The central legal point established in the judgment is the burden of proof on a director to establish lack of gross neglect, misfeasance, or breach of duty in relation to the affairs of the company to absolve themselves from liability for tax dues of the company.

JUDGMENT

Dhiraj Singh Thakur, J. - The petitioner challenges the order dated 22nd December 2017 passed by the Income Tax Offcer under section 179 of the Income Tax Act, 1961 ('the Act') treating the petitioner liable for taxes allegedly due from the company M/s. Kaizen Automation Pvt. Ltd. (KAPL) for the assessment years 2008-09 and 2009-10. Order dated 18th March 2019 passed by the Principal Commissioner of Income-tax, Mumbai dismissing the revision petition under section 264 of the Act is also challenged in the present petition.

2. Briefy stated the material facts are as under :

2.1 A show cause notice dated 12th January 2017 was served upon the petitioner in terms of section 179 of the Act requiring the petitioner to show cause as to why recovery proceedings be not initiated against her in her capacity as a director of KAPL inasmuch as the assessee company was not traceable on the available addresses and further that the tax dues could not be recovered despite attachment of the bank accounts as the funds available were insuffcient. An amount of Rs.1404.42 lacs was thus sought to be recovered from the petitioner.

2.2 With a view to prove that the non-recovery of the taxes due could not be attributed to any gross neglect, misfeasance, breach of duty on her part, in relation to the affairs of the company, the petitioner in her response to the show cause noticed dated 23rd October 2017, took a stand that the petitioner, as a director in the company had no liberty, authorization or independence to act in a particular manner for the beneft of KAPL and that she did not have any control over the company's affairs. It was stated that the petitioner did not have any authority to sign any cheque independently or take any decision on behalf of the company nor did KAPL provide any operational control or space to the petitioner to perform her duties. It was also stated that the petitioner did not have any functional responsibility assigned to her and no one from KAPL reported to her or her husband Shri Prakash Kamat, who was also a shareholder and director in the company.

3. With a view to elucidate that the operational control and the decision making authority did not lie with the petitioner, certain details were referred to in the said reply to the show cause notice. Averments have also been made in that regard in the present writ petition. It would be worthwhile to briefy advert to them for purposes of clarity. This would also give the background in which the assessee company was formed and the agreements that were executed between various entities in that regard.

Brief Background :

4. The petitioner's husband, Shri Prakash Kamat is stated to have developed a smart card based ticketing solution for being used at various public transport organizations like BEST, Central and Western Suburban trains etc. Trials were run successfully and an agreement was entered into between Shri Prakash Kamat and BEST and Central Railways in 2006.

The projects with BEST and Railways were to be implemented on 'BOT' model and required funds to the tune of Rs.50 to 60 Crores as initial investment. Khaleej Finance and Investment, a company registered in Baharain (hereinafter referred to as 'KFI') agreed to make an investment in the said project subject to certain conditions, according to which a Special Purpose Vehicle was to be incorporated to carry on the said project which lead to incorporation of KAPL on 30th March 2006. Investment was made by KFI in the said project through its Mauritius based company 'AFC System Ltd. (hereinafter referred to as 'AFC')'.

A Joint Venture Agreement dated 21st June 2006 ('JVA'), Deed of Pledge dated 21st June 2006 ('DP') along with Irrevocable Power of Attorney dated June 2006 ('IPOA'), was between into among Shri Prakash Kamat, the petitioner, KFI and the said company-KAPL.

5. Some of the clauses of the JVA were referred to by Mr.Mistri, learned counsel for the petitioner. It was stated that as per clause 7.2.1 in Article 7, the Au