Wa/531/2011 Of Alex Cherian v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 24TH AUGUST 2011 / 2ND BHADRA 1933 WA.No. 531 of 2011() -------------------- AGAINST THE JUDGEMENT/ORDER DATED 22/01/2010 IN RP.73/2010 .................... APPELLANT(S): / PETITIONER -------------- ALEX CHERIAN,AGED 49 YEARS, S/O.LATE CHERIAN ALEX, M/S.SAMURAI TECHNO TRADING (P) LTD, NO.6, NEPTUNE COLONY,ERNAKULAM. BY ADV. SRI.V.PHILIP MATHEWS RESPONDENT(S): / RESPONDENT --------------- 1. THE COMMISSIONER OF INCOME TAX, ERNAKULAM, PIN - 682 018. 2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1 (3), RANGE -1 (ASSESSING OFFICER), ERNAKULAM, PIN - 682 018. 3. DEPUTY COMMISSIONER OF INCOME TAX (H), ERNAKULAM, PIN - 682 018. MR.JOSE JOSEPH, SC THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 24/08/2011, ALONG WITH WA NOs. 532 & 533 OF 2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX APPELLANT'S EXHIBITS ANNEXURE 1 :COPY OF ORDER DATED 22/01/2010 PASSED BY THE LEARNEDSINGLE JUDGE IN REVIEW PETITION NO.1216/09, R.P.NO.1217/09 & 73/10. ANNEXUARE 2 :COPY OF MEMORANDUM OF REVIEW PETITION. ANNEXURE 3 :COPY OF STATEMENT FILED ON BEHALF OF RESPONDENTS IN WP(C) NO.3217/2008. ANNEXURE 4 :COPY OF REPLY AFFIDAVIT FILED BY THE PETITIONER AGAINSTTHE STATEMENT (ANNEXURE 3) ANNEXURE 5 :COPY OF COUNTER AFFIDAVIT AGAINST THE REPLY AFFIDAVIT(ANNEXURE 4). ANNEXURE 6 :COPY OF PETITION FOR EXTENSION OF TIME. ANNEXURE 7 :COPY OF PROCEEDINGS OF THE COMMISSIONER OF INCOME TAXDATED 06/05/2009. ANNEXURE 8 :COPY OF PROCEEDINGS OF CHIEF COMMISSIONER OF INCOME TAXDATED 29/07/2009. ANNEXURE 9 :COPY OF CERTIFICATE NO.030296610/1455/11 DATED06/08/2011 ISSUED BY THE CHIEF MANAGER, KERALA FINANCIAL CORPORATION. ANNEXURE 10 :COPY OF DECREE IN O.S. 131/1998 ON THE FILE OF PRINCIPALSUB JUDGE, KOCHI DATED 16/10/1999. //TRUE COPY// jg PA TO JUDGE. C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. .................................................................... W.A. Nos.531, 532 & 533 of 2011 .................................................................... Dated this the 24[th] day of August, 2011. J U D G M E N T Ramachandran Nair, J. The above Writ Appeals are filed against the common judgment of the learned Single Judge declining to interferewith recovery proceedings initiated by the Income TaxDepartment for recovery of income tax from the appellant asDirector of a Private Limited Company, in terms of Section 179of the Income Tax Act (hereinafter referred to as the Act forshort). 2.We have heard learned counsel appearing for theappellant and learned Standing Counsel appearing for theDepartment and have also gone through the original judgmentand the review judgment issued by the learned Single Judge. We have heard learned counsel appearing for the 3.After hearing both sides what we notice is thatarrears of tax due is for the years from 1993-94 to 1995-96.Appellant's case is that the Company was engaged in thebusiness of running fish farms which were closed pursuant to W.A.Nos.531, 532 & 533/2011 2.We have heard learned counsel appearing for theappellant and learned Standing Counsel appearing for theDepartment and have also gone through the original judgmentand the review judgment issued by the learned Single Judge. We have heard learned counsel appearing for the 3.After hearing both sides what we notice is thatarrears of tax due is for the years from 1993-94 to 1995-96.Appellant's case is that the Company was engaged in thebusiness of running fish farms which were closed pursuant to W.A.Nos.531, 532 & 533/2011 orders issued by the Honourable Supreme Court, in 1997. Onaccount of business loss, the Company could not settle the taxis the case put forward by the appellant. Further contentionraised by the appellant to resist the recovery proceedingsinitiated under Section 179 of the Act is that the Company hasassets in Tamilnadu which could be sold for recovery ofarrears of tax due from the Company. 4.Learned Standing Counsel submitted that onenquiry, the properties of the Company were mortgaged toBanks and so much so, the Department is not able to sell theproperty for recovery of tax on account of first charge infavour of the Bank. Learned counsel for the appellant,however refuted the contention raised by the Department bycontending that properties are free from mortgage. We aresurprised to note this contention raised by the appellantbecause if landed properties are available with the Company,we do not know why the Company did not sell the propertiesand settle tax liability in the course of last 15 years. Theappellant's contention that the Income Tax Department's W.A.Nos.531, 532 & 533/2011 3 attachment prevented sale of properties by the Company forsettlement of arrears of tax does not appear to be genuine orbonafide. 5.Learned Standing Counsel for the Departmentreferred to the findings of the Income Tax Authorities that theDirectors have siphoned off all assets and wealth of thedefaulted Company and invested in other Companies. If theseare facts, those transfers and investments could be declaredinvalid through process in law by the Department Authorities,and in fact recovery could be proceeded against such assetsthough in the name of other concerns. In any case, we do notfind any merit in the challenge against recovery proceedingsinitiated under Section 179 of the Act against Directors of thePrivate Limited Company including the appellant, who isadmittedly a Director and the beneficiary of the income earnedby the Company in respect of which tax demand survives. However, we feel the appellant can be allowed to settleliability after getting waiver of default interest in part or fullprovided arrears of tax and penalty are paid and if application W.A.Nos.531, 532 & 533/2011 is made for waiver of default interest under Section 220(2A) ofthe Act. However, we make it clear that without payment oftax and penalty the Commissioner need not consider anyapplication for waiver of interest based on the observationsmade in this judgment. We also make it clear that theappellant is free to pursue challenge against demand ofpenalty or tax, if any, pending before any Court or authority.The appellant is also free to find out purchasers for theproperty and approach the Commissioner of Income Tax, sothat on his approval property can be sold on the purchaserdirectly remitting sale consideration in terms of theCommissioner's order to the Department for adjustment of taxarrears. These Writ Appeals are dismissed but with the aboveobservations. (C.N.RAMACHANDRAN NAIR, JUDGE) (P.S.GOPINATHAN, JUDGE)