedings under Section 179 of the Act should not be initiated against him for outstanding demand against KAPL the assessee Company. The notice recorded name of Petitioner and his wife only and no other Directors of the Company for Assessment Year 2008-09 and 2009-10. It was learnt that assessment has been made and penalties to the tune of Rs. 14 Crores levied on KAPL. No copies of any orders or proceedings pursuant to which demand has arisen, were provided to Petitioner. 4.5) It is contended that Petitioner had filed detailed reply and supplied all the documents, agreements etc contending that non recovery of tax from KAPL cannot be at....
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....ch Director cannot be held liable. It was further submitted that the impugned orders were passed without considering the true and correct purport and interpretation of Section 179(1) of the Act. 9. Mr. Mistry further urged that citizens like Petitioner or his wife cannot be subjected to arbitrary and unreasonable powers as wielded by Respondents while passing the impugned orders. It was submitted that true purport of Section 179(1) of the Act is that a person must not only be a Director at the relevant assessment year but also a director at the time when the demand was raised and such Director can be held responsible only and only when "non recovery" is attributable to gross neglect, misfeasance or breach of duty on the part of such Director. Mr. Mistry further urged that strictly speaking, question of non recovery being attributable to conduct of Petitioner would be relevant only if he was a Director when the demand has been raised. He submitted that in the present case Petitioner was admittedly not a Director when the reassessment proceedings were initiated in the year 2017 and hence there is no question of Section 179(1) of the Act being attracted. Even otherwise, according t....
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....ointly and severally liable for the payment of such tax unless the proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company." 13. This Court in Mukesh D. Ramani's case (supra) has considered various judgments of this Court as well as other High Courts. As noted in judgments of Satish D. Sanghavi v. Union of India (2012) 25 taxmann.com 328(Bombay) and Narinder Singh v. Union of India 2019 (367) ELT 775 , it is settled position of law that in absence of any specific provisions in the statute, duty or penalty liability of the company cannot be recovered from its Director, who is not personally liable towards liability of the Company. Perusal of Section 179(1) of the Act shows that it provides for an escape route to the Director. It says that where a Director proves that non recovery of tax dues cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the Company, he shall not be liable for payment of tax dues. Of course, the responsibility of establishing such fact is upon the Director. Once the Director places before the autho....
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....of the company at the relevant time would be jointly and severally liable for payment of such taxes, unless, it is proved that non-recovery cannot be attributed to any gross negligence, misfeasance or breach of duty on their part in relation to the affairs of the company. The burden cast by statute is thus in the negative and is on the director concerned as is observed in case of Maganbhai Hansrajbhai Patel (supra). However, once in defence, the director places necessary facts before the Tax Recovery Officer to establish that non-recovery cannot be attributed to gross negligence, misfeasance or breach of duty on his part, the Tax Recovery Officer is required to apply his mind and come to definite findings......" (emphasis supplied) 16. Viewed from the aforesaid settled position of law, now let us examine the material produced by Petitioner before the authorities passing the impugned orders. 17. Petitioner had produced all the documents in support of his case that he was not in the controlling capacity of KAPL the assessee company specially its financial affairs. It is not the case of Respondent that the tax dues (which is subject matter of the impugned orders) were d....
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...." to any gross neglect misfeasance or breach of duty on his part, in the present case, as observed above, Petitioner has discharged such burden by placing on record his specific case and supporting material. It was therefore imperative for the Authorities to consider the same and come to a reasoned conclusion in terms of section 179(1) of the Act. The same is awfully lacking in the impugned Orders. 19. In the circumstances, we are of the view that petitioner is squarely covered by the exception carved out by the later part of Section 179(1) of the Act and as such he cannot be held liable. For such conclusion, we also draw support from a judgment of Gujarat High Court in Ram Prakash Singeshwar Rungta v. ITO [2015] 59 taxmann.com 174. In para 14 thereof, it is held:- "14............ Thus, the very basis on which the respondent has proceeded, suffers from non-application of mind to the requirements for exercise of powers under section 179(1) of the Act. In the absence of any finding that non-recovery of the tax due from the company can be attributed to any gross negligence, misfeasance or breach of duty on the part of the petitioners, no order could have been made under se....