Liability of the
director(s) u/s 179 of the Income Tax Act is towards the amount of “tax” only
and not towards “interest” and “penalty”
Case Law: SANJAY GHAI Vs. ASSTT. CIT
& ORS. in W.P.(C) 2303/2012 & 5175/2012 Dated 11.10.2012 (DHC)
Decided in Whose Favour ? -- Assessee
Facts _ Issue Involved: In this case, the issue involved was that if
there is a default on the part of a private limited company in payment of its
income tax dues to the Income Tax Department then the liability of the company
can be shifted to its director(s) u/s 179 of the Income Tax Act and
accordingly, the Income Tax Department can hold the said director(s) liable to
pay income tax dues of the company. The question arose as to whether it is the
amount of “tax” only that can be shifted upon the director(s) or even other
components of income tax demands such as “interest” and “penalty” can also be
recovered from the director(s) u/s 179 of the Income Tax Act.
Decision
: Hon’ble Delhi High Court after analyzing
Section 179 and other provisions of the Income Tax Act held that it is the
amount of “tax” only which can be recovered form the director(s) u/s 179 and no
other demand i.e. “interest” or “penalty” can be recovered from director(s) u/s
179 of the Income Tax Act.
Significance of the Judgement
This decision helps the director to pay only income tax as in many cases the portion of
“interest” and “penalty” becomes higher than the actual income tax. IT department may levay penalty can be levied upto 300% of the amount of tax and this verdict gives some relief to those at default.
