Jagesh Savjani An Adult, Indian Inhabitanthaving Address At, 13-B, Sambhavtirth,Chs, Ltd., Haji Ali, Mumbai v. Union Of Indiathrough Its Mumbai Office Located At Ayakar Bhavan, New Marline Lines,Mumbai, Representing Income Taxdepartment, Ministry Of Finance

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 437 OF 2021 Jagesh Savjani An Adult, Indian InhabitantHaving Address at, 13-B, Sambhavtirth,CHS, Ltd., Haji Ali, Mumbai …Petitioner Versus 1. Union of Indiathrough its Mumbai Office located at Ayakar Bhavan, New Marline Lines,Mumbai, representing Income TaxDepartment, Ministry of Finance,...RespondentsGovernment of India. 2. Income Tax Officer,Ward 5(3)(1), Mumbai, having office at Room No.526, 5[th] Floor, Aykar Bhavan,MK Road, Mumbai WITH INTERIM APPLICATION IA(L) NO.24778 OF 2022 WHITE WATER PARKS INDIA PVT. LTD. 319, Bussa Industrial Estate, 3[rd] Floor,Century Bazar, Prabhadevi, Mumbai 400 025.PAN : Jagesh SavjaniAn Adult, Indian inhabitantHaving address at 13-B, Sambhavtirth CHS Ltd., Haji Ali, Mumbai …Intervenor/Applicant IN THE MATTER BETWEEN : JAGESH BHADRAKUMAR SAVJANIHaving Address at, 13-B, Sambhav Tirth,CHS, Ltd., Haji Ali, Mumbai Versus …Petitioner 1. The Union of IndiaAyakar Bhavan, New Marline Line, Mumbai,Representing Income Tax Department,Ministry of Finance, Government of India. ...Respondents 2. Income Tax Officer,Ward 5(3)(1), Mumbai, having office at Room No.526, 5[th] Floor, Aykar Bhavan,MK Road, Mumbai WITH INTERIM APPLICATION IA (L) NO. 26761 OF 2022 SAMIR BHADRAKUMAR SAVJANIOffice at 319, Bussa Industrial Estate, 3[rd]Floor, CenturyBazaar, Prabhadevi, Mumbai 400 025. PAN : …Intervenor/Applicant IN THE MATTER BETWEEN : JAGESH BHADRAKUMAR SAVJANI …Petitioner Versus 1. Union of Indiathrough its Mumbai Office located atAyakar Bhavan, New Marline Lines,Mumbai, representing Income TaxDepartment, Ministry of Finance,Government of India.2. Income Tax Officer,Ward 5(3)(1), Mumbai, having office at Room No.526, 5[th] Floor, Aykar Bhavan,MK Road, Mumbai ...Respondents Mr.Rahul Gaikwad, Advocate with Mr. Aman Jhawar, Ms. GarimaJoshi, Mr. Vivek Akshali, Ms. Reshma Nair and Ms. NikitaAbhyankar i/b Gravitas Legal, for petitioner. Mr. Suresh Kumar, Advocate for Respondent – Revenue Mr.Aseem Naphade with Mr. Vishesh Srivastav, Advocate forapplicant in IAL/24778/2022. Mr. Samir Savjani, Applicant-in-person in IAL/26761/2022. CORAM:DHIRAJ SINGH THAKUR ANDVALMIKI SA MENEZES, JJ. RESERVED ON: 09.12.2022.10.02.2023. PRONOUNCED ON : JUDGMENT : PER (Valmiki Sa Menezes,J) Rule. Rule made returnable forthwith. Heard finally by consent of the parties present before us and who havewaived service ofnotice, the petition is heard finally. (2)This is a writ petition filed under Article 226of the Constitution of India seeking the quashing and settingaside of show cause notices under Section 179 of the Income TaxAct,1961, (for short ‘the Act’) dated 15.10.2019, 24.02.2020,19.03.2020, 04.12.2020 and order dated 14.12.2020 issued bythe respondent No.2, as being contrary to law. (3)It is the petitioner’s case as averred in thepetition, that he had received show cause notices dated24.02.2020, 19.03.2020 and 04.12.2020 from the respondentNo.2 purportedly invoking powers under Section 179 of the Act.He further avers that the issuance of a similar notice dated Rule. Rule made returnable forthwith. Heard finally by consent of the parties present before us and who havewaived service ofnotice, the petition is heard finally. (2)This is a writ petition filed under Article 226of the Constitution of India seeking the quashing and settingaside of show cause notices under Section 179 of the Income TaxAct,1961, (for short ‘the Act’) dated 15.10.2019, 24.02.2020,19.03.2020, 04.12.2020 and order dated 14.12.2020 issued bythe respondent No.2, as being contrary to law. (3)It is the petitioner’s case as averred in thepetition, that he had received show cause notices dated24.02.2020, 19.03.2020 and 04.12.2020 from the respondentNo.2 purportedly invoking powers under Section 179 of the Act.He further avers that the issuance of a similar notice dated 15.10.2019 also impugned herein by the respondents came to hisknowledge from the reply filed by the respondents, which noticehe claims, was never served upon him. The petitioner hasaverred that he had filed an affidavit-in-reply dated 19.03.2020to the income tax authorities stating therein that the petitionerhad not attended any Board meetings of M/s. White Water ParkIndia Private Ltd. (for short ‘the Company’) during the financialyear 2006-07 till date, nor handled any income tax assessment ofthe said company for the Assessment Year 2007-08 as its Director.He claims that under the provisions of Section 283 of theCompanies Act, 1956, as also under the provisions of Section 167of the Companies Act, 2013, since, he has not attended threeconsecutive meetings of the Board of Directors of the saidcompany or for that the matter, all meetings of Board ofDirectors during the period of 12 months without seeking leave,he is deemed to have vacated the Office of Director of the saidcompany. According to the petitioner, as he was not the Directorof the Company, he was not liable to receive any notice underSection 179 of the Act, which provision can be invoked onlyagainst a Director of a private Company. (4) It is further the petitioner’s contention that he has filed before this Court an affidavit dated 01.02.2022,reiterating the facts stated by him in his affidavit-in-reply beforethe respondent No.2 dated 19.03.2020 in answered to the showcause notice. He further submits that neither the show causenotice issued to him nor the order dated 14.12.2020 issuedunder Section 179 of the Act, states the steps taken by therespondents to recover tax dues from the company. It is thepetitioner’s submission that it is obligatory on the part of therespondents to demonstrate by referring to material before it,and by making specific references to such material as to the stepstaken by it, and also state such facts in its show cause notice, andrefer to the same in the impugned order. The petitioner submitsthat the failure to aver the steps taken by it to recover tax duesfrom the company or failure to make disclosures in the showcause notice of the material which constituted the steps taken bythe department against the company, would render theimpugned order dated 14.12.2020 contrary to the provisions ofSection 179 of the Act. Amongst the grounds taken by thepetitioner to lay a challenge to the impugned show cause notices and the impugned order, is also the ground that facts which arerequired to be disclosed in the show cause notices and in theimpugned order are steps taken to recover tax dues from thecompany, which are missing and therefore, the respondentswould have no jurisdiction to proceed with an action underSection 179 of the Act. and the impugned order, is also the ground that facts which arerequired to be disclosed in the show cause notices and in theimpugned order are steps taken to recover tax dues from thecompany, which are missing and therefore, the respondentswould have no jurisdiction to proceed with an action underSection 179 of the Act. (5)After notice was issued to the respondents, therespondent Nos.1 and 2 came to file an affidavit-in-reply dated16.02.2021 to which are attached certain documents, which thepetitioner averred, are supplied to the respondents by oneMr.Samir Savjani, a Director of the said company. A furtheraffidavit-in-reply was filed by the respondents on 26.02.2022which the petitioner also submits as documents attached to it,which are supplied by the said Mr.Samir Savjani, who thepetitioner claims has been instigating the respondents to proceedagainst the petitioner without any cause. The petitioner has filed an affidavit in rejoinderdated 01.02.2022 controverting facts stated by the respondentsin their affidavit-in-reply dated 16.02.2021. Thereafter, the respondents have filed an affidavit in sur-rejoinder attempting tobring on record various steps taken by the department ofrecovery tax dues from the company. Pursuant to this Court’sobservations that the revenue was required to explain the stepstaken to recover the tax dues from the company, affidavit dated21.04.2022 was filed by the respondents through one JulietRavichandran, ITO-5(3)(1)(Mumbai) 570, setting out the stepstaken by the department from 2016 until the year 2020 torecover the dues from the said company. (6)Whilst the petition was pending, two interimapplications came to be filed before this Court. The first of theseapplications is Interim Application IA(L) No.24778/2022 filed byM/s. White Water Park India Private Ltd. (the Company),through its authorized signatory Jigar Chheda on 01.08.2022,seeking intervention and leave to make submissions with respectto the petition. In this interim application (IA), the company hasalso sought dismissal of the writ petition, and an order to preventthe petitioner from disposing of any of his personal assets so asto protect the interest of the respondent revenue ; it has alsosought an order to maintain status quo till conclusion of the intervention application. The interim application has furthersought setting aside of the interim order dated 16.12.2020passed by this Court in favour of the petitioner. The companyalleged in the IA, that the petitioner had averred false facts in thepetition and had approached this Court with unclean hands bysuppressing material facts. The applicant further avers that thepetitioner has committed fraud upon the company and that thepetitioner had actually attended all the Board meetings, signedits annual return, and was infact a Director of the Company andtherefore, liable. (7)The second Interim Application bearingIA(L)No.26761/2022 has been filed by Samir B. Savjani, prayingfor intervention in the petition and for leave to make hissubmissions with respect to the petition. In addition, theapplicant – Samir, opposes the petition supporting the impugnedorders passed against the petitioner under Section 179 and seeksan order of restraint against the petitioner to prevent him fromdisposing of any of his personal assets so as to protect theinterest of the respondent revenue and to maintain status quo.This applicant also seeks setting aside of order dated 16.12.2020 passed by this Court granting interim relief to the petitioner. The applicant Samir Savjani, in InterimApplication IA(L) No.26761/2022, in substance has reiterated inhis application the averments made by the Company in itsInterim Application IA(L) No.24778/2022. (8)We have heard Shri Rahul Gaikwad, learnedcounsel for the petitioner, Shri Suresh Kumar, learned counsel forrespondent and Shri Asim Nafde, learned counsel for applicant inIA(L) No.24778/2022 filed by the company. passed by this Court granting interim relief to the petitioner. The applicant Samir Savjani, in InterimApplication IA(L) No.26761/2022, in substance has reiterated inhis application the averments made by the Company in itsInterim Application IA(L) No.24778/2022. (8)We have heard Shri Rahul Gaikwad, learnedcounsel for the petitioner, Shri Suresh Kumar, learned counsel forrespondent and Shri Asim Nafde, learned counsel for applicant inIA(L) No.24778/2022 filed by the company. (9)Shri Samir Savjani, argued at length before usin person in Interim Application IA(L)No.26761/2022 and wasalso heard at length while opposing grant of any relief in thepetition. We have also recorded the consent of SamirSavjani, for disposal of the petition finally at the stage ofadmission whilst hearing the intervention application along withpetition. (10)Shri Rahul Gaikwad, learned counsel for the petitioner has submitted before us that it is the petitioner’s casethat he was not a Director of the Company much prior to theissuance of the impugned show cause notices and the impugnedorder, by virtue of the fact that he had not attended a singleBoard meeting of the company. He further submits that in termsof the provisions of Section 283 of the Companies Act, 1956 (oldAct) and in terms of the provisions of Section 167 of theCompanies Act, 2013 (new Act), the petitioner is deemed to havevacated the Office of the Director since he was absent for all themeetings of the Board of Directors during any period prior to theissuance of the show cause notices. As such, he submits that thepetitioner not being a Director of the Company, he is not liablefor any notice from the respondents under Section 179 of theAct. (11)It is further the submission of learned counselfor the petitioner that in terms of the requirement of underSection 179 of the Act, the revenue can assume jurisdiction toproceed only if it has initiated action against the company torecover its tax dues, and on its failure to recover such dues fromthe private company, it can initiate action against the Directors. He submits that in the present case, the absence of any referenceto the attempts made by the revenue to recover tax dues fromthe company, the respondents would not be vested with anyjurisdiction to proceed against the Directors of the company. Heargues, that notwithstanding the fact that the petitioner is notthe Director of the company, the revenue could not proceedagainst him in terms of Section 179 of the Act, withoutspecifically averring in the show cause notice the various stepstaken by it to proceed against the company to recover its dues.He further argues that since the notice under Section 179 of theAct is totally silent on this aspect and does not record thesatisfaction of the concerned Officer, after considering the stepstaken against the company for recovery, the recovery would notbe permissible. He submits that the notice does not comply withthe pre-requisites and necessary conditions to be fulfilled beforeaction under Section 179 of the Act, can be initiated. (12)Learned counsel for the petitioner and for therespondents also filed written notes of arguments. The petitionerhas relied upon the judgment of this Court dated 24.06.2019 inWrit Petition No.1083/2019 in the case of Vanraj V. Shah Vs. Dy. (12)Learned counsel for the petitioner and for therespondents also filed written notes of arguments. The petitionerhas relied upon the judgment of this Court dated 24.06.2019 inWrit Petition No.1083/2019 in the case of Vanraj V. Shah Vs. Dy. Commissioner of Income Tax -10(1)(1) & anr., wherein thisCourt has considered the requirements of a show cause noticeissued under Section 179 of the Act and the sine quo non forproceeding with an action under that provision. It is argued thatin Vanraj V. Shah (supra), this Court has held that action of anAssessing Officer to order recovery of unpaid tax dues of aprivate company from its Director, was without jurisdiction, if thenotice under Section 179 of the Act did not disclose necessaryaverments that the dues of the company could not be recoveredfrom the said company. It further hold that this foundational factwas a necessity of the law before the Officer could proceed torecover the tax from the Director. (13)Learned counsel for the petitioner furtherrefers to the judgment of the Gujrat High Court dated20.01.2020 in R/Special Civil Application No.3947/2019 inSonal Nimish Patel Vs. Assistant Commissioner of Income Tax,Circle 4(1)(2), where it was held that the first requirement toattract liability of a Director, of a private limited company is thatthe revenue was unable to recover the tax from the companyitself. It is held in that judgment that such a requirement was a pre-requisite and a necessary condition to be fulfilled before anyaction under Section 179 could be taken and that, it wasnecessary for the revenue to establish these facts in the noticeitself, as also for the Officer to record his satisfaction on suchmaterial that was considered by him to conclude that recoveryagainst the company was not possible. (14)Learned counsel for the petitioner thenreferred to the judgment of this Court dated 26.07.2022 in WritPetition No.3590/2019 in Rajendra R. Singh Vs. AssistantCommissioner of Income Tax Act-9(2)(2), Mumbai and others, inwhich this Court has held that orders under Section 179 of theAct, are unsustainable if the Assessment Officer has notenumerated in the notice the steps taken towards recovery of taxdues from the private company or there is a lack of recording hissatisfaction that such tax cannot be recovered from the company.The learned counsel for the petitioner, therefore, submits that alack of these jurisdictional facts being stated in the show causenotice would render the impugned order dated 14.12.2020contrary to the provisions of Section 179 of the Act andtherefore, not sustainable in the eyes of law. (15)Shri Suresh Kumar, learned counsel for therespondents has opposed the petition and submitted that thoughthe impugned show cause notices did not state the details andfacts which constitute the steps taken by the revenue for recoveryof the tax dues from the company, the revenue had filed adetailed affidavit before this Court setting out all steps taken byit, from the year 2016 till year 2020 for making efforts to recoverthe dues from the company. It is his contention that a reading ofthe aforementioned affidavit would leave no manner of doubtthat the Officer who has issued the show cause notices wassatisfied that there was enough material to conclude that therevenue was unable to recover taxes from the company and wasleft with no choice but to proceed against the Directors of thecompany. He further argues that the impugned orderdated 14.12.2020 is passed in accordance with the provisions ofSection 179 of the Act, as the order concludes that the petitionerwas infact the Director of the company and therefore, liable topay taxes in terms of notice issued under Section 179 of the Act,in default of the company. He further argues that the impugned orderdated 14.12.2020 is passed in accordance with the provisions ofSection 179 of the Act, as the order concludes that the petitionerwas infact the Director of the company and therefore, liable topay taxes in terms of notice issued under Section 179 of the Act,in default of the company. (16)Shri Suresh Kumar, learned counsel for therespondents refers to judgments of this Court in Union of IndiaVs. Manik Dattatreya Lotlikar, reported in (1987) 35 Taxman 526(Bombay), and in Mehul Jadavji Shah Vs. Deputy Commissionerof Income Tax-11(2) (1), reported in (2018) taxmann.com 401(Bombay) and submits that in the event this Court concludesthat the notices are unsustainable, the course followed by thisCourt in these judgments which was to set aside the impugnednotices and order, and to allow the respondents to startproceedings under Section 179 of the Act afresh, by stating allthe jurisdictional facts required, should be followed. (17)Shri Aseem Naphade, learned Advocate for theCompany in Interim Application IA (L)No.24778/2022 has takenus through the application for intervention of the Company inthis petition and contended that perusal of the documentsannexed to the application, including Form DIN-2, which isintimation of allotment of Director Identification Number (DIN)would show that the petitioner was appointed as a Director as on01/04/2001; he further submits that the Director's report of theCompany and the correspondence between various Government Departments and the Company would bear out that thepetitioner was in fact Director of the Company; he submits thatwhen show causes notices were issued to the petitioner, he hasfraudulently sought to portray a picture that he was no more atthe helm of the affairs of the Company by virtue of his claim thathe had not attended the requisite number of meetings in terms ofthe Companies Act. He further submits that the whole purpose offiling of this petition was to prevent the Tax Authorities frommoving against his personal assets, which according to theIntervenor includes the immovable properties listed in theIntervention Application. He further argues that on this ground,the petitioner is required to be restrained from disposing of anyof his personal assets to protect the interest of Revenue. (18)Shri Samir Savjani, applicant in InterimApplication IA(L)No.26761/2022 argued in person and adoptedthe arguments of the Revenue and of the Company in InterimApplication IA(L)No.24778/2022. He also took us throughvarious documents annexed to his Interim Application to contendthat the petitioner has come to this Court with unclean handsand has not disclosed various criminal proceedings which were pending against him in the State of Gujarat and at Mumbai. Hereiterated the arguments for the Company, that this Court oughtto restrain the petitioner from disposing of any of his personalassets to enable the Revenue to recover dues from the Company. (19)We have considered the submissions of theparties before us and the entire record of the petition; we havealso perused the record of the two Interim Applications withtheir annexures. We have also considered the Notes ofArguments placed by the parties before us. (20)Before we proceed to decide the legality of theimpugned show cause notices and the impugned order dated14/12/2020, it would be apposite to quote the provisions ofSection 179 of the Income Tax Act, 1961 :- Liability of directors of private company in liquidation. pending against him in the State of Gujarat and at Mumbai. Hereiterated the arguments for the Company, that this Court oughtto restrain the petitioner from disposing of any of his personalassets to enable the Revenue to recover dues from the Company. (19)We have considered the submissions of theparties before us and the entire record of the petition; we havealso perused the record of the two Interim Applications withtheir annexures. We have also considered the Notes ofArguments placed by the parties before us. (20)Before we proceed to decide the legality of theimpugned show cause notices and the impugned order dated14/12/2020, it would be apposite to quote the provisions ofSection 179 of the Income Tax Act, 1961 :- Liability of directors of private company in liquidation. 179.(1)Notwithstanding anything contained inthe Companies Act, 1956 (1 of 1956), [where any taxdue from a private company in respect of any incomeof any previous year or from any other company inrespect of any income of any previous year duringwhich such other company was a private company]cannot be recovered, then, every person who was adirector of the private company at any time during therelevant previous year shall be jointly and severallyliable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any grossneglect, misfeasance or breach of duty on his part inrelation to the affairs of the company. [(2)Where a private company is converted into apublic company and the tax assessed in respect of anyincome of any previous year during which suchcompany was a private company cannot be recovered,then, nothing contained in sub-section (1) shall applyto any person who was a director of such privatecompany in relation to any tax due in respect of anyincome of such private company assessable for anyassessment year commencing before the 1st day ofApril, 1962.] [Explanation - For the purposes of this section, theexpression "tax due" includes penalty, interest or anyother sum payable under the Act.] (21)From a perusal of these provisions, it is clear that the Assessing Officer is vested with jurisdiction to recoverthe tax from a Director of a Private Company only when theofficer is unable to recover such dues from that Company. It isalso clear from this provision that the Assessing Officer assumesjurisdiction under Section 179 of the Act only when there isfailure to recover dues from the Private Company after effortshave been made by the Revenue to recover such dues. (22) The argument that the petitioner was not a Director of the Company would be irrelevant at this stage, if thepetitioner was able to demonstrate from the contents of the show cause notices and the impugned order that there was nocompliance with the mandate of Section 179 of the Act. (23)In Vanraj Shah(supra), a Division Bench ofthis Court has set out the legal requirements contained in Section179 of the Act, for the Assessing Officer to acquire jurisdiction toproceed under that provision against a Director of a DefaultingPrivate Company. This Court in Vanraj V. Shah Vrs. Dy.Commissioner of Income Tax- 10(1)(1) and another inParagraph Nos.4 and 5 has held as under :- (22) The argument that the petitioner was not a Director of the Company would be irrelevant at this stage, if thepetitioner was able to demonstrate from the contents of the show cause notices and the impugned order that there was nocompliance with the mandate of Section 179 of the Act. (23)In Vanraj Shah(supra), a Division Bench ofthis Court has set out the legal requirements contained in Section179 of the Act, for the Assessing Officer to acquire jurisdiction toproceed under that provision against a Director of a DefaultingPrivate Company. This Court in Vanraj V. Shah Vrs. Dy.Commissioner of Income Tax- 10(1)(1) and another inParagraph Nos.4 and 5 has held as under :- "4.In terms of sub-section (1) of Section 179,from every person who was a director of a privatecompany during the time when the tax dues arose,such tax could be recovered from such director holdinghim jointly and severally liable for payment of suchtax. However, the same cannot be recovered from himunless he proves that non-recovery cannot beattributed to any gross negligence, misfeasance orbreach of duty on his part in relation to the affairs ofthe Company. First requirement for application of sub-section (1) of Section 176, therefore, is that the taxdues in question could not be recovered from privatecompany. Even if this requirement is satisfied, it is openfor the concerned director to prove that such non-recovery cannot be attributed to any gross negligence,misfeasance or breach of duty on his part in relation tothe affairs of the company. On all these counts,therefore, the petitioner had a right to oppose andresist the proposal of the Assessing Officer. 5.In the show-cause notice, it is not evenaverred that the dues of the company should not be recovered from the said Company and that therefore,the onus would be on the director to prove that thesame could not be attributed to his gross neglect,misfeasance or breach of duty. The action of theAssessing Officer to order recovery of the unpaid taxdues of the company from the petitioner, thus, waswithout the foundation of the necessary facts in show-cause notice." (24)Following on similar lines, anotherDivision Bench of this Court in Rajendra R. Singh (supra)which considering the scope of Section 179 of the Act hasheld as under :- "5.By virtue of the order impugned dated 13thFebruary 2018, the objections and contentions raised bythe petitioner were rejected. It was held that theallegation that the proceedings under section 179 weredirectly initiated was baseless. It was held that after thetax demand, several phone calls were made to the ARsof the assessee which did not elicit any responsewhereafter the bank account of the assessee wasattached for recovery of dues and further thatproceedings under section 179 was initiated becausethe assessee was unwilling and non-co-operative to payits tax dues. 16.The orders impugned are also unsustainableon another ground. Power under section 179 of the Actcan be exercised against the Directors upon satisfactionof certain conditions only if the tax dues cannot berecovered from the private company. To justify that thetax dues cannot be recovered, the Assessing Officer hasto enumerate the steps taken towards recovery of taxdues from the company. For example, attachment of theaccounts of the company as also, its movable andimmovable assets, efforts made by the Assessing Officerin identification of the various movable and immovableassets of the company, and so on and so forth. The Show cause notice under section 179 of the Act, dated 24th January, 2018, on the other hand, reads asunder :- "1 In the case of M/s. Crest Paper Mills Limited (PAN :AAACCC4343D), the demand of Rs.3,98,19,430/- isoutstanding. 2The aforesaid demands have been raised vide ordergiving effect to the order of CIT (A) u/s 250 of the ITAct and have been outstanding since long but the samehas not been paid by the assessee company so far ...." The Show cause notice under section 179 of the Act, dated 24th January, 2018, on the other hand, reads asunder :- "1 In the case of M/s. Crest Paper Mills Limited (PAN :AAACCC4343D), the demand of Rs.3,98,19,430/- isoutstanding. 2The aforesaid demands have been raised vide ordergiving effect to the order of CIT (A) u/s 250 of the ITAct and have been outstanding since long but the samehas not been paid by the assessee company so far ...." 17.A reading the show cause notice wouldtherefore clearly suggest that there was no satisfactionrecorded that the tax cannot be recovered. It needs tobe understood that recovery procedure under section179 of the Act against the directors is not to be resortedto casually and only because it is convenient to do so faraffecting recovery of the tax dues. 18.With a view to show that the respondent No.1had mechanically resorted to the provisions of section179 of the Act, the petitioner has relied upon an orderof attachment, dated 6th March 2019, whereby the TaxRecovery Officer-2, Thane has ordered the attachmentof land at Village Kalivali, Taluka Panvel, Dist. Raigad toshow that if respondent had made an effort, the taxdues could be recovered from the company. Anadditional affidavit has also been filed by the petitioner. In response to this additional affidavit, anaffidavit in reply has also been filed by the DeputyCommissioner of Income Tax-1(2)(1), Mumbai in whicha stand is taken that steps for sale of the propertyattached would be initiated after getting the fair marketvalue determined. This statement itself has the effect ofnullifying the action initiated under section 179 of theAct against the petitioner rendering the order impugnedunsustainable in law." (25)The Gujarat High Court in the case of Sonal Nimish Patel(supra) has held that it is prerequisite and necessary condition to be fulfilled before action under Section 179 of theAct can be taken, that the Revenue must establish, if suchrecovery from the Private Company cannot be made. Whileconsidering the scope of Section 179 of the Act and the factsrequired to be considered by the Assessing Officer beforeassuming jurisdiction under that provision, the Gujarat HighCourt has held thus :- "20.. . .. . . . . The first requirement, therefore, toattract such liability of the director of a private limitedcompany is that the tax cannot be recovered from thecompany itself. Such requirement is held to be a pre-requisite and necessary condition to be fulfilled beforeaction under section 179 of the Act can be taken. In thecontext of Section 179 of the Act, 1961, this Court heldthat before recovery in respect of the dues from aprivate company can be initiated against the directors,to make them jointly and severally liable for such dues,it is necessary for the Revenue to establish that suchrecovery cannot be made against the company and thenalone it can reach to the directors who were responsiblefor the conduct of the business during the previous yearin relation to which liability exists. 21.There is no escape from the fact that theperusal of the Notice under Section 179 of the Act,1961, reveals that the same is totally silent as regardsthe satisfaction of the condition precedent for takingaction under Section 179 of the Act, 1961, viz. that thetax dues cannot be recovered from the Company. In theshow-cause notice, there is no whisper of any stepshaving been taken against the Company for recovery ofthe outstanding amount. Even in the impugned order, no such details or information has been staled." (26)We take note of the fact that in that case, anadditional affidavit-in- reply was filed to demonstrate the stepstaken by the Revenue against the Company for recovery of dues.The Gujarat High Court has further considered whether theabsence of facts required to be stated in the show cause noticescould be supplanted by filing of an affidavit-in-reply stating suchfacts, and has observed in Paragraph No.22 as under :- no such details or information has been staled." (26)We take note of the fact that in that case, anadditional affidavit-in- reply was filed to demonstrate the stepstaken by the Revenue against the Company for recovery of dues.The Gujarat High Court has further considered whether theabsence of facts required to be stated in the show cause noticescould be supplanted by filing of an affidavit-in-reply stating suchfacts, and has observed in Paragraph No.22 as under :- "22. In such circumstances, referred to above, thequestion is, whether such an order could be said to besustainable in law. The answer has to be in the negative.At the same time, in the peculiar facts andcircumstances of the case and more particularly, when ithas been indicated before us by way of an additionalaffidavit-in-reply as regards the steps taken against thecompany for the recovery of the dues, we would like togive one chance to the department to undertake a freshexercise so far as Section 179 of the Act, 1961, isconcerned. If the show-cause notice is silent includingthe impugned order, the void left behind in the twodocuments cannot be filled by way of an affidavit-in-reply. Ultimately, it is the subjective satisfaction of theauthority concerned that is important and it should bereflected from the order itself based on some cogentmaterials. However, with a view to protect the interestof both, the writ applicant as well as Revenue, we areinclined to quash the impugned order and give oneopportunity to the Revenue to initiate the proceedingsafresh by issuance of fresh show-cause notice with allnecessary details so that the writ-applicant can meetwith the case of the Revenue. We are inclined to adoptsuch measure keeping in mind the statement made bythe learned counsel Mr. Soparkar that till the fresh proceedings are not completed, his client will notoperate the bank account." Notice may be taken of the fact that theGujarat High Court in Sonal Nimish Patel (supra) haschosen to adopt the course of allowing the Revenue toinitiate fresh proceedings after setting aside the originalshow cause notices and order, only on the basis of thestatement made by learned counsel for the petitionertherein, that till fresh proceedings were completed, thepetitioner would not operate his bank account. (27) We take further note of this Court's Judgment in Mehul Jadhavji Shah (supra) which considered therequirements of Section 179 while issuing show cause noticesand consequent order under that provision. This Court held thatsetting out particulars of the efforts made by the Revenue and itsfailure to recover tax dues from the Private Company form thesine qua non for proceeding against the Director. It alsoconsidered that stating of such facts in the notice beforeassuming jurisdiction to proceed, was required in order to giveopportunity to the Director against whom such a notice wasissued, to point out why the efforts made by the Revenue torecover from the Company were inadequate or improper. MehulJadavji Shah(supra) refers to an earlier Judgment passed by thisCourt in Madhavi Kerkar Vrs. Assistant CIT, reported in (2018)90 taxmann.com 55/253 Taxman 288 (Bom.)and has held inrequirements of Section 179 while issuing show cause noticesand consequent order under that provision. This Court held thatsetting out particulars of the efforts made by the Revenue and itsfailure to recover tax dues from the Private Company form thesine qua non for proceeding against the Director. It alsoconsidered that stating of such facts in the notice beforeassuming jurisdiction to proceed, was required in order to giveopportunity to the Director against whom such a notice wasissued, to point out why the efforts made by the Revenue torecover from the Company were inadequate or improper. MehulJadavji Shah(supra) refers to an earlier Judgment passed by thisCourt in Madhavi Kerkar Vrs. Assistant CIT, reported in (2018)90 taxmann.com 55/253 Taxman 288 (Bom.)and has held in "7.So far as the second and third submission onbehalf of the Revenue that in the facts of this case, theefforts which were made to recover the tax dues fromthe delinquent company though not stated in the showcause notice are found in the impugned order or in anyevent in the affidavit-in-reply dated 14th February,2018. Thus, is sufficient compliance with Section 179 ofthe Act. It is the petitioner's case in the petition that, anamount of Rs.49.81 crores are loans advanced tocompanies/associates of its Director, Mr. Praful Setna.The attempts at recovery if made known in the showcause notice, would have given an opportunity to thepetitioner to bring the above facts to the notice of theAssessing Officer who could have recovered from thembefore proceeding with the notice. Therefore, the givingof particulars of efforts made and failure to recover thetax dues for the delinquent Private Limited Company ina notice issued under section 179(1) of the Act is a sina-qua non for proceeding further. This is so as not onlythe Assessing Officer can assume/acquire jurisdictiononly on failure to recover its dues from a PrivateLimited Company after proper efforts. But is also givesan opportunity to the assessee to point out why theefforts made are inadequate and/or improper. 8.In view of the above, it is clear that before theAssessing Officer assumes jurisdiction efforts to recoverthe tax dues from the delinquent Private LimitedCompany should have failed. This effort and failure ofrecovery of the tax dues must find mention in the showcause notice howsoever briefly. This would give anopportunity to the noticee to object to the same on factsand if the Revenue finds merit in the objection, it cantake action to recover it from the delinquent PrivateLimited Company. This before any order under section179 (1) of the Act is passed adverse to the noticee. Inthis case, admittedly the show cause notice itself doesnot indicate any particulars of the failed efforts torecover the tax dues from the delinquent PrivateLimited Company. Thus, the issue stands covered in favour of the petitioner by the order of this Court inMadhavi Kerkar (supra). In the above circumstances,the impugned order dated 26th December, 2017 isquashed and set aside." (28)Union of India Vrs. Manik Dattatreya Lotlikar (supra) cited by the Revenue, was a case where the contentionraised by the petitioner was whether provisions of Section 179(1) of the Act, which came into operation on 01/10/1975, wouldoperate retrospectively and make Directors of a DefaultingPrivate Company liable for payment of tax due from theCompany from 01/04/1962 onwards. That Judgment does notdecide the issue raised in this petition i.e. whether thejurisdictional facts are required to be stated in the show causenotice itself to allow the Assessing Officer to proceed against aDirector. In our view, therefore, Union of India Vrs. ManikDattatreya Lotlikar(supra) would not apply to the facts of thepresent case. B. Muralidhar Vrs. Deputy Commissioner of IncomeTax Corporate Circle-1, reported in (2019) 110 taxmann.com 54(Madras)cited by the Revenue was to support its arguments thatthe petitioner had an alternate efficacious remedy in terms ofstatutory revision under Section 264 of the Act. (29)A perusal of the Judgment of the Madras High Court in B. Muralidhar(supra) would reveal that in that case, the onlyquestion that arose was whether the petitioner had validlysubmitted his resignation from the delinquent Company and was,therefore, not liable to pay its taxes in terms of provisions ofSection 179 of the Act. There were no jurisdictional issues raisedin that petition of the nature and the grounds raised in thepresent petition. It is in that light that the Madras High Courtheld that Section 264 of the Act provided the petitioner with anadequate alternate remedy of filing Revision under Section 264of the Act rather than invoking jurisdiction of the High Courtunder Article 226. (29)A perusal of the Judgment of the Madras High Court in B. Muralidhar(supra) would reveal that in that case, the onlyquestion that arose was whether the petitioner had validlysubmitted his resignation from the delinquent Company and was,therefore, not liable to pay its taxes in terms of provisions ofSection 179 of the Act. There were no jurisdictional issues raisedin that petition of the nature and the grounds raised in thepresent petition. It is in that light that the Madras High Courtheld that Section 264 of the Act provided the petitioner with anadequate alternate remedy of filing Revision under Section 264of the Act rather than invoking jurisdiction of the High Courtunder Article 226. (30)In the present petition, the main ground ofchallenge is lack of jurisdiction of the Assessing Officer toproceed with the show cause notices issued by it under Section179 of the Act and to pass impugned order in absence of statingthe jurisdictional facts that were required under the provisions ofthe Act. The challenge therefore, is to the sustainability of thenotice and the order on the touch stone of the provisions ofSection 179 of the Act. (31)Applying the ratio of the Judgments cited above, in Vanraj V. Shah (supra), Rajendra R. Singh (supra) and MehulJadavji Shah (supra)to the facts of the present case, that theimpugned show cause notices disclose no facts regarding thesteps taken by the Revenue to recover tax dues from thedelinquent Company. In fact, the show cause notices dated24/02/2020, 19/03/2020 and 04/12/2020 are mere repetitionof the contents of the show cause notice dated 15/10/2019. An affidavit-in-reply dated 21/04/2022 filed beforeus by the Assessing Officer attempts to list out various stepstaken by the Revenue to recover tax dues from the Companybetween the year 2016 until the year 2020. However, as held bythis Court in Mehul Jadavji Shah (supra), giving particulars ofsteps taken against the delinquent Company in an affidavit-in-reply or even in the impugned orders does not meet therequirements of a proper notice to the Director. (32)A perusal of the impugned order dated 14/12/2020discloses that it does not record any of the material whichformed the basis for the Assessing Officer to conclude that all steps have been taken to recover the tax dues from the Company.Further, the impugned order does not refer to the AssessingOfficer's subjective satisfaction based upon material before it, toconclude that all steps had been taken to proceed against thedelinquent Company and such steps had failed. This being a sinequa non for proceeding further, and for assuming jurisdictionunder Section 179 of the Act, failure to disclose this material andto record the satisfaction of the Assessing Officer in the mannerrequired by the provisions of Section 179 of the Act renders theimpugned show cause notices and the impugned order dated14/12/2020 unsustainable at law. (33)We are therefore, of the considered opinion that theimpugned show cause notices dated 24/02/2020, 19/03/2020and 04/12/2020 and the impugned order 14/12/2020 issuedunder Section 179 of the Income Tax Act, 1961 are unsustainableand contrary to the Act; consequently, we quash and set asidethree show cause notices dated 24/02/2020, 19/03/2020 and04/12/2020 and the impugned order dated 14/12/2020. (34)Needless to state, from the conclusions we have arrived hereinabove, Interim Application IA(L)No.24778/2022 ofthe Company and Interim Application IA(L)No.26761/2022 ofShri Samir Savjani, Applicant-in-person are hereby rejected. Theprayer contained in the I.A.'S. for an order of restraint againstthe petitioner from disposing of his assets are unsustainable. (35)The petition is allowed. The Rule is made absolute interms of Prayer Clauses (b) and (c1). No costs. [VALMIKI SA MENEZES, J.] [DHIRAJ SINGH THAKUR, J.] Prity/Choulwar