The assessee is one of the Director of Nakoda Syntex Pvt Ltd . The AO passed the assessment order against the company making various addition . The company preferred an appeal which is pending for final hearing . The company filed and application for stay of recovery which was rejected by the AO. The AO initiated recovery proceedings under section 179 of the Act against the assessee and passed an order under section 179 of the Act and also issued a certificate under section 222 of the Act . Against the said order the assessee filed writ petition . Allowing the Petition the Court held that the AO must make efforts for recovery of the outstanding dues from the private limited company which had committed default in payment of the outstanding demand . Only because the director was unable to deposit 20% of the demand raised in the assessment order against the company , he cannot be said to be negligent and AO cannot invoke jurisdiction under section 179 of the Act. (SCA No. 12961 of 2019 dt 16 -12 -2022 )
Devendra Babulal Jain v. ITO ( 2023) The Chamber’s Journal -January -P. 89 ( Guj)( HC)
S. 226 : Collection and recovery – Modes of recovery – 20% of tax demand – Liability of directors of the private limited company – Pendency of appeal – Assessing Officer cannot directly initiate recovery proceedings against directors of the company without taking an assertive step for recovery of the outstanding tax due from the Private Limited company [ S. 179, Art , 226 ]