2011 (7) TMI 332 - HC - Income Tax

Compounding of offence - revised guidelines - Prohibition - Held that - the condition that offences could be compounded only before the filing of the complaint remained unaltered in the revised guidelines of 29.07.2003. - The amendment specifically stipulates that all the conditions prescribed are required to be satisfied for compounding of a technical offence. - Three complaints have already been filed against the petitioner and in two of those, the petitioner stands convicted by the competent court. The revisions for enhancement of punishment have been filed by the Department and the appeals against the conviction have also been filed by the petitioner. - the competent authority was not bound to effect compounding in violation of the mandatory prohibitions prescribed therefor.

Issues:
1. Compounding of tax offences under section 276B of Income Tax Act for AY 1982-83, 1983-84, and 1984-85.
2. Rejection of compounding petition by competent authority.
3. Interpretation of guidelines for compounding of technical offences.
4. Compliance with court orders and revised guidelines.

Analysis:

Issue 1: Compounding of tax offences
The petitioner, as the Managing Director of a company, faced complaints for late tax deposit for AY 1982-83, 1983-84, and 1984-85 under section 276B of Income Tax Act. While the complaint for 1982-83 was at a trial stage, the Ld. ACMM convicted the company directors for the other two years. The Department sought enhancement of sentence, and the petitioner appealed against the conviction. The petitioner sought compounding of offences, but the competent authority rejected the petition citing ongoing trials and convictions. The petitioner contended that the order to adjudicate compounding fee was not complied with, but the court held that compounding was not mandatory if the offence was not compoundable.

Issue 2: Rejection of compounding petition
The competent authority rejected the compounding petition based on existing convictions and ongoing trials, stating that it would not be prudent to compound the offences at that stage. The petitioner argued that the CCIT was obligated to compound the offence based on court orders and amended guidelines. However, the court found that the offences were not compoundable due to existing convictions and pending trials, and the competent authority was not bound to effect compounding in violation of prohibitions.

Issue 3: Interpretation of guidelines
The revised guidelines of 29.07.2003 allowed for compounding of technical offences by CCIT/DGIT without distinction between first and subsequent offences. The conditions for compounding remained unchanged, emphasizing that compounding should occur before the filing of complaints. The court clarified that compounding was not permissible after complaints were filed or convictions obtained, as stated in the unambiguous guidelines.

Issue 4: Compliance with court orders and guidelines
The court emphasized that the order to adjudicate compounding fee did not mandate compounding if the offence was not compoundable. The court rejected the petitioner's plea for directions to the competent authority to effect compromise or adjudicate compounding fee, leading to the dismissal of the petition.

In conclusion, the court dismissed the petition, highlighting that compounding of offences was not permissible after complaints were filed or convictions obtained, as per the unambiguous guidelines. The competent authority was not obligated to compound the offences in violation of prohibitions, even if court orders directed adjudication of compounding fees.

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