(Per T. D. Sugla, J.)

By this petitioner under article 226 of the Constitution of India, the petitioner has challenged the notice of demand dated December 9, 1983, issued by the Tax Recovery Officer, Bombay, under section 179 of the Income-tax Act, 1961. Briefly stated, the relevant facts are that the petitioner became a director of a private limited company known as Kapadia Construction Company Pvt. Ltd. on November 30, 1966. The income-tax assessments of the said company for the assessment years 1970-71 to 1973-74 were completed and certain demands were raised. The demands were not paid. Eventually, by a notice dated July 22, 1983, the Income-tax Officer, Central Circle XXVIII, Bombay, required the petitioner to show cause why the arrears of demand of the said company be not recovered from him as a defaulter under section 179 of the Act. The petitioner, by his letter dated August 16, 1983, informed the Income-tax Officer that though he had become a director of the said company on November 30, 1966, he had ceased to be a director some time in February, 1967, as he did not attend any board meeting after he become a director. It was stated that, in the circumstances, he was not liable under section 179 of the Act at all.

It appears that, thereafter, the Tax Recovery Officer issued a notice of demand dated December 9, 1983, to the petitioner treating him as a defaulter in respect, of an amount of Rs. 27,67,668 which was stated to be the taxes due from the company. By an order of attachment dated December 28, 1983, the Tax Recovery Officer attached the petitioner's residential flat in a building known as "Mount Unique" on G. Deshmukh Marg, Bombay 26. Thereafter, the petitioner approached the Commissioner by an application dated February 21, 1984, requesting him to cancel the attachment and sought a personal hearing. Soon thereafter, the Tax Recovery Officer issued proclamation of sale dated March 15, 1984 (which date seems to be wrong as this petition itself was filed only on March 8, 1984). It was at that stage that this petition was filed. Rule was issued and interim stay in terms of prayer clause (c)(ii) was granted on March 9, 1984.

The first contention raised on behalf of the petitioner by Shri Dwarkadas is that the amendment of section 179 of the Act, is not retrospective so much so that, for assessment years prior to the assessment year 1975-76, the liability of a company could be fastened on the directors only in case the company was wound up and not otherwise. This contention requires to be rejected in view of this Court's judgments in Union of India v. Manik Dattatreya Lotlikar [1988] 172 ITR 1, and Union of India v. Praveen D. Desai [1988] 173 ITR 303. It was pointed out that the question is pending before the Supreme Court. Be that as it may, the judgments of this Court still hold the field and, therefore, following those decisions, it has to be held that section 179 of the Act as amended is retrospective in operation.

On merits, it was the case of Shri Dwarkadas that when, in reply to the show-cause notice, the petitioner submitted to the Income-tax Officer that he had ceased to be a director from February, 1967, of the said company the Income-tax Officer was not justified in issuing a demand notice without giving him an opportunity of hearing or at least passing an order under section 179 of the Act, It is pertinent to mention that Dr. Balasubramaniam for the Income-tax Department, at this stage, stated that the Department had filed an affidavit-in-reply some time in September, 1988. However, this affidavit is not found in the Court's records and counsel for the petitioner stated that no such affidavit was served on him. To ascertain as to what was the case of the Department as regards the petitioner's statements that he had ceased to be a director of the said company from February, 1967, Dr. Balasubramaniam read out from the affidavit-in-reply, a copy of which was in his hand, an averment which was found t