- (1.) In this writ petition, the petitioner has prayed for the following relief : "(i) issue a writ, order or direction in the nature of prohibition against respondent no.1 prohibiting it from continuing further with the proceedings; (ii) issue a writ, order or direction in the nature of certiorari calling for bringing up of the records of the said case and quashing the order dated 29.3.2007 (Annexure-10 to the writ petition); (iii) issue a writ, order or direction in the nature of mandamus directing the respondent -1 to desist from acting further as its order dated 29.3.2007 (Annexure-10 to the writ petition) and to treat it as non-est. (iv) issue a writ, order or direction in the nature of certiorari to quashing the order of attachment dated 22.9.2006 of the only residential flat of the petitioner situate at B-10/4 IInd Floor, Ramesh Nagar, New Delhi (Annexure-9-A to this writ petition). (v) issue any other writ, order or direction, which this Hon'ble Court may deem fit and proper in the facts and circumstances of this case ; (vi) award the cost to the petitioner."
(2.) Briefly stated the facts of the present case are that the petitioner was Director in M/s. Sri Ganesh Chemicals (P.) Ltd. (the company) which is a Private Ltd. Company incorporated under the Companies Act, 1956. The petitioner undisputedly resigned from the Directorship vide letter dated 20.10.1983 submitted to the Board of Directors of the Company. A search was conducted on 17.6.1985 at the office premise of the Company and its then Directors. Thereafter, the assessment orders in respect of the Company was passed and certain demands were created for the assessment years 1984-85 to 1988-89. Proceeding under Section 179 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was initiated by the DCIT (Investigation Circle), Muzaffarnagar against the petitioner and her husband Sri Santosh Kumar Garg who was also Director of the company. The DCIT passed the order dated 28.3.2000 against which the petitioner filed an application under Section 264 of the Act before the CIT, Muzaffarnagar who vide order dated 15.7.2002 (Annexure -7) set aside the order of the DCIT dated 28.3.2000 and held as under : "Now it is clear that the assessee was a Director in the Co. for a part of period i.e. 1.4.82 to 27.10.83 relevant to A.Y. 1984-85 only. Thus it is obvious that these facts were not before the Assessing Officer when he passed the order u/s 179 (1). Under the circumstances the order passed u/s 179(1) of I.T.Act 1961 on 28.3.2000 is hereby set aside."
(3.) Thereafter the DCIT issued a show cause notice dated 9.9.2002. Petitioner submitted reply dated 16.9.2002 (Annexure-7A) contending that she was Director in the company merely for namesake and was not concerned with day to day working of the company, she has not caused any loss to the company, the appeal of the company is pending before the Tribunal and the dues of the company cannot be recovered from Directors without recovering first from the company. The ACIT, Circle 2, Muzaffarnagar did not agree with the submission of the petitioner and passed the order dated 15.3.2004 (Annexure-8) holding the petitioner to be liable to pay the outstanding demand against the company for assessment order 1984-85 under Section 179 of the Act. In the said order, the ACIT observed that as on today the demand against the company for the assessment year 1984-85 is Rs. 3,34,832/- + interest under Section 220 (2) and penalties Rs. 3,20,500/- under Section 271 (1)(c) and 273 (2) (b). Aggrieved with the order of the ACIT, the petitioner filed an application under section 264 of the Act before the CIT, Muzaffarnagar who rejected the application vide order dated 29.3.2007 (Annexiure-10) and held as under : "6. Having considered the arguments Smt. Pratibha Garg my findings are discussed below : i. as per the provisions of Section 264 (3) an application for revision must be made within one year from the date on which the order was communicated to the applicant on the date on which he otherwise came to know of it, whichever is earlier. a. In the case before us the order passed under Section 179 by the ACIT is dated 15.3.2004 but Smt. Pratibha Garg claims to have received it only on 28.2.2006 i.e. after a lapse of almost 2 years. I find that a copy of the order under Section 179 dated 15.3.2004 passed by the ACIT, Muzaffarnagar was endorsed to Smt. Pratibha Garg, this endorsement raises the presumption that a copy of the order was communicated to her. Whenever, a copy of a Govt. order is endorsed to an individual, it raises a strong presumption that a copy of the order was dispatched to the individual concerned. b. The plea of Smt. Pratibha Garg regarding non receipt of order under Section 179 for two years is further weakened by the fact that Smt. Pratibha Garg had participated in the proceedings under Section 179 and replies were filed by Smt. Pratibha Garg which was considered by the ACIT in his order dated 15.3.2004. Consequently, this also raises the presumption that Smt. Pratibha Garg would have taken notice of the order u/s. 179 which was consequent to her participation in the proceedings thereof. c. I also take notice of the fact that this is an old case relating to AY 1984-85 and Smt. Pratibha Garg has been adopting various dilatory tactics with a view to depriving the exchequer of the tax etc. demand raised by the Revenue against her. ii. The fact that she had resigned from the Directorship of the company, has already been taken cognizance of and therefore, the ACIT in his order dated 15.3.2004 has held that Smt. Pratibha Garg would be responsible for making payments of demand only for AY 1984-85. The fact that she was an inactive Director has no relevance to the legal position, because Section 179 of the Act places a liability on the Directors of the defaulting companies, without any consideration as to whether the Director was active or passive. Therefore, this plea of the applicant, Smt. Pratibha Garg, is not accepted. iii. With regard to the plea of the applicant that only tax can be recovered and not interest and penalty, I find that u/s. 220(1) "any amount...............specified as payable under Section 156 shall be paid within 30 days............." when Sec. 220(1) is read in conjunction with Sec. 156 it is seen that Sec. 156 states that " when any tax, interest, penalty..........is payable in consequence of any order passed under this act, the AO shall serve upon the assessee a notice of demand........... A. from the above it is clear that the liability of the director u/s. 179 shall relate to all liability covered by the notice of demand issued u/s. 156. iv. With regard to opportunities to be heard during proceedings under Section 179 I find that Smt. Pratibha Garg had filed written submission before the ACIT who has discussed them in the body of the order (on page-3) as below. "Replies of Smt. Pratibha Garg om compliance to the notice u/s.179 of the act were received. She has stated that the company had appealed before the ITAT, New Delhi against the orders of the CIT (A). Smt. Pratibha Garg had requested for keeping these demands in abeyance till the disposal of the appeal by the tribunal. It was further stated that Smt. Pratibha Garg does not have any substantial income of her own hence she was in no position to pay these demands. She has stated that the demands be recovered from the shares and trade debtors seized from the premises of Smt. S.K.Garg during the course of search in 1985." a. From the above, it is clear that Smt. Pratibha Garg was granted adequate opportunity and that she did participate in the proceedings u/s.179. v. With regard to the plea of Smt. Pratibha Garg that recovery cannot be made from her before first attempting to recover tax from the company, I find that the AO had proceeded against the Director u/s. 179 only after having failed to recover the demand from the company. The ACIT in his order dated 15.3.2004 has stated as under : "The efforts made for recovery of demands in these cases were fruitless. The bank accounts of the company which were attached by the department had hardly any funds, hence the demands could not be recovered. Further, the latest return of the company reveals a paltry bank balance, hence recovery cannot be made therefrom. Moreover, the business of the company is virtually closed." 7. In light of the above discussions, I see no merit in the application under Section 264 and accordingly reject the same.";