Directors who frequently change the names and addresses of companies in order to evade tax will now become answerable for their actions.
The income tax department is identifying directors of such companies, and will make them pay up the tax dues even if they are not attached to the company any more.
This development took place after finance minister Pranab Mukherjee asked income tax (I-T) officials to explore the possibility of recovery in cases of tax defaulters having no assets and where the assessees are not traceable.
Mukherjee had a review meeting on direct tax collection with senior I-T officials in Mumbai on Saturday.
Following the meeting, I-T officials have vigorously begun to identify companies which were shut within a short span of opening and then began functioning under different names and addresses.
The directors will be penalised under section 179 of the Income Tax Act, which deals with the liability of directors of private companies in liquidation (see box).
Officials said that it has become necessary to identify such companies and recover tax, as the department in Mumbai is likely to fall way short of its Rs2.04 lakh crore target.
Only around half the target amount has been recovered so far.
However, Naresh Dharia, a chartered account from South Mumbai, said that the nature of the directorship would have to be ascertained before any action is initiated.
“A person could be a nominee director in a company, in which case he cannot be held responsible for paying tax that the company has evaded,” said Dharia.
He added that the proportion of holding of shares (what percentage of shares a director is holding) would also play a crucial role.