Wp(C)/28722/2018 Of Maliakkattu Varghese Uthup v. The Principal Commissionr Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS FRIDAY, THE 1 DAY OF APRIL 2022 / 11TH CHAITHRA, 1944 WP(C) NO. 28722 OF 2018 PETITIONER: MAILAKKATTU VARGHESE UTHUP,S/O.THOMAS VARGHESE, MAILAKKATTU HOUSE, PUTHUPPALLY P.O., KOTTAYAM DISTRICT-686 011BY ADV PREETHA S.NAIR RESPONDENTS: 1THE PRINCIPAL COMMISSIONR OF INCOME TAXC.R BUILDING, I.S, PRESS ROAD,KOCHI-682 0182THE DEPUTY COMMISSIONER OF INCOME TAXCENTRAL CIRCLE-2, ERNAKULAM, ALFA BUILDING, NEAR AMBADYCHAMBERS, CHITTOOR ROAD, OPP.SRV LP SCHOOL, KOCHI-682 0113DIRECTOR GENERAL OF INMCOME TAX (INV)S.A.ROAD, KOCHI-682 0204BUREAU OF IMMIGRATION(MINISTRY OF HOME AFFAIRS) COCHIN INTERNATIONAL AIRPORTLTD, KOCHI-682 3115THE REGISTRAR OF COMPANIESKERALA COMPANY LAW BHAVAN, B.M.C. ROAD, THRIKKAKARA,KOCHI-682 021BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAXSRI.T.V.VINU, CGC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON01.04.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: BECHU KURIAN THOMAS, J. ----------------------------------------- W.P.(C) No. 28722 of 2018 ---------------------------------------- Dated this the 1[st] day of April 2022 JUDGMENT Petitioner challenges Ext.P10 order dated 10/7/2018, issued in exercise of the powers under Section 179 of theIncome Tax Act 1961 (for short the Act). Further, a reliefof declaration that petitioner is not liable for any incometax dues of M/s.Al Zarafa Travels and ManpowerConsultants Pvt.Ltd., has also been sought for. 2. Petitioner was the Managing Director of M/s. Al Zarafa Travels and Manpower Consultants Pvt.Ltd.,(forshort the “Company”). According to the petitioner, hewas the Director of the Company only for a very shortperiod and had resigned as Director on 1/10/2009 afterwhich, he had no connection with the Company. In themeanwhile, since arrears of income tax were due from theCompany recovery proceedings were initiated against theDirectors of the Company. By the impugned order Ext.P10 dated 10/7/2018, proceedings were initiated against thepetitioner alleging him to be a Director of the Company. 3. While the challenge against Ext.P10 was pending before this Court the Company had, admittedly, pursuedits challenge against the order of assessment that createdthe liability as against it. According to the petitioner, inthe first appeal filed by the Company, a partial relief wasobtained, and in the second appeal before the AppellateTribunal, the entire assessment order against theCompany was set aside. The Appellate Tribunal allowedthe appeal by Ext.P29, in respect of the issues in appealand remanded the remaining issues for reconsideration tothe assessing officer. Thus, as far as the liability of taxdue from the Company is concerned, the matter has beenleft open for consideration by the Assessing Officer. 4. In view of the subsequent events that has arisenon account of Ext.P29, the learned Senior CounselSri.Joseph Markose contended that, no tax is due fromthe Company, warranting any proceedings under Section 4 179 of the Act. It was therefore submitted that, the entireproceedings in the form of Ext.P10 becomes invalid andthe same has not left to stand. 5. The learned Standing Counsel Sri.Jose Joseph, onthe other hand, contended that the issue may still arisefor consideration under Section 179 of the Act if theAssessing Officer, subsequent to the remand order passesfresh orders, creating any tax liability for the Company.He also submitted, that it cannot be contended thatExt.P10 is without any basis since at the time, when thesaid order was issued, tax liability was due from theCompany. 6. On a consideration of the various contentions 4 179 of the Act. It was therefore submitted that, the entireproceedings in the form of Ext.P10 becomes invalid andthe same has not left to stand. 5. The learned Standing Counsel Sri.Jose Joseph, onthe other hand, contended that the issue may still arisefor consideration under Section 179 of the Act if theAssessing Officer, subsequent to the remand order passesfresh orders, creating any tax liability for the Company.He also submitted, that it cannot be contended thatExt.P10 is without any basis since at the time, when thesaid order was issued, tax liability was due from theCompany. 6. On a consideration of the various contentions raised by the learned Senior Counsel as well as thelearned Standing Counsel, I am of the view that, byvirtue of the order passed in appeal by the AppellateTribunal, produced as Ext.P29, a total change of scenariohas occurred. As rightly, contended by the learned SeniorCounsel Sri.Joseph Markose, the proceedings under Section 179 of the Act can be initiated only when there isa tax due from the Company, in respect of any income ofany previous year. As per Section 179 of the Act if tax isdue from a private Company and the same cannot berecovered, then every person, who was a Director of theCompany, at any during the relevant previous year, willbe liable for payment of such tax. The very basis for issueof Ext.P10 was the existence of a tax liability against theCompany. The said tax liability has been effacedcompletely by virtue of Ext.P29, and the same has beenremanded for reconsideration. 7. When the issue that was pending consideration before the Tribunal has been directed to be reconsidered,in the eyes of law after setting aside the order ofassessment to the extent challenged before the Tribunal,there is no tax due from the Company. Consequentlythere cannot be any recovery of tax from any Director ofthe Company for any assessment year, relevant to theprevious year. Therefore, I am of the view that, Ext.P10has no legs to stand, in view of Ext.P29. 6 8. Accordingly, Ext.P10 shall stand set aside. It is made clear that, I have not considered the merits of anyof the findings entered into in Ext.P10 and the contentionsraised by both parties against Ext.P10 are left open to beconsidered at an appropriate stage, if such an occassionarises. Accordingly, this writ petition is allowed, settingaside Ext.P10. Sd/- BECHU KURIAN THOMAS JUDGE AJM APPENDIX OF WP(C) 28722/2018 PETITIONER EXHIBITSEXHIBIT P1TRUE COPY OF THE FORM 32 RETURN FILED BY THE COMPANY BEFORE THE REGISTRAR OFCOMPANIES, KERALAEXHIBIT P2TRUE COPY OF THE ORDER DATED 05.03.2018 PASSED BY THE 2ND RESPONDENT UNDER SECTION 230 OF THE INCOME TAX ACTEXHIBIT P3TRUE COPY OF THE COMMUNICATION/ORDER OF STAY OF BALANCE DEMAND DATED 23.03.2018 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS)EXHIBIT P4TRUE COPY OF THE ORDER DATED 14.08.2017 PASSED UNDER SECTION 179 OFTHE INCOME TAX ACTEXHIBIT P5TRUE COPY OF THE ORDER OF ATTACHMENT DATED 16-08-2016EXHIBIT P6TRUE COPY OF THE JUDGMENT DATED 11.06.2018 PASSED BY THIS HON'BLE COURT IN W.P(C) NO.10675/2018EXHIBIT P7TRUE COPY OF THE JUDGMENT DATED 25.06.2018 PASSED BY THE DIVISION BENCH OF THIS HON'BLE COURT IN W.A. NO.1180/2018EXHIBIT P8TRUE COPY OF THE NOTICE UNDER SECTION 179 DATED 06.06.2018 (TO BE READ AS 29.06.2018) ISSUED BY THE 2ND RESPONDENTEXHIBIT P9TRUE COPY OF THE DETAILED OBJECTION DATED 06.07.2018 FILED BY THE PETITIONER (WITHOUT EXHIBITS)EXHIBIT P10TRUE COPY OF THE ORDER DATED 10.07.2018 PASSED BY THE 2ND RESPONDENT UNDER SECTION 179EXHIBIT P11TRUE COPY OF THE SHOW CASE NOTICE DATED 11.07.2018 ISSUED BY THE 2ND RESPONDENTEXHIBIT P12TRUE COPY OF THE OBJECTIONS DATED 12.07.2018 FILED BY THE PETITIONEREXHIBIT P13TRUE COPY OF THE IMPUGNED ORDER DATED 19.07.2018 PASSED BY THE 2ND RESPONDENT UNDER SECTION 230Exhibit P14TRUE COPY OF THE APPELLATE ORDER DATED 25/1/2021 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) KOCHIExhibit P15(A)TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 22/2/2020 (SUBSEQUENTLY CORRECTED TO 22/2/2021 BY CORRIGENDUM ORDER )FOR ASSESSMENT YEAR 2009-10Exhibit P15(b)TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 22/2/2020 (SUBSEQUENTLY CORRECTED TO 22/2/2021 BY CORRIGENDUM ORDER )FOR ASSESSMENT YEAR 2010-11Exhibit P16(a)TRUE COPY OF THE CORRIGENDUM ORDER DATED 17/3/2021 FOR ASSESSMENT YEAR 2009-10Exhibit P116(b)TRUE COPY OF THE CORRIGENDUM ORDER DATED 17/3/2021 FOR ASSESSMENT YEAR 2010-11Exhibit P117(a)TRUE COPY OF THE REVISED PENALTY ORDERDATED 30/03/2021 FOR ASSESSMENT YEAR 2009-10Exhibit P17(b)TRUE COPY OF THE REVISED PENALTY ORDERDATED 30/03/2021 FOR ASSESSMENT YEAR 2010-11Exhibit P18TRUE COPY OF THE APPELLATE ORDER DATED12/7/2021 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS), KOCHIExhibit P19(a)TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 22/2/2020 FOR ASSESSMENT YEAR 2011-12Exhibit P19(b)TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 22/2/2020 FOR ASSESSMENT YEAR 2012-13Exhibit P19(c)TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 22/2/2020 FOR ASSESSMENT YEAR 2014-15Exhibit P19(d)TRUE COPY OF THE REVISED ASSESSMENT ORDER DATED 19/11/2020 FOR ASSESSMENT YEAR 2015-16Exhibit P20(a)TRUE COPY OF THE CORRIGENDUM ORDER DATED 17/3/2021 FOR ASSESSMENT YEAR 2011-12Exhibit P20(b)TRUE COPY OF THE CORRIGENDUM 0RDR DATED 17/3/2021 FOR ASSESSMENT YEAR 2012-13Exhibit P20(c)TRUE COPY OF THE CORRIGENDUM 0RDR DATED 17/3/2021 FOR ASSESSMENT YEAR 2014-15 Exhibit P20(d)TRUE COPY OF THE CORRIGENDUM 0RDR DATED 17/3/2021 FOR ASSESSMENT YEAR 2015-16Exhibit P21(a)TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 30/3/2021 FOR ASSESSMENT YEAR 2011-12Exhibit P21(b)TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 30/3/2021 FOR ASSESSMENT YEAR 2012-13Exhibit P21(c)TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 30/3/2021 FOR ASSESSMENT YEAR 2014-15Exhibit P21(d)TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 30/3/2021 FOR ASSESSMENT YEAR 2015-16Exhibit P22TRUE COPY OF THE APPLICATION DATED 12/7/2021 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENTExhibit P23TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 12/10/2021 FOR ASSESSMENT YEAR 2009-10 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAMExhibit P24TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 12/10/2021 FOR ASSESSMENT YEAR 2010-11 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAMExhibit P25TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 12/10/2021 FOR ASSESSMENT YEAR 2011-12 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAMExhibit P26TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 12/10/2021 FOR ASSESSMENT YEAR 2012-13 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAMExhibit P27TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 12/10/2021 FOR ASSESSMENT YEAR 2014-15 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAMExhibit P28TRUE COPY OF THE REVISED PENALTY ASSESSMENT ORDER DATED 12/10/2021 FOR ASSESSMENT YEAR 2015-16 ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAMTRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 10/2/2022 IN ITA NOS.25-30/COCH/2021 AND ITA NOS.88 & 89/COCH/2021 Exhibit P29 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, ERNAKULAMTRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 10/2/2022 IN ITA NOS.25-30/COCH/2021 AND ITA NOS.88 & 89/COCH/2021 Exhibit P29 Exhibit P30TRUE COPY OF THE ORDER DATED 2/9/2021 ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-3, KOCHIExhibit P31(a)TRUE COPY OF THE ORDER GIVING EFFECT TO U/S.250 AND COMPUTATION SHEET DATED28/10/2021 FOR AY 2009-10Exhibit P31(b)TRUE COPY OF THE ORDER GIVING EFFECT TO U/S.250 AND COMPUTATION SHEET DATED28/10/2021 FOR AY 2010-11Exhibit P31(c)TRUE COPY OF THE ORDER GIVING EFFECT TO U/S.250 AND COMPUTATION SHEET DATED28/10/2021 FOR AY 2012-13Exhibit P31(d)TRUE COPY OF THE ORDER GIVING EFFECT TO U/S.250 AND COMPUTATION SHEET DATED28/10/2021 FOR AY 2013-14Exhibit P31(e)TRUE COPY OF THE ORDER GIVING EFFECT TO U/S.250 AND COMPUTATION SHEET DATED28/10/2021 FOR AY 2014-15Exhibit P31(f)TRUE COPY OF THE ORDER GIVING EFFECT TO U/S.250 AND COMPUTATION SHEET DATED28/10/2021 FOR AY 2015-16Exhibit P32TRUE COPY OF THE LETTER DATED 22/2/2022 ALONG WITH THREE CHALLANS //TRUE COPY// PA TO JUDGE