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2016 (9) TMI 756 - HC - Income TaxCompounding of offenses - Held that - In the instant case, the matter has been pending since 1999, and there has been no progress. The respondent/Department stated that the petitioner/Firm was an accused. Furthermore, the Principal Sessions Court, while granting permission to the respondent to consider the petitioner s Application for compounding the offence, in its order, dated 28.04.2015, observed that the offences are compoundable in nature, therefore, leave is granted to the competent Authority to compound the offence. Thus, this Court is of the view that the respondent can examine the matter afresh without being, in any manner, influenced merely because of the conviction passed against the petitioner by the Criminal Court. In the result, the Writ Petition is allowed, and the impugned order is set aside, and the matter is remanded to the respondent for fresh consideration, in terms of the observations made in the preceding paras
Issues Involved:
1. Validity of the order rejecting the application for compounding the offence. 2. Interpretation of Section 279(2) of the Income Tax Act, 1961. 3. Applicability of CBDT guidelines on compounding offences. 4. Impact of criminal conviction on the compounding of offences. 5. Jurisdiction and binding nature of High Court decisions. Detailed Analysis: 1. Validity of the Order Rejecting the Application for Compounding the Offence: The petitioner sought to quash the order dated 10.08.2015 by the Chief Commissioner of Income Tax-TDS, which rejected their application for compounding the offence under Section 276B and Section 278B of the Income Tax Act, 1961. The Chief Commissioner refused the application based on the petitioner’s conviction by a Criminal Court and the issuance of a Non-Bailable Warrant. 2. Interpretation of Section 279(2) of the Income Tax Act, 1961: Section 279(2) allows for the compounding of offences either before or after the institution of proceedings. The court referenced a prior case (Chairman, Central Board of Direct Taxes and others vs. Umayal Ramanathan), which clarified that the power to compound offences under Section 279(2) is broad and can be exercised even when proceedings are pending. The court emphasized that the term "proceedings" includes appellate stages, thus supporting the petitioner’s argument for compounding despite the ongoing appeal. 3. Applicability of CBDT Guidelines on Compounding Offences: The Chief Commissioner referred to the CBDT guidelines dated 16.05.2008, which suggest that cases involving convictions should "normally not be compounded." However, the court noted that these guidelines do not impose an absolute prohibition but rather provide discretion to the authority. The expression "should normally not be compounded" allows for exceptions based on the merits of each case. 4. Impact of Criminal Conviction on the Compounding of Offences: The court considered whether a criminal conviction should solely disqualify the petitioner from compounding the offence. It was noted that the guidelines do not explicitly prevent compounding in cases of conviction. The court cited previous judgments that allowed compounding even where convictions existed, emphasizing that each case should be evaluated on its individual merits. 5. Jurisdiction and Binding Nature of High Court Decisions: The court highlighted the binding nature of decisions from the jurisdictional High Court. It referenced the Supreme Court's ruling in M/s. East India Commercial Co. Ltd. vs. Collector of Customs, Calcutta, which mandates that authorities must follow the law declared by the highest court in the state. Consequently, the court followed the precedent set by the Hon’ble Division Bench in Umayal Ramanathan’s case, which supported the petitioner’s position. Conclusion: The court concluded that the Chief Commissioner should re-examine the application for compounding without being influenced solely by the petitioner’s conviction. The court allowed the writ petition, set aside the impugned order, and remanded the matter for fresh consideration, emphasizing that the competent authority has the discretion to compound offences even in cases of conviction.
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