HARDIP SINGH & ANR. versus THE INCOME TAX OFFICER, AMRITSAR & ORS.

Citation: [1979] 3 S.C.R. 781 · Decided: 26-04-1979 · Supreme Court of India · Bench: N.L. UNTWALIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

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HARDIP SINGH & ANR. 
v. 
THE INCOME TAX OFFICER, AMRITSAR & ORS. 
April 26, 1979 
[!'{, L. UNTWALIA, R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.] 
Income Tax Act 1961-S. 179--Scope of-Resolution tor wi11ding up o/ 
co1np1Ut.y passed before the coming into force of tl1e Act-J.T.O. issued notices 
to Managing Director & Director to- pay large tax arrears due fro1n the company 
-Notice if ralid. 
Secticn 179 of the Income-tax Act, 1961 (before it was amended in 1975) 
provided that when any private company is wound up after the commencement 
of the ,Act and any tax assessed on the company whether before or in the course 
of or after its liquidation in respect of any income of any previous year cannot 
be recovered, then, every person who was a director of the ptivate company 
at any lime during the relevant previous year shall be jointly and severally 
liable for the payment of such tax. 
The appellants were the managing director anU director of a private limited 
company. 
On November 13, 1961 a resolution for voluntary liquidation of 
the private company W2t5 passed. In February and November, 1970 the Income 
Tax Officer issued notices to the appellants calling upon them to pay income 
tax which remained unpaid from the company to the tune o[ Rs. 1.34 Jakhs. 
The contention of the appellants that the company had gone into liquidation 
before the Act came into force on 1st April, 1962 and, tl:erefore, s. 179 bad 
no appiic~tion to this case was rejected by the Income-tax Officer. The appel-
lants' revision petition was rejected by the Commissioner; 
the High Court 
dismissed tbeir writ petition in lin1ine. 
Dismissing the appeal, 
HELD : The appellants could not escape from their liability to pay the 
tax dues. 
Section 179 was meant to cover cases of this nature also. [784A] 
There are three stages when a company goes into liquiJation, n~mely : ( 1) 
the con1mencement of the winding up of the company; (2) continuation of the 
proceedings or the steps for winding up and (3) final winding up and dissolution 
of the company. Section 179 will be attracted if any on'e or more of the three 
stages occurred after the commencement of the Act even though the first or 
the first and second events had happened eairlier. The directors were made 
liable to pay the tax dues because on its liquidation it becon1es difficult for 
the department to realise the tax dues from the assets of the company. 
[783D-E] 
.Jn the instant case, although the commencement of the winding Up of the 
c-0mpany had begun on a date prior to the date of commencement of the 
Act, a.t the time when the Income-tax Officer issued notice, proc·eedings for its 
windins up were pending. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2390 of 1972. 
From the Judgment and Order d-ated 7-3-72 of the Punjab and 
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SUPREME COURT REPORTS 
[1979] 3 s.c.R. 
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Haryana High Court in Civil Writ No. 773/72. 
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Bhagirath Das, B. P. Maheshwari and Suresh Sethi for the Appel-
lants. 
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P.A. Francis and Miss A. Subhashini for the Respondents 
The Judgment of the Court was delivered by 
UNTWALIA, J. This is an appeal by certificate from the 
Order 
of the High Court of Punjab and Haryana dismissing the appellants' 
writ application in limine. 
Sandhu Transport Company 
(Private) 
Lin1ited is a private limited company. 
The two appellants were its 
directors. 
One of them 
was a Managing 
Director. 
A resolution 
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was passed ou the 13th November, 1961 for a voluntary liquidation ~ 
of the company at the instance of its creditors. 
In respect of some 
years ending with the assessment year 1964-65 a huge 
arno~nt of 
income tax to the tune of Rs. 1,34,319/- remained due from the 
company. The Income Tax Officer issued a notice on 7th of February, 
1970 against appellant No. 2 under Section 179 of the Income Tax 
Act 1961, hereinafter called the Act, to show cause why action should 
not be taken against the directors of the company for realisation of 
the arrears of income-tax due from the company. 
A similar notice 
was issued to appellant No. 1 on the 1 W1 of Novemb~r, 1970. 
Both 
the appellants filed their show cause before the Income Tax Officer 
mainly taking the stand that since the company had gone into liqui-
dation before the Act had come into force, action under Section 179 
could not be taken against them. 
Some other points were also taken 
in the show cause filed by the appellants but 

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