2019 (9) TMI 59 - HC - Income Tax

Continuance of Prosecution proceedings u/s 279 where penalty has been reduced - Compounding petition u/s 279 of the Income Tax Act, 1961 rejected - petitioner alleged to have concealed an amount as deposited in a Foreign Bank Account and is thereby prosecuted for offences under Section 276C of the Income Tax Act, 1961 - HELD THAT - It is not the case of the Department that this Court had stayed the order of the Commissioner of Appeals, as well as the Tribunal in the Tax Case Appeals. Just because the order reducing the penalty has been put under challenge in the Tax Case Appeals, it cannot be said that the order reducing the penalty itself has been kept under abeyance. In this background, it can only be said that the petitioner would be entitled to the benefit of Section 279 (1A) of the Act and the mere challenge to the order reducing the penalty may not suffice to deny such a benefit. In view of these subsequent developments, there cannot now be any impediment on the part of the Department to compound the offences under Sections 276C and 277 of the Act. The learned Standing counsel for the respondents made a faint attempt by placing reliance on paragraph 19 of the dismissal order 2019 (3) TMI 1638 - MADRAS HIGH COURT and submitted that Prem Dass's case 1999 (2) TMI 6 - SUPREME COURT has been distinguished and held to be not applicable to the present case. Hence the learned Standing counsel would submit that, since the order of reduction of penalty was not passed under Section 273B of the Act, Section 279 (1A) of the Act is not applicable to the petitioner. As observed earlier, Section 279 (1A) is self-explanatory and the Hon'ble Supreme Court in Prem Dass s case (supra) has further clarified that the assessee cannot be proceeded against for an offence when the penalty imposed on him has been reduced. Under Article 141 of the Constitution of India, the law declared by the Hon'ble Supreme Court shall be binding on all Courts, which includes the High Courts. As such, the decision in Prem Dass s case (supra) would be binding on this Court and as such, with due respects to the observations made in this regard in paragraph 19 of the order passed by the learned Judge in 2019 (3) TMI 1638 - MADRAS HIGH COURT is per incuriam and the observation made therein is not the proper appraisal and cannot be relied upon. Matter remanded back to the Committee prescribed under the CBDT Guideline No.7.1 (c) dated 16.05.2008.

Summary

Issues Involved:
1. Jurisdiction of DGIT in compounding non-technical offences under Section 276C (1).
2. Impact of reduction of penalty on prosecution under Section 279 (1A).
3. Validity of documents relied upon by respondents.
4. Jurisdiction and limitation period concerning notice under Section 148.

Detailed Analysis:

1. Jurisdiction of DGIT in Compounding Non-Technical Offences:
The petitioner argued that the DGIT lacked jurisdiction to pass the impugned order as per the CBDT Guidelines, which mandate a Committee comprising CCIT (CCA), DGIT (Investigation), and CCIT/DGIT having jurisdiction over the case to compound non-technical offences under Section 276C (1). The court agreed, noting that the DGIT exceeded his jurisdiction by dealing with the compounding application, which should have been forwarded to the Committee. The court emphasized that the DGIT must follow the Guidelines and cannot assume powers not vested in him.

2. Impact of Reduction of Penalty on Prosecution:
The petitioner contended that the reduction of penalty by the Commissioner of Income Tax (Appeals) under Section 279 (1A) should preclude prosecution. The court referenced the Supreme Court decision in Prem Dass v. Income Tax Officer, which held that prosecution cannot continue if the penalty is reduced. The court noted that the reduction of penalty had not been stayed and thus, the petitioner should benefit from Section 279 (1A). The court found the DGIT's refusal to compound the offences unjustified.

3. Validity of Documents Relied Upon by Respondents:
The respondents argued that the trial court should decide the authenticity of the documents. The court did not delve deeply into this issue, as it was remanding the matter to the Committee for reconsideration.

4. Jurisdiction and Limitation Period Concerning Notice under Section 148:
The petitioner claimed that the notice under Section 148 was issued without jurisdiction and beyond the limitation period. The respondents countered that the legality of the notice was under consideration by a Division Bench and that the Economic Offences (Inapplicability of Limitation) Act negated the limitation period. The court did not specifically address these points, focusing instead on the remand to the Committee.

Conclusion:
The court set aside the impugned order by the DGIT and remanded the matter to the Committee as per CBDT Guidelines. The petitioner was granted liberty to file a fresh compounding petition, which the Committee must consider within 60 days. The writ petition was allowed, and the connected miscellaneous petition was closed with no costs.