Law:

Section:

Section 179 of the Income-tax Act, 1961 - Company-in-liquidation - Liabilities of directors - Whether phrase 'tax' as contemplated under section 179 does not include penalty and interest insofar as directors of company are concerned - Held, yes Section 179 of the Income-tax Act, 1961 - Company-in-liquidation - Liabilities of directors - Whether for invoking section 179 it is not necessary that all three ingredients, viz., gross neglect, misfeasance and breach of duty are satisfied; it is sufficient if it is held that there is a gross neglect or misfeasance or breach of duty on part of directors in relation to affairs of company - Held, yes - Petitioners were managing director/ directors of assessee-company which had not filed its returns of income for more than a decade and was not in a position to meet demands of payments of income-tax and dues of statutory authorities - Whether, on facts, it could be said that there was a gross neglect on part of directors of company and, hence, all ingredients of section 179 were satisfied - Held, yes Words & phrases - 'tax' as appearing in section 179 of the Income-tax Act, 1961 FACTS The first petitioner was the managing director and petitioner Nos. 2 to 4 were the directors of a company which had not filed returns of income since its inception in 1991 till date of search conducted on it on 18-1-2001. Pursuant to the said search, the Assessing Officer passed an assessment order determining undisclosed income of the company and the net tax payable by it. The petitioners being the directors of the company, proceedings were initiated against them under section 179 on the ground that if the company was not in a position to meet the demands of payment of income-tax, the directors were personally liable to satisfy the said claim. The petitioners' case was that under section 179 only the amount of tax could be recovered and the said amount would not include the interest and penalty. It was their further case that none of the three ingredients under section 179, viz., gross neglect, misfeasance or breach of duty on the part of the directors in relation to affairs of the company was satisfied before initiation of proceedings…

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