| Question And Answer | |
|---|---|
| Subject: | Can recovery proceedings be started against a Director of Limited Company ? |
| Category: | Income-Tax |
| Querist: | Pddar |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Director, limited Company, Recovery |
| Date: | May 11, 2021 |
Can the Department can take recovery proceedings against a Director of Limited Company under section 179 of the Act for recovery of Tax due of the Company?
The Hon’ble High Court of Gujrat in the case of Pravinbhai M. Kheni v. ACIT [2013] 353 ITR 585 (Guj) (HC) observed that being a public company, ordinarily, provisions of section 179(1) of the Act could not be applied; however, if factors noted by Assistant Commissioner were duly established, it would certainly be a fit case where invocation of principle of lifting of corporate veil would be justified.
Therefore, the department can proceed against a director of a public company by lifting the corporate veil and issuing necessary statutory notices along with a reasonable opportunity of hearing.
Note: In Paras S. Savla v. ACIT (2016) 389 ITR 336 / 244 Taxman 17 (Guj.)(HC) the Court held that If the Department had wanted to apply the principle of lifting the corporate veil in the context of section 179, it ought to have prima facie sufficient material to confront the assessee on the issue calling upon him to show cause why such powers should not be invoked. High Court considered the ratio in Pravinbhai M. Kheni v. ACIT [2013] 353 ITR 585 (Guj) (HC) also refer, Dhaval N. Patel v. CIT (2015) 231 Taxman 500 (Guj.)(HC) Ajay S. Patel v. ITO (2015) 375 ITR 72 / 231 Taxman 64 (Guj.)(HC)
Dr. K. Shivaram Senior Advocate