The amendment in Section 179 of the Income-tax Act, 1961, made in 1975, which made directors liable for the company's tax arrears even if the company had not gone into liquidation, was not applicable to a director who had resigned before the amendment came into effect.

( 1 ) THIS appeal is directed against the judgment of a learned single judge dated September 2, 1992. The main grievance of the appellant/petitioner in this appeal is that the learned single judge should have quashed the order of the Commissioner of Income-tax dated March 30, 1989, and the order of the Assistant Commissioner dated September 12, 1991, and ought to have held that the amendment in Section 179 of the Income-tax Act, 1961, which was amended in October, 1975, is not applicable in the case of the director of a company who resigned in 1974 when the company has not gone into liquidation. Consequently, the petitioner as well as the petitioner's husband who was one of the directors, before the amendment in Section 179 is not liable for any tax of the company in question under Section 179 of the Income-tax Act, 1961 (hereinafter referred to as "the Act of 1961" ).

( 2 ) THE petitioner's husband expired on May 22, 1988, at Calcutta. The petitioner's husband was one of the directors in Friends United Investors (P.) Ltd. (hereinafter referred to as "the company" ). The husband of the petitioner was the director of the company and resigned from the directorship on April 4, 1974, and that resignation was accepted and communicated by the Assistant Registrar of Companies vide his letter dated May 23, 1974. Thereafter, the petitioner's husband has nothing to do with the company.

( 3 ) IN 1985, the husband of the petitioner, Shri D. M. Gupta, was served with a notice under Section 226 (3) of the Act of 1961 for recovery of the tax liabilities of the company for the assessment years 1968-69 to 1974-75. The petitioner's husband, Shri D. M. Gupta, challenged that notice of recovery proceedings on the ground, inter alia, that the amendment made in 1975 in Section 179 has no application in the assessment years prior to 1975 and no opportunity was given to the appellant/petitioner's husband for hearing before the order under Section 179 was passed. Though the petition was dismissed a direction was given that the Income-tax Officer should give the opportunity and pass a fresh order under Section 179 in accordance with law.

( 4 ) IN compliance with the direction of this court, the Income-tax Officer has passed a fresh order after hearing the petitioner's husband under Section 179 of the Act of 1961, and concluded that the petitioner's husband is not liable for payment of tax due against the company under Section 179 of the Act vide order dated March 4, 1987. In 1988, the petitioner's husband expired.

( 5 ) IN the revisional power under Section 263, the Commissioner of Income-tax (hereinafter referred to as "the CIT") has set aside the order of the Income-tax Officer, which was passed under Section 179, dated March 4, 1987. After that a fresh order was passed by the Assistant Commissioner under Section 179 on September 12, 1991, holding that Shri D. M. Gupta was liable for payment of arrears of tax due against the company.

( 6 ) IN the petition before this court, the order of the Commissioner under Section 263 dated March 30, 1989, and the order of the Assistant Commissioner dated September 12, 1991, were challenged on the ground that no opportunity has been given nor was there any justification to set aside the order of the Income-tax Officer which was passed under Section 179 dated March 4, 1987.

( 7 ) LEARNED counsel for the petitioner submits that when the Income-tax Officer has passed the order under Section 179 on March 4, 1987, in compliance with the direction of this court in accordance with law that order should not be set aside by the Commissioner of Income-tax, under Section 263 of the Act of 1961. The order of the Income-tax Officer was neither erroneous nor prejudicial to the interests of the Revenue. When the order was not erroneous and was strictly in compliance with the direction of this court, the Commissioner of Income-tax should not set aside that order and any further orders passed by the income-t