PRATIBHA GARG Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this writ petition, the petitioner has prayed for the following relief :

(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 :

(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 :