My years are before June 2013. Can the department still say the Explanation to s.179 makes me liable for the company's interest and penalty?
The Bombay High Court says yes. It held that the Explanation added to s.179 with effect from 1 June 2013 came in only to remove the doubt created by the earlier decisions, that it is therefore clarificatory, and that on Gold Coin a clarificatory amendment operates retrospectively - so directors were liable for the company's penalty and interest for years as far back as 1995-96.
Decided by the High Court (T.V. Nalawade J and Sunil K. Kotwal J) on 2019-02-01, reported as Writ Petition No. 8922 of 2016 with Writ Petition No. 9009 of 2016 and Writ Petition No. 9012 of 2016 (High Court of Judicature at Bombay, Bench at Aurangabad); reserved 9 January 2019, pronounced 1 February 2019. No law-report citation appeared in the text read.. It bears on section 179, section 2(43), section 170, section 177, section 188A, section 189 of the Income Tax Act 1961, in Demand, Recovery & Stay, How Tax Law Is Read and Penalty matters.
This is the Revenue side of the line and the library needs it carried. A practitioner who reads only Sanjay Ghai and Dinesh T. Tailor will advise a client that pre-2013 interest and penalty cannot be reached, and will be met across the table with this judgment. The Court's own Division Bench in Dinesh T. Tailor had held in 2010 that tax, penalty and interest are different concepts and had refused to follow the earlier Bombay view in Manik Dattatreya Lotlikar; here the same High Court treated the 2013 Explanation as restoring the Lotlikar position from the outset. Note also that the order under challenge went as far as a warrant of arrest and detention in civil prison, which is the practical end of a s.179 order that is not resisted. The petitioners had already paid the tax and were fighting only the penalty and interest.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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M/s Nath Holdings and Investment was a private company dealing in shares and securities. The Assistant Commissioner passed an order under s.179(1) on 16 August 2010 against the company and its directors for recovery of income tax, interest and penalty totalling Rs 336.84 lakh, assessed for the years 1995-96, 1996-97 and 2002-03. The Tax Recovery Officer's order directed the three petitioner-directors to pay not only the company's income tax but also interest and penalty, and ordered the issue of a warrant of arrest and their detention in civil prison for non-payment. The tax had by then been paid by the petitioners; only the penalty and interest remained, and the petitions were confined to that. The directors' case was that 'tax' in s.179 does not include penalty and interest, and that the Explanation added with effect from 1 June 2013 could not be used against them given the assessment years involved.
The word 'tax' in s.179 covers penalty and interest, the Explanation added with effect from 1 June 2013 having been enacted only to make the intention of Parliament clear and being therefore clarificatory and retrospective in operation. No interference was warranted in the order made against the petitioners and all three petitions were dismissed (paras 8, 9, 12, 13 and 15).
The Court recorded that the Division Bench in Dinesh T. Tailor, decided on 27 April 2010, had adopted the Supreme Court's statement that tax, penalty and interest are different concepts and that the s.2(43) definition does not include penalty or interest, and had accordingly declined to accept the earlier Bombay view in Manik Dattatreya Lotlikar that 'tax' for s.179 includes penalty; the Explanation to s.179 then came into effect on 1 June 2013 (paras 6 and 7). Accepting the Revenue's submission built on Gold Coin, and setting out the passages there on declaratory statutes - that the presumption against retrospective operation does not apply to declaratory Acts, and that an amendment which is clarificatory is applicable retrospectively - the Court held there was force in the contention that the Explanation entered the statute only to remove the doubt created and to make clear that 'tax' in s.179 includes penalty and interest (para 8). As in Gold Coin, the Explanation was added because some High Courts had taken the contrary view, so the Gold Coin ratio applied (para 9). The authorities the petitioners cited on retrospectivity - Sedco Forex, Vatika Township, Essar Teleholdings and Pratibha Garg - were distinguished as turning on different facts, the Court observing that whether only an additional liability was created by an amendment must be ascertained case by case (paras 10 and 11). On the substance, the non obstante clause opening s.179 and the placing of the burden of proof on the directors showed that Parliament had intended joint and several liability from the beginning, so directors can be held responsible for penalty and interest where the company was liable for them (para 12). Reading 'tax' narrowly would render s.179 meaningless in part and cause loss of interest and penalty to the exchequer; the context in which a word is used matters as much as the definition clause, on Utkal Contractors (para 13). It followed that s.170, s.177, s.188A and s.189 are enabling provisions for specific situations and cannot be read to ascertain the scheme of the Act (para 14) - the exact opposite of the use the Delhi High Court made of those provisions in Sanjay Ghai.
the directors can be held responsible to pay penalty and interest when the company was liable to pay the penalty and interest.
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Handle my notice → Ask a CA on WhatsAppThe Bombay High Court says yes. It held that the Explanation added to s.179 with effect from 1 June 2013 came in only to remove the doubt created by the earlier decisions, that it is therefore clarificatory, and that on Gold Coin a clarificatory amendment operates retrospectively - so directors were liable for the company's penalty and interest for years as far back as 1995-96. This was decided by the High Court (T.V. Nalawade J and Sunil K. Kotwal J) and bears on section 179, section 2(43), section 170, section 177, section 188A, section 189 of the Income Tax Act 1961. It is reported as Writ Petition No. 8922 of 2016 with Writ Petition No. 9009 of 2016 and Writ Petition No. 9012 of 2016 (High Court of Judicature at Bombay, Bench at Aurangabad); reserved 9 January 2019, pronounced 1 February 2019. No law-report citation appeared in the text read.. This is the Revenue side of the line and the library needs it carried. A practitioner who reads only Sanjay Ghai and Dinesh T. Tailor will advise a client that pre-2013 interest and penalty cannot be reached, and will be met across the table with this judgment. The Court's own Division Bench in Dinesh T. Tailor had held in 2010 that tax, penalty and interest are different concepts and had refused to follow the earlier Bombay view in Manik Dattatreya Lotlikar; here the same High Court treated the 2013 Explanation as restoring the Lotlikar position from the outset. Note also that the order under challenge went as far as a warrant of arrest and detention in civil prison, which is the practical end of a s.179 order that is not resisted. The petitioners had already paid the tax and were fighting only the penalty and interest. If it applies to you, the first step is this: If your years are pre-June-2013, expect the department to rely on this judgment; do not advise a client that Sanjay Ghai or Dinesh T. Tailor settles the point.
M/s Nath Holdings and Investment was a private company dealing in shares and securities. The Assistant Commissioner passed an order under s.179(1) on 16 August 2010 against the company and its directors for recovery of income tax, interest and penalty totalling Rs 336.84 lakh, assessed for the years 1995-96, 1996-97 and 2002-03. The Tax Recovery Officer's order directed the three petitioner-directors to pay not only the company's income tax but also interest and penalty, and ordered the issue of a warrant of arrest and their detention in civil prison for non-payment. The tax had by then been paid by the petitioners; only the penalty and interest remained, and the petitions were confined to that. The directors' case was that 'tax' in s.179 does not include penalty and interest, and that the Explanation added with effect from 1 June 2013 could not be used against them given the assessment years involved. The matter was decided on 2019-02-01 by the High Court (T.V. Nalawade J and Sunil K. Kotwal J). On those facts the High Court held as follows. The word 'tax' in s.179 covers penalty and interest, the Explanation added with effect from 1 June 2013 having been enacted only to make the intention of Parliament clear and being therefore clarificatory and retrospective in operation. No interference was warranted in the order made against the petitioners and all three petitions were dismissed (paras 8, 9, 12, 13 and 15).
The Court recorded that the Division Bench in Dinesh T. Tailor, decided on 27 April 2010, had adopted the Supreme Court's statement that tax, penalty and interest are different concepts and that the s.2(43) definition does not include penalty or interest, and had accordingly declined to accept the earlier Bombay view in Manik Dattatreya Lotlikar that 'tax' for s.179 includes penalty; the Explanation to s.179 then came into effect on 1 June 2013 (paras 6 and 7). Accepting the Revenue's submission built on Gold Coin, and setting out the passages there on declaratory statutes - that the presumption against retrospective operation does not apply to declaratory Acts, and that an amendment which is clarificatory is applicable retrospectively - the Court held there was force in the contention that the Explanation entered the statute only to remove the doubt created and to make clear that 'tax' in s.179 includes penalty and interest (para 8). As in Gold Coin, the Explanation was added because some High Courts had taken the contrary view, so the Gold Coin ratio applied (para 9). The authorities the petitioners cited on retrospectivity - Sedco Forex, Vatika Township, Essar Teleholdings and Pratibha Garg - were distinguished as turning on different facts, the Court observing that whether only an additional liability was created by an amendment must be ascertained case by case (paras 10 and 11). On the substance, the non obstante clause opening s.179 and the placing of the burden of proof on the directors showed that Parliament had intended joint and several liability from the beginning, so directors can be held responsible for penalty and interest where the company was liable for them (para 12). Reading 'tax' narrowly would render s.179 meaningless in part and cause loss of interest and penalty to the exchequer; the context in which a word is used matters as much as the definition clause, on Utkal Contractors (para 13). It followed that s.170, s.177, s.188A and s.189 are enabling provisions for specific situations and cannot be read to ascertain the scheme of the Act (para 14) - the exact opposite of the use the Delhi High Court made of those provisions in Sanjay Ghai. In the words reproduced by the source cited on this page: "the directors can be held responsible to pay penalty and interest when the company was liable to pay the penalty and interest." The decision followed or applied Commissioner of Income Tax-I, Ahmedabad v. Gold Coin Health Food Private Limited, (2008) 9 SCC 662 - applied; Utkal Contractors and Joinery Pvt. Ltd. v. State of Orissa, AIR 1987 SC 1454 - relied on; Dinesh T. Tailor v. Tax Recovery Officer, (2010) 326 ITR 85 (Bom.) - discussed and effectively displaced by the Explanation; Union of India v. Manik Dattatreya Lotlikar, (1988) 172 ITR 1 (Bom.) - discussed; Sedco Forex International Drill Inc. v. CIT, (2005) 279 ITR 310 (SC); CIT v. Vatika Township Pvt. Ltd., (2014) 367 ITR 466 (SC); CIT v. Essar Teleholdings Ltd., (2018) 401 ITR 445 (SC); Smt. Pratibha Garg v. CIT - all distinguished on facts.
It was decided by the High Court on 2019-02-01 and is reported as Writ Petition No. 8922 of 2016 with Writ Petition No. 9009 of 2016 and Writ Petition No. 9012 of 2016 (High Court of Judicature at Bombay, Bench at Aurangabad); reserved 9 January 2019, pronounced 1 February 2019. No law-report citation appeared in the text read.. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 179, section 2(43), section 170, section 177, section 188A, section 189, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The word 'tax' in s.179 covers penalty and interest, the Explanation added with effect from 1 June 2013 having been enacted only to make the intention of Parliament clear and being therefore clarificatory and retrospective in operation. No interference was warranted in the order made against the petitioners and all three petitions were dismissed (paras 8, 9, 12, 13 and 15). It arises in Demand, Recovery & Stay, How Tax Law Is Read and Penalty matters, on section 179, section 2(43), section 170, section 177, section 188A, section 189 of the Income Tax Act 1961, and was decided by T.V. Nalawade J and Sunil K. Kotwal J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Argue the counter that the Explanation created a new and additional liability rather than clarifying an existing one - the Court itself said at paragraph 11 that 'whether only additional liability was created by the amendment in such circumstances needs to be ascertained by the Court', which leaves the question open on different facts. Marshal the retrospectivity authorities the petitioners cited here and which the Court distinguished on facts rather than principle: Sedco Forex, Vatika Township and Essar Teleholdings. Do not concede that the Explanation disposes of the case: the escape in s.179(1) is untouched by it, so still put the department to proof on non-recovery from the company and still discharge the burden on gross neglect. Where arrest and civil imprisonment are threatened, treat the quantum split as urgent - the tax was already paid here and only interest and penalty were in issue.
Searched for later treatment; none was found. That is not the same as a source affirming it. Two probes produced nothing amounting to judicial treatment. The citedby search returns a single hit, Surta Ram v ITO (ITAT Chandigarh, 10 May 2023), and the passage there is a reference to Mir Gulam AN Khan v CIT [1987] 165 ITR 228, not to this judgment - a false match on the name. A second probe by case name plus section 179 returned only the judgment itself and its two companion petitions decided the same day by the same Bombay High Court Bench, Nandkishor Kagliwal v ACIT and Shrirang S Agarwal v ACIT (both 1 February 2019). So the holding that the Explanation to section 179 is clarificatory and therefore retrospective, so that a director of a company that was a private company during the relevant previous year remains liable even after conversion, has not been applied, doubted or overruled anywhere on record. It is a Bombay High Court view only; a practitioner elsewhere should not assume it is settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The indiankanoon document is titled 'Mohmmad Zamir Khan vs Assistant Commissioner Of Income Tax' but the header block in the text lists Nandkishor Kagliwal first among the three petitioners; the same common order disposes of Writ Petitions 8922, 9009 and 9012 of 2016 and indiankanoon carries it under three separate document ids. The paragraph numbering in the text read is untidy: paragraph 8 encloses a long block quotation from Gold Coin whose own internal paragraphs are numbered 13 to 17, so numbers 13 to 17 appear twice in the document, once inside the quotation and once as the Court's own paragraphs. The paragraph numbers cited here are the Court's own. The name is spelled 'Mohmmad' in the indiankanoon title and 'Mohammad' in the header block. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The word 'tax' in s.179 covers penalty and interest, the Explanation added with effect from 1 June 2013 having been enacted only to make the intention of Parliament clear and being therefore clarificatory and retrospective in operation. No interference was warranted in the order made against the petitioners and all three petitions were dismissed (paras 8, 9, 12, 13 and 15).
TaxSphere, “Mohmmad Zamir Khan v ACIT”, https://taxnotice.vittsphere.com/caselaw/case/mohmmad-zamir-khan-179-explanation-is-clarificatory-and-retrospective/ (validity last checked 2026-09-07)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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Our firm was dissolved two years ago. The Assessing Officer has now made an assessment in the firm's name and served the demand on me as an ex-partner, with a penalty on top. Can he assess a firm that no longer exists, and can he recover the whole amount from me alone?
Partners left and joined during the year, and one of them died. Will the department make one assessment on the firm for the whole year or two separate assessments?
Our firm was dissolved before the penalty order was passed, and as a registered firm it pays no tax of its own. Can a concealment penalty still be levied on it?
The officer has raised a demand on me personally as a director of a private company that has closed, and the figure includes interest and penalty as well as tax. Does section 179 reach interest and penalty?
