Law: Income Tax Act, 1961

Section: 179

Income-tax----Recovery of tax---Company---Director---Recovery of tax due from private company from its director---Liability is primarily that off' company---Director can be proceeded against only if Revenue establishes that tax could not be recovered from company---Indian Income Tax Act, 1961, S.179. A bare perusal of section 179 of the Income Tax Act, 1961, shows that before recovery in respect of dues from the private company can be initiated against the directors, to make them jointly and severally liable for such dues, it is necessary for the Revenue to establish that such recovery cannot be made against the company and then end then alone it can reach the directors who were responsible for the conduct of business during the' previous year in relation to which liability exists: Held, that, in the instant case, neither in the order passed under section 179 nor in the affidavit filed by the Revenue was any assertion made that in spite of making efforts against the company, it was not possible to recover the amount from the company by reaching its assets. On the other hand, there was clear indication that section 179 was being put to use by the Revenue Authorities to resolve the dispute between the erstwhile directors and the present incumbent about the terms of the agreement between them. The Income-tax Act has not assigned arty such role to its authority to act as an arbiter of disputes between parties which does not concern it. Section 179 had been invoked without laying the necessary foundation for the same. The order, therefore, suffered from an error apparent on the face of it and was ultra vires section 179. JUDGMENT R. BALIA, J.---Rule; Service of rule is waived by learned counsel for the respondent. At the request of learned counsel for the parties the matter is finally heard today. The petitioner challenges order (Annexure-A), dated October 29, 1998, purported to have been made under section 179 of the Income Tax Act, 1961. As per the order, a demand of Rs.9,82,050 was outstanding against a company named Samir Theatre (Pvt.) Ltd., for the assessment years 1986--87 and 1987-88. The present petitioner was a director of the said private company during…

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