High Court Quashes Tax Recovery Order Against Former Company Director, Says Authorities Failed to Consider Reply and Supporting Documents
The Gujarat High Court has set aside an tax recovery order passed against Sanjay Vimal Jain, a former director of Sudarshan Diamonds Pvt. Ltd., after finding that the tax authorities had not considered his reply and supporting documents before passing the order.
The case concerned an order dated November 5, 2024, issued under Section 179 of the Income Tax Act, 1961.
The tax department had sought to recover the company’s outstanding tax dues for Assessment Years 2011-12, 2012-13, 2015-16, 2016-17 and 2017-18 from Jain in his capacity as a director of the company.
Jain told the High Court that he had joined the company as a director in April 2010 but resigned from the post on April 1, 2018. He also claimed that he had transferred his shareholding to a third party and was no longer associated with the company when the relevant assessment orders were passed.
The assessment orders against the company were passed between December 27, 2018 and May 30, 2023, Jain said. He was served a show cause notice under section 179 on 4th January, 2024 and filed his reply on 12th January, 2024. Along with the reply, he attached documents showing his resignation and transfer of shares.
But, the Income Tax Officer has passed the Section 179 order on 05.11.2024 without considering his reply and the documents submitted by him. The counsel for the tax department also admitted before the High Court that the reply was missed.
The High Court held that the petitioner’s reply and the documents submitted in support thereof have not been considered and the order passed was in violation of the principles of natural justice.
The court therefore quashed and set aside the November 5, 2024 order. It directed the concerned tax authority to reconsider the matter and pass a fresh order in accordance with law and after following the principles of natural justice.
The authority has been given 12 weeks from the date of receiving the High Court’s order to decide the matter afresh. The petition was accordingly allowed to this extent.
Case citation: Sanjay Vimal Jain Vs Office of the Income ATX Officer (Gujarat High Court); C/SCA/17635/2024; 25/08/2026.
