Search Results For: Private company - Liability of directors -Applicability of section 179 of the I.T. Act.

Private company – Liability of directors -Applicability of section 179 of the I.T. Act.

QUERY: AO passes an order u/s. 179(1) of the Act whereby directors of the concerned Pvt. Co. are jointly and severally held liable for payment of outstanding demand of such Pvt. Co. in which they are directors. Can such directors prefer a writ petition before the Hon’ble High Court challenging the said order? Whether, before initiating recovery proceedings u/s. 179 against directors in respect of dues of a company, it is essential for the revenue to establish that such recovery cannot be made against the company? Whether directors can be made liable for such tax dues of a company even if such non recovery cannot be attributable to any gross neglect, misfeasance or breach of duty on the part of directors?
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That the Department acquired or get jurisdiction to proceed against the directors of the private limited company, only after it had failed to recover the dues from the company, it was a condition precedent for the Assessing Officer to exercise jurisdiction under section 179(1) against the director of the company. The jurisdictional requirement was not satisfied by a mere statement in the order that recovery proceedings had been conducted against the defaulting company but it had failed to recover its dues. Such a statement should be supported by mentioning briefly the types of efforts made and the results. The notice under section 179(1) did not indicate or give any particulars in respect of the steps taken by the Department to recover the tax dues of the defaulting company and failure thereof.

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