Law:

Section:

Section 179 of the Income-tax Act, 1961, read with section 43A of the Companies Act, 1956 - Company in liquidation - Liabilities of Directors - Assessment years 1978-79 to 1982-83 - Whether proceedings under section 179 could not be initiated against director of company for recovery of tax due from company for period subsequent to date when said company became public limited company by virtue of section 43A of 1956 Act - Held, yes FACTS The assessments of the assessee company were completed and certain demand for payment of tax was raised. This amount was not paid for various reason and so, the Deputy Commissioner passed an order holding the appellants, who were directors of the company, liable to pay the tax due from the assessee in view of the provisions of section 179. The revision petition filed by the appellants were also dismissed. Thereafter, an application under section 154 was filed contending that the company was not a private limited company and, therefore, the proceedings under section 179 were unjustified. But the Commissioner rejected that contention on the ground that it had not been raised earlier and that there was no mistake apparent on the face of the record which needed rectification. The Single Judge dismissed the appellants' writ petition and the appeals before the Division Bench were also unsuccessful. On appeal to the Supreme Court, HELD The affidavit filed by the Registrar clearly showed that the assessee had become a public limited company by virtue of section 43A of the 195C Act, with effect from 1-10-1975. The arrears sought to be recovered from the appellants related to the assessment years 1977-78 to 1982-83. Obviously, the company being a public limited company, proceedings against the Directors for recovery of the tax due from the company could not be taken, and certainly not proceeded with, under section 179. Article 265 of the Constitution clearly prohibits any attempt to recover taxes except under the authority of law. It was, therefore, clear that further proceeding against the appellants for recovery of the tax due from the company have to be stayed. The order passed under section 179 and the further orders passed by the…

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