2017 (7) TMI 610 - HC - Income Tax

Compounding of offences under section 276 CC - Held that - Pursuant to the decision taken by the CBDT as approved by the Hon ble Finance Minister the learned Judge has given such a direction which is exactly on the line of earlier directions issued by atleast in two cases as referred to by the learned Judge in his Judgment as well as by the RCC committee in its deliberations dated 20.3.2015. The present appeal filed by the Revenue assailing such direction issued by the learned Judge in the impugned order in our considered view is totally unjustifiable bereft of any sustainable ground. Moreover on perusal of the report of the Principal Chief Commissioner of Income Tax Chennai dated 27.4.2015 and subsequent report as well as documents on record and the periodical notes generated from time to time at the level of CBDT that all authorities unimpeachably have uniformly recommended the case of the Assessee for consideration in view of her age illness and the circumstances encountered by her during the relevant period. The only negative turn which we noticed from the reading of the note file produced before us is the view expressed by the member CBDT on 30.3.2016 which we have extracted hereinabove. The reason according to the CBDT for taking a different view on 30.3.2016 is that the Assessee had filed the returns as a consequence of survey under Section 133 A and there is a wide gap between returned income and the Assessed income for which no explanation has been offered and even the Court has observed that but for survey under Section 133 A the returns would not have been filed. This reasoning given by the member CBDT albeit taking a different view was already available despite which the Principal Chief Commissioner of Income Tax had sent a recommendatory report to the CBDT. These reasons in our view cannot form the sole criteria to take a different stand and thus form the basis of rejecting the plea of the Assessee in exercise of its powers by the Hon ble Minister under para 7.2 of the guidelines dated 16.05.2008. Given the over all factual matrix we find that there is considerable force in the submissions made by the learned counsel appearing for the Assessee that the direction issued by the learned Judge is a well considered one as the learned Judge took into account not only the circumstances of the Assessee but also relied upon precedents of similar nature. Therefore the mere pendency of the appeal against the conviction in our view could no longer be a reason for refusing the consideration for compounding of offence within the meaning of clause 4.4(f) of the guidelines dated 16.05.2008. The reasoning given by the CBDT via its note dated 30.3.2016 which has subsequently been approved by the concerned Secretary to the Government of India as well as by the Hon ble Finance Minister in our view in the present circumstances cannot stand in the way of the Revenue re-visiting the issue of compounding the Assessee s offence as accordingly has been directed by the learned Judge via the Judgment impugned. We are of the considered view that there is no infirmity in the directives issued by the learned Judge save and except for the fact that for completeness he ought to have gone further and dealt with order dated 3.5.2016 as well. Accordingly the appeal filed by the Revenue in W.A.No.132 of 2017 is liable to be dismissed. It is ordered accordingly.

Summary

Issues Involved:
1. Compounding of Offence
2. Conviction and Sentencing
3. Prosecution Proceedings
4. Revenue's Rejection of Compounding Petition
5. Judicial Review and Directions

Detailed Analysis:

1. Compounding of Offence:
The Assessee, a sole proprietrix, was found guilty of not filing returns for the assessment years 1996-97 to 1998-99. Due to her age, health issues, and personal losses, she sought to compound the offence under Section 276CC of the Income Tax Act. The Assessee had paid the entire tax demand, including interest and penalties, and filed a petition for compounding the offence on 24.3.2015. However, the Joint Commissioner of Income Tax rejected the petition on 03.5.2016, stating it was not a deserving case per the guidelines dated 16.5.2008.

2. Conviction and Sentencing:
The Assessee was convicted by the Chief Metropolitan Magistrate, Chennai, and sentenced to six months of rigorous imprisonment with a fine of Rs. 10,000/- for each of the three years. The conviction was under Section 276CC of the IT Act. The Assessee appealed the conviction, and the sentence was suspended by the Principal Sessions Judge, City Civil Court, Chennai, with the appeal still pending adjudication.

3. Prosecution Proceedings:
The Revenue initiated prosecution proceedings against the Assessee for non-filing of returns. Despite the Assessee's payment of all dues, the prosecution led to her conviction. The Assessee's appeal against the conviction was pending, and she sought compounding of the offence during this period.

4. Revenue's Rejection of Compounding Petition:
The Revenue, via the Joint Commissioner of Income Tax, rejected the Assessee's compounding petition based on the guidelines that normally do not allow compounding after a conviction. The Principal Chief Commissioner of Income Tax had recommended considering the petition on sympathetic grounds, but the Central Board of Direct Taxes (CBDT) ultimately decided against it. The Assessee challenged this rejection in a writ petition, leading to the learned Single Judge directing the Revenue to reconsider the compounding petition.

5. Judicial Review and Directions:
The learned Single Judge, after reviewing the case, directed the Chief Commissioner of Income Tax to reconsider the Assessee's compounding petition, taking into account her age, health, and the peculiar facts of the case. The Judge noted that the guidelines did not place an absolute bar on compounding in cases of conviction and emphasized the discretionary power of the competent authority to consider each case on its merits.

Conclusion:
The High Court dismissed the Revenue's appeal against the learned Single Judge's directions, emphasizing that the Assessee's case should be reconsidered for compounding due to her age, health, and the full payment of dues. The Court also allowed the Assessee's appeal, quashing the Revenue's order dated 03.05.2016, thereby reinforcing the directive to reconsider the compounding petition. The Court highlighted that the discretionary power under the guidelines should be exercised, taking into account the peculiar circumstances of each case.