SONIA GOKANI, J.

1. In the present petition, the challenge is made by the petitioner to the order dated November 03, 2004 of the Revenue passed under section 179 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) in the following factual background :

1.1 M/s. Blue Information Technology Ltd. is a Public Limited Company vide certificate of incorporation dated May 25, 1992. On June 12, 1996 the company came out with a public issue and the petitioner was the director of the said Company till he resigned on June 09, 1997. It is averred in the petition that the petitioner was an ordinary Director, not connected with the day-to-day activities of the company nor was he an executive Director.

1.2 The company was assessed for the assessment year 1995-96, 1996-97 and 1997-98 and the substantial tax demands were raised against the company.

1.3 A notice dated October 14, 2001 was issued under section 221(1) of the Act for nonpayment of dues of the company to the tune of Rs.297 lakh. The petitioner replied to the same inter alia stating that he was no longer associated with the company since many years and he cannot be held liable for any tax demand raised against the company. The order is passed holding that the petitioner was a director of the company and was managing the affairs of the company in his capacity as a director. Keeping in mind all the circumstances, it came to be deduced that the demands were raised due to gross neglect, misfeasance or breach of duty by the directors and as the said amount could not be recovered from the company, the directors are to be held responsible and are liable for recovery. It is further held that M/s. Blue Information Technology Ltd. is a private limited company and by virtue of being the director during the said period for which the tax demand was raised, the director would be responsible and the petitioner, accordingly, was held liable for payment of such demands. The petitioner also challenged the very issuance of notice on the ground that the action under section 179 of the Act is not available to the respondent-Revenue and when non-recovery cannot be attributed to the gross neglect or misfeasance of the petitioner, such order passed under section 179 of the Act deserves to be quashed.

1.4 The petitioner was protected by way of an interim relief granted on March 07, 2005 and simultaneously, the Rule was issued.

1.5 In response to the same, an affidavit in reply is filed inter alia contending that section 179 of the Act imposes vicarious liability on the director of the private limited company. The petitioner was the director of the Company and was managing the affairs. It is further held that the definition of the phrase “private company” is not available under the Act. However, from the Indian Companies Act, the true intent of such words shall have to be gathered. It is further contended that the primary reason for failure to collect demand is on account of the fact that there is no asset in the name of the company. It was for the directors to ensure the payment of Government dues, which were to arise during the course of operation, to be duly paid and this outstanding demand is essentially on account of breach of duty by all the directors, including the present petitioner and, therefore, the action to initiate proceedings under section 179 of the Act may not be interfered with.

2. We have heard the learned counsel for the parties and also examined the material on record. At the outset, the law on the subject requires to be considered. It would be profitable to reproduce section 179 of the Act, which reads as under :

“Liability of directors of private company in liquidation :

179.(1) Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company cannot be re