PANKAJ MORAKHIA vs. ASSITANT COMMISSIONER OF INCOME TAX CIRCLE - 2(1)(2), 1ST FLOOR,

to the show cause notice issued by the said officer. Under the circumstances, in exercise of power under Section 179 of the Income-tax Act, 1961 [“the Act” for short], the said order came to be passed.

Having heard learned advocates for the parties, the following broad facts emerge - [i] though the competent authority had issued show cause notice to the petitioner before passing an order under Section 179 of the Act, the petitioners had not responded to such notice. The defence of the petitioners therefore could not be brought on the record; of course due to failure on the part of the petitioners to respond to the notice. [ii] Out of the many outstanding liabilities cited by the competent authority under the show cause notice and the final order of recovery, many of them are pending at the first appellate stage before the Commissioner [Appeals]. [iii] We are informed that the Department had taken certain post-dated cheques from the Company which have been honoured; as and when presented for encashment. [iv] Section 179 of the Act permits recovery of outstanding dues of a Private Limited Company from its Directors; subject to certain conditions. Besides, the prime condition for such dues not being C/SCA/1373/2018 ORDER recovered from the company, another important condition is that the concerned Director of Sales has to prove that non-recoveries cannot be attributed to any gross negligence, misfeasance or breach of duty on his part in relation to the affairs of the Company.

Considering such factual and legal position, we are inclined to allow the petitioners to represent their full cases before the competent authority. This, however, this cannot be done unconditionally since the petitioners have already missed the bus once.

In the facts of the case, therefore, these petitions are disposed of with the following directions : [a] All the impugned orders are set-aside. [b] Proceedings are placed back before the competent authority for passing fresh orders in accordance with law, after enabling the petitioners to file their replies to the show cause notices and produce necessary documents and materials. [c] If this is done latest by 30th April 2018, the competent authority shall taken into account the said defense of the petitioners. [d] Latest by 15th May 2018, the petitioners or the Company shall deposit a further sum of Rs. 15 lakhs towards the outstanding tax liability. The petitioners shall also file an undertaking before C/SCA/1373/2018 ORDER this Court latest by 20th April 2018 that this condition shall be satisfied. [e] That the Company may request the Commissioner [Appeals] before whom the relevant issues may be pending in appeals for expeditious disposal of such Appeals. The Commissioner, considering his workload, may grant priority to such Appeals.

Nothing stated in this order will enable the Company to contend that no further recoveries by the Tax Department can be made against the Company.

The Company shall file a list of its immovable properties before the Assessing Officer on or before 30th April 2018. Such list shall indicate which of these properties are encumbered and which are not. The petitioner shall file an undertaking before the Assessing Officer that now onwards no further encumbrance on any of the properties enlisted shall be created without prior permission of the Assessing Officer.

With these directions, all these petitions stand disposed of. [Akil Kureshi, J.] [B.N Karia, J.] Prakash