RATANLALL MURARKA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE issues raised by this original petition turns on the effect of Section 179, I.T. Act, 1961--for brevity " the Act". THE relevant facts necessary for its disposal are the following : THEre was a public company by name the Shankar Paint and Oil Mills Ltd.--" the company " for short--which was incorporated in 1945. This company was converted into a private company in 1959, and then reconverted into a public company, ten years later in 1969, During the assessment years 1959-60 to 1963-64, of which the case is concerned only with 1959-60, 1960-61 and 1963-64, the company's directors were the petitioner and two others. (THE latter two resigned their offices in 1969). THE petitioner died during the pendency of the original petition and is now represented by his legal representatives, additional petitioners Nos. 2 to 8. We will, however, confine our reference to the petitioner, who alone counts in these proceedings. THE company was assessed to income-tax, surcharge and corporation tax for the assessment years 1959-60, 1960-61, 1961-62, 1962-63 and 1963-64, and reassessments, to which no reference is called for. On June 9, 1975, by a special resolution of the members and that of the creditors it was decided to wind up the company voluntarily as a creditor's voluntary winding-up and to appoint a liquidator. Steps in the winding-up are in progress. While so, the first respondent, who is the ITO, "A" Ward, Companies Circle, Ernakulam, served a notice, Ex. P-5, dated June 14, 1976, upon the petitioner proposing to recover from him the arrears of tax shown therein which was due from the company, by invoking the provisions of Section 179 and asking him to file his objections, if any. THE details of the tax given in Ex. P-5, are Rs. 19,192 (on account of income-tax, surcharge, corporation tax and interest under Section 220(2) of the Act), for the assessment year 1959-60, Rs. 4,416 under the same heads for 1960-61 and Rs. 6,735 (on account of income-tax and interest) for 1963-64. THE sums aggregate to Rs. 30,343. In response to this action, the petitioner filed his objections, Ex. P-6, disputing his liability. By the order, Ex. P-7, dated August 31, 1976, the first respondent rejected the petitioner's objections and held that the petitioner was liable under Section 179 for the amounts due from the company. He followed it up by serving upon the petitioner three notices of demand under Section 156 of the Act, for each of the above years of assessment. Exs. P-8, P-9 and P-10 are the three notices dated August 31, 1976. THE petitioner challenged the order, Ex. P-7, by filing a revision under Section 264 before the second respondent, the Commissioner, Ernakulam. Ex. P-11 is the memorandum of revision and Exs. P-12 and P-13 are the letters sent by the petitioner to the second respondent raising additional grounds in support of the revision. By the order, Ex. P-14, dated November 9, 1976, the second respondent dismissed the revision, confirming the order, Ex. P-7. In the wake of this order, the first respondent issued certificates of recovery and on the basis of the certificates, the TRO, Ernakulam, served on the petitioner the notices of demand, Exs. P-15, P-16 and P-17, dated January 3, 1979, for recovery of the arrears of tax mentioned above and the process fee of Rs. 1.50 in respect of each notice.

(2.) SECTION 179 as it stood before it was amended by the T.L. (Amend.) Art, 1975, with effect from October 1, 1975, was in these terms :

(3.) WE hold that the petitioner is not liable for the income-tax, surcharge, corporation tax and interest for the assessment years 1959-60 and 1960-61, mentioned in Ex. P-7, WE quash Exs. P-7, P-8 and P-10 and P-14 to P-17, in so far as they make the petitioner liable for these amounts. The original petition is allowed to the above extent and dismissed in other respects. In the circumstances we direct the parties to bear their costs. July 10, 1980