Point of Law:
Department to prove that they could not recover the tax from the company on account of gross negligence, misfeasance or breach of duty on the part of the Directors of the Company, but on the contrary, it is for the Directors against whom the Department wants to proceed to prove that the non-recovery cannot be attributed to any gross negligence, misfeasance or breach of duty on their part.

ORDER :

J.B. PARDIWALA, J.

1. Rule returnable forth with. Mrs.Mauna Bhatt, the learned standing counsel waives service of notice of rule for and on behalf of the Revenue.

2. By this writ application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following relief’s:

“7(a) quash and set aside the impugned order at Annexure-A to this petition;

(b) Pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the order at Annexure' A' to this petition.

(c) any other and further relief deemed just and proper be granted in the interest of justice;

(d) to provide for the cost of this petition.”

3. The subject matter of challenge in this writ-application at the instance of the writ-applicant is an order passed by the respondent under Section 179 of the Income Tax Act, 1961 (for short the “Act,1961”). The impugned order reads thus:”

ORDER U/S.179 OF the Income Tax Act, 1961

In the case of M/s. Tirupati Proteins Pvt. Ltd (PAN-AABCT8423E) demand of Rs.9074.34 lakhs is outstanding as on date and the breakup of the demand as mentioned is given as under:

2. The said demand has not been paid till date. Despite being given a number of opportunities, the company did not make the payment of outstanding demand of Rs.9074.34 lacs.

3. At the relevant point of time the directors of the assessee company were Smt. Sonal Nimish Patel and Smt. Ashita Nilesh Patel. Further, it is noticed from the records of the company that there are no recoverable assets in the name of assessee company. In such circumstances, proceedings under Section 179 of the I.T. Act were initiated on 02.11.2017 by way of issuing of notice to the then Directors and all the directors were requested to show cause vide notice u/s 179 of the Act as to why they should not be treated as jointly and severally liable for the payment of such tax and why an order u/s 179 of the Income Act, 1961 should not be passed against them. In terms of the said notice the directors were to attend the office of the undersigned on 10.11.2017 with explanation. But no compliance was made in response to the said notice. It is noticed that neither the Directors or any of their authorized representatives attended nor any written submission was furnished.

4. The Company, M/s. Tirupati Proteins Pvt. Ltd. is a private company and hence, the provisions of Section 179 of the I.T. Act are clearly applicable in the case of directors of the said company. As directors of the company it was duty bound on the part of the directors of the company to pay tax due. The directors of the assessee company failed to discharge that duty, hence provisions of section 179(1) are clearly attracted. Reliance is placed on the decision of Union of India vs. Praveen D.Desai (1988) 173 ITR 303.

5. The provisions of Section 179 of the Act are very clear in this matter and is reproduced below:

“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 recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.”

6. It is further emphasized that the Board had desired that the provisions of Section 179 of the IT Act should not