Service of Income Tax notice to assessee in jail should be through Superintendent of jail – High Court

Service of Income Tax notice to assessee in jail should be through Superintendent of the jail. High Court quashed order passed u/s 179 and 230 of Income Tax Act

ABCAUS Case Law Citation
ABCAUS 2370 (2018) 06 HC

The instant writ was filed by the petitioner against the orders passed under Sections 230 (Tax Clearance Certificate  for going abroad) and section 179 (liability of directors of provate limited company in liquidation) of the Income Tax Act (the Act).

The Petitioner was a director in a private limited company which was under investigation by CBI with respect to a recruitment fraud. The petitioner surrendered before the Court and obtained bail. According to the Petitioner he had an appointment in the Medical Hospital abroad in connection with the treatments for his renal ailments and the trial court had permitted hum to go abroad.

However, in the meanwhile, the impugned order was issued by the Assistant Commissioner of Income Tax (ACIT/AO). As per the said order, the petitioner was an assessee in default within the meaning of Section 220 of the Act. Apart from the outstanding liability of the petitioner in his individual capacity he was jointly and severally liable for payment of tax and penalty demands of the company under Section 179 of the Act to the extent of Rs. 400 crores approx. It was alleged that the petitioner had been evading payment of the outstanding demands and had not made any satisfactory arrangements to clear the outstanding demands and that therefore he shall not leave the territory of India by land, sea or air unless he furnishes a Tax Clearance Certificate to the effect that satisfactory arrangements have been made by him for payment of his tax dues.

According to the petitioner, he was unable to go abroad in terms of the order on account of his inability to obtain Tax Clearance Certificate as directed in the order. Regarding his personal liability , he stated that the orders, on the basis of which demand was raised against him, had been challenged by the petitioner in appeals and realisation of the demand amount had been stayed. Regarding the liability of the company it was stated that it was only from the order that he came to know of the said order making him also liable for the tax dues of the company under Section 179 of the Act. According to the petitioner, the order was illegal in as much as the same was one issued without notice to him. It was also the case of the petitioner that liability has been fastened on him for the period beyond the date he had been the director of the company.

The Hon’ble High Court observed that an order under Section 179 of the Act cannot be passed without affording the parties concerned an opportunity of hearing. However, the notice was issued in the proceedings initiated against him under Section 179 of the Act, the petitioner was in jail.

The Hon’ble High Court opined that the said notice should have been served on him through the Superintendent of the jail wherein he was detained. The said course had not been adopted by the respondent Income Tax Authorities. In the circumstances, the order cannot be reckoned as one issued in compliance with the principles of natural justice and was liable to be set aside and the matter has to be considered afresh.

Accordingly, the order was quashed and the ACIT was directed to pass fresh orders after affording the petitioner an opportunity of hearing.

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