The burden of proof lies on the director to show non-recovery of tax dues was not due to gross neglect, misfeasance, or breach of duty, as per Section 179(1) of the Income Tax Act.

JUDGMENT

Manmohan, J. - Present writ petition has been filed challenging the orders dated 01st April, 2021 passed under Section 264 of the Income Tax Act, 1961 [for short 'the Act'] and 29th January, 2018 under Section 179 of the Act by respondent No. 1 and respondent No.2 respectively. Petitioner seeks a direction to restrain the respondents from recovering the outstanding demand of Rs.5,89,68,019/- in the case of Real tech Group from the petitioner, pertaining to the Assessment Years 2006-07 to 2009-10.

RELEVANT FACTS

2. The relevant facts of the present case are that the petitioners along with two other promoters, namely, Sh. Pankaj Dayal and Sh. Yogesh Gupta formed and promoted the Realtech group of companies in 2005 comprising M/s Realtech Projects Pvt. Ltd., M/s Real Infrastructure Pvt. Ltd., M/s Vivid Builders Pvt. Ltd. and M/s Realtech Constructions Pvt. Ltd.

3. During the year 2010-11, allegedly disputes arose amongst the promoters and to settle the said inter se disputes a Memorandum of Understanding (MOU) was executed on 02nd June, 2011. In terms of the MOU, the petitioner allegedly resigned as Director from M/s Vivid Builders Pvt. Ltd., M/s Realtech Construction Pvt. Ltd. as well as some other group companies of Realtech group and stopped participating in the m anagement of the Realtech group. It was also allegedly agreed in the MOU that all the income tax liabilities in respect of Realtech Construction Pvt. Ltd, Realtech Projects Pvt. Ltd., Vivid Builders Pvt. Ltd. and Realtech Infrastructure will be borne and paid by Mr. Pankaj Dayal (one of the Directors). Mr. Pankaj Dayal was allegedly separately allocated 17000 sq. ft. in City EmporiaMall, Chandigarh to meet the tax liabilities of Realtech group of companies.

4. Subsequent to the MOU, an alleged Settlement Deed dated 16th December, 2015, was also entered into between Mr. Rajeev Behl and Mr. Pankaj Dayal, in which the MOU dated 02nd June, 2011 was given assent to and it was reiterated that Mr. Pankaj Dayal will bear the income tax liabilities of the Realtech group.

5. In order to implement the MOU, an arbitration proceeding was started under the aegis of Hon'ble Justice Sh. S.B. Sinha (Retired), who vide Arbitration Award dated 28th January, 2018 upheld the terms of the aforesaid MOU.

6. The Arbitration Award was challenged by Mr. Pankaj Dayal before this Court by way of O.M.P (COMM) No. 449 of 2018, wherein, a learned Single Judge of this Court upheld the Award vide order dated 29th October, 2018.

7. In the meantime, the petitioner was called upon by the income tax authorities to provide details of arrangement for discharge of income tax liability of Realtech group of companies. In response thereto, the petitioner vide its letters dated 10th March, 2015 and 18th March, 2015 addressed to CCIT gave details of assets of Realtech group, which were sufficient to discharge the income tax liability and requested the authorities to take appropriate steps as early as possible for recovery of income tax.

8. The petitioner was served with the impugned order dated 29th January, 2018 under Section 179 of the Act wherein it was held that tax dues of a private limited company that cannot be recovered from the company can be recovered from a Director of the said company as the Director is jointly and severely liable for payment of outstanding tax demands of the company. Petitioner's revision petition under Section 246 of the Act was also dismissed vide order dated 01st April, 2021.

ARGUMENTS ON BEHALF OF THE PETITIONER

9. Learned senior counsel for the petitioner stated that no action to recover the demand from the Realtech Group of Companies had been taken by the Assessing Officer. He emphasised that the Respondent No. 1 had failed to appreciate that there are more than adequate assets available with Realtech group to pay the tax demand and in the absence of any steps taken to recover the demand from their assets, it could not be alleged much less validly held that demand could not be