Facts of the Case

The petitioner, Rajib Saha, filed a writ petition challenging a notice dated 25.04.2023 issued under Section 179 of the Income Tax Act, 1961. The notice sought recovery of outstanding tax dues of a company, Gisil Designs Pvt. Ltd. (GDPL), for Assessment Year 2008–09.

The petitioner was one of the Directors of GDPL. It was submitted that the assessment order, forming the basis of the recovery, had already been challenged by way of an appeal filed in 2013, which remained pending adjudication.

Additionally, the petitioner had responded to the show-cause notice; however, the reply dated 11.05.2023 had not been placed on record, though a hard copy was produced before the Court.

Involved

  1. Whether recovery proceedings under Section 179 can proceed against a Director when the underlying assessment order is pending appeal.
  2. Whether the show-cause notice issued under Section 179 required proper adjudication before enforcement.
  3. Whether interim protection should be granted to the petitioner against coercive recovery.

 Petitioner’s Arguments

  • The recovery proceedings were premature as the assessment order was under challenge and pending since 2013.
  • A detailed reply to the show-cause notice had already been submitted.
  • The failure to consider the reply violated principles of natural justice.
  • Coercive recovery without adjudication of the reply was unjustified.

 Respondent’s Arguments

  • The Revenue proceeded based on the existing record and did not insist on filing a counter-affidavit.
  • The notice under Section 179 was validly issued for recovery of dues from the Director of the defaulting company.
  • The matter could be decided on the basis of available material.

 Court’s Findings / Order

  • The Court declined to quash or interdict the proceedings at this stage.
  • The concerned officer was directed to adjudicate the show-cause notice dated 25.04.2023.
  • If the decision is adverse to the petitioner, it shall not be given effect for a period of four weeks from service of the order.
  • The petitioner must be granted a personal hearing before any adverse order is passed.
  • Liberty was granted to the petitioner to pursue appropriate remedies thereafter.
  • The writ petition was disposed of accordingly.

Important Clarification

  • The Court emphasized procedural fairness by mandating adjudication of the show-cause notice.
  • It reinforced that recovery under Section 179 cannot be enforced without granting an opportunity of hearing.
  • Temporary protection (4 weeks) ensures the petitioner can seek further legal remedies.

 Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS01062023CW81092023_115921.pdf

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