RAMANUJAM J. -
(1.) THE petitioner.. herein seeks a writ of certiorari to quash the order dated June 8, 1966, passed by the Income-tax Officer, Companies Circle, Tiruchirapalli-1, holding the petitioner personally liable to pay the tax of Rs. 10, 566.45 due by the company, Hindu Bank Karur Ltd., of which the petitioner is a liquidator. THE said company went into voluntary liquidation in the year 1962 and the petitioner was appointed on October 28, 1963, as liquidator in the said voluntary windi rig up. On November 17, 1963, the petitioner, in his capacity as liquidator of the company, submitted to the Income-tax Officer a return enclosing the balance-sheet and profit and loss account for the assessment year 1963-64 specifically stating therein that the bank had transferred its assets and liabilities to the Syndicate Bank, Udipi, as, on August 26, 1962.
(2.) THE said letter made it clear that he is addressing the Income-tax Officer in his capacity as liquidator. On December 13, 1963, also he addressed another letterto the same Income-tax Officer posting him with all the details of discontinuance of the banking business and the transfer of assets and liabilities to the Syndicate Bank for a consideration of Rs. 3, 59, 010 and that there has been a loss of Rs. 95, 694 as h(been shown in the profit and loss account already sent. In that letter the Income-tax Officer was told that there are no income-tax arrears, that income-tax advance and the contingent liability for income-tax were taken over by the Syndicate Bank and that in view of the fact that sufficient provision to meet the contingent liability of income-tax having been made already, he is proposing to distribute the funds to the shareholders. It appears that the petitioner also wrote letters to the Income-tax Officer on January 4, 1964, and February 7, 1965, as to the stage of the winding up proceedings. THE assessment order in relation to the assessment year 1963-64 was passed on January 19, 1965, accepting the petitioner's return submitted in his capacity as liquidator resulting in no tax liability in view of the loss shown in the return. But the said assessment was, however, revised by the Commissioner of Income-tax on April 7, 1966, and this resulted in the tax liability to the extent of Rs. 10, 566.45.
This is sought to be recovered personally from the petitioner under section 178(4) of the Income-tax Act as amended by the Finance Act of 1965 with effect frorn April 1, 1965One important fact to be remembered in this case is that the tax liability arose long subsequent to the petitioner's appointment as official liquidator and that too only as a result of the revision of the assessment by the Commissioner of Income-tax on April 7, 1966, while the liquidator was appointed in October, 1962. It is true that under section 178(1) to (3), before its amendment, the petitioner is bound, within 30 days of his appointment as liquidator, to give notice to the Income-tax Officer concerned of such appointment who, in his turn, is bound, within 3 months, to intimate to the liquidator the estimated amount of tax liability of the company. The liquidator has to set aside an amount to meet the tax liability and he should not part with any of the assets except for paying the secured creditors entitled to priority over Government dues. Sub-section (4) of section 178 provided that if the official liquidator does not set aside the amount notified under sub-section (3) by the Income-tax Officer, the liquidator shall be personally liable to the extent of that amount for payment of tax on behalf of the company. Under the provisions as it stood then, the liquidator can be made personally liable to pay the tax assessed on the company only if he fails to set aside that amount after it is notified under sub-section (2) by the Income-tax Officer. As already stated in this case there was no notice issued by the Income-tax Officer under sub-section (2) and hence the liquidator cannot be made personally liable as per the provisions in section 178 then in force. But sub-sections (3) and (4) of section 178 were substituted by new provisions, the effect of which was to make the official liquidator liable personally for the amount of tax if he fails to give the notice in accordance with sub-section (1) or fails to set aside the amount as required by sub-section (2) or parts with any of the assets of the company or property in his hands in contravention of the provision in that sub-section. In this case the petitioner has been made liable to pay the amount of tax personally invoking the amended provisions of section 178. We are of the view that the amended provisions cannot be invoked to the facts of the present case and that under the provisions, as it stood before the amendment, the petitioner cannot be said to have contravened the provisions of sub-section (3) of section 178. In this case the liquidator has, by his letter dated November 17, 1963, sent a return along with the balance-sheet and profit and loss account. In that letter it is made clear that he is sending the return on behalf of the company in liquidation and in his capacity as a liquidator. This letter dated November 17, 1963, is in substantial compliance with section 178(1) of the Act. It is not possible for us to accept the contention advanced on behalf of the revenue that the letter dated November 17, 1963, sent by the petitioner cannot be construed as a notice of his appointment as liquidator. We find there is no form prescribed for the purpose and it is open to the petitioner to send a notice in any form provided he communicates the. fact of his appointment as liquidator in substance. On a perusal of the letter dated November 17, 1963, it is clear that the petitioner has sent that letter in his capacity as a liquidator of the company which was under liquidation.
Though it is desirable to have a specific form for giving notice of the appointment of the liquidator of a company to the Income-tax Officer concerned under sub-section (1) of section 178, so long as no form has been prescribed, the letter sent by the petitioner has to be held to be in substantial compliance with section 178(1). The Income-tax Officer concerned did not notify the amount of tax due by the company within three months as contemplated by sub-section (2) of section 178 and as such there is no question of non-compliance with sub-section (3) of section 178 so as to attract the personal liability of the liquidator under sub-section (4) Here the liability to tax arose by virtue of a revisional order by the Commissioner of Income-tax passed on April 7, 1966, and the liquidator who has begun distributing the funds of the company long earlier cannot suffer the liability under sub-section (4) of section 178. In our view the amended provision in sub-sections (3) and (4) of section 178 cannot apply to the facts of the present case where the liquidator has been appointed in the year 1962 and notice of such appointment has been given duly and substantially on November 17, 1963, and the Income-tax Officer concerned not having notified the disputed amount of tax within 3 months from that date, the liquidator cannot be held personally liable for the amount in dispute brought to tax by the Commissioner in the year 1966. In the view me have taken, on the special facts and circumstances of this case. the order of the Income-tax Officer making the petitioner personally liable for the tax of Rs. 10, 566.45 due by the company, Hindu Bank Karur Ltd., cannot be sustained.
The rule nisi is made absolute and the writ petition is allowed with costs. Counsel's fee, Rs. 250.;