PRAVEEN D DESAI Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner is a director of a private limited company called Advent Corporation (P) Ltd. The company carries on the business of construction of buildings and the sale of flats therein. For the asst. yrs. 1961 62 to 1968 69 the company contended that no profit arose upon the construction by it of buildings until the entire construction work was completed. This argument was rejected by the ITO and a percentage of the cost of work done during the relevant year was added on to the company's income. The company preferred appeals, which were rejected. The company thereafter went up to the Tribunal. The Tribunal also rejected the appeals but made references to this Court, which are pending.

(2.) IN the meantime, the petitioner was served with a notice to show cause why the arrears of income tax of the company should not be recovered from the petitioner under S. 179 of the IT Act, 1961. On April 10, 1979, the petitioner's chartered accountants replied and submitted that the demand which had been raised had been disputed and was pending before this Court. The contention of the company that in the case of a builder, profits could not be arrived at and taxed on the basis of work in progress was reiterated. It was also submitted that the provisions of S. 179 could not be invoked because it was not proved that the non recovery of tax was attributable to gross negligence, misfeasance or breach of duty on the part of the petitioner in relation to the affairs of the company.

(3.) PURSUANT to the order under S. 179, the TRO attached certain properties of the petitioner. This petition filed on August 22, 1980, impugns the order under S. 179 and the attachments made pursuant thereto. The first submission made on behalf of the petitioner must be upheld because it is covered in his favour by my judgment dt. 11th Jan., 1983, in Miscellaneous Petition No. 1432 of 4978 M. D. Lotlikar vs. R.C. De Desouza, CIT, since reported in (1983) 34 CTR (Bom) 17 : (1984) 145 ITR 433 (Bom). In that case the petitioner was a director of a private limited company. The tax liability determined in respect of the company for the asst. yrs. 1964 65 and 1965 66 was not paid by the company. On 17th Sept., 1976, the ITO passed an order under S. 179, as amended w.e.f. 1st Oct., 1975, holding that the petitioner was liable for the arrears. The contention that was upheld was that there was nothing in S. 179, as amended by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st Oct., 1975, which made its operation retrospective. The tax sought to be collected pertained to a period much prior to the coming into force of the Amendment Act. The petitioner could not be saddled with such tax liability under S. 179. The judgment in Lotlikar's case (supra), squarely applies to the facts of this petition and as a ground for striking down the order under S. 179 and the attachments consequential thereon.