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2020 (1) TMI 1064 - HC - Income TaxCompounding of offence u/s 276C(1) - Compounding of offence - offence pertains to willful attempt to evade tax etc. - whether 100% of the amount sought to evaded or 100% of tax sought to be evaded is to be paid for compounding of offence - HELD THAT - As decided in Supernova System (P.) Ltd. 2018 (9) TMI 1322 - GUJARAT HIGH COURT for compounding of offence under Section 276C(1) of the Act 1961 would be permissible on payment of 100% of the tax sought to be evaded and not 100% of the amount sought to be evaded by the assessee. The petitions succeed and are accordingly allowed. The petitioner is therefore required to pay 100% of the tax sought to be evaded for compounding of offence under Section 276C(1) of the Income Tax Act 1961. Rule is made absolute to the aforesaid extent.
Issues:
Determining whether 100% of the amount sought to be evaded or 100% of tax sought to be evaded is to be paid for compounding of offense under Section 276C(1) of the Income Tax Act. Analysis: The judgment involved a case where the petitioner, a partnership firm dealing in lubricating oil and petroleum products, faced complaints under Sections 276C(1), 271, 278B, and 278 of the Income Tax Act. The key question before the court was the amount required to be paid for compounding the offense under Section 276C(1) of the Act. The petitioner contended that the compounding fees should be based on 100% of the tax evaded, not 100% of the income sought to be evaded, citing a previous decision by the court. The Central Board of Direct Taxes (CBDT) had issued guidelines for compounding offenses under Direct Tax Laws, 2014, specifying that the amount to be paid for compounding under Section 276C(1) is 100% of the amount sought to be evaded. The petitioner objected to this calculation and argued for payment based on tax evaded, not income evaded. The court referred to a previous decision in the case of Supernova System Pvt. Ltd, which held that compounding fees for Section 276C(1) offenses should be 100% of the tax sought to be evaded. The court analyzed the statutory provisions and the severity of punishment linked to the amount sought to be evaded in cases of willful tax evasion. It emphasized that the compounding fees should be based on 100% of the tax sought to be evaded, as per the CBDT circular and the previous court decision. The judgment concluded by allowing the petitions, directing the petitioner to pay 100% of the tax sought to be evaded for compounding the offense under Section 276C(1) of the Income Tax Act.
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