2020 (2) TMI 840 - HC - Income Tax

Prosecution u/s 276C and 277 - Reopening of assessment - petitioner had willfully and deliberately failed to file returns of income without reflecting the investment in the form of bank balance in a foreign bank account, thereby, attempted to evade tax - application for compounding the offence under Section 279 filled - HELD THAT - As per Section 279(1A) of the Income Tax Act, 1961, a person shall not be proceeded against for an offence under Section 276C and Section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under clause (iii) of sub- section (1) of section 271 has been reduced or waived by an order under section 273A. This aspect ought to have been kept in mind. In this case, the penalty was reduced by Commissioner of Income Tax (Appeals). These factors should also kept in mind by the respondents. Respondents shall also consider the age of the petitioner and his status in society while deciding the case of the petitioner. The fact that petitioner has been subjected to the prosecution from 2011 is itself also an adequate punishment. This factor also should be kept in mind by the respondents while disposing the case. If the petitioner has no other cases against him, the respondents shall consider compounding application for compounding the offence favourably in favour of the petitioner subject to payment of appropriate compounding fees by the petitioner. I am therefore of the view that the impugned order is liable to be quashed and the application filed by the petitioner should be re-examined by the respondents in the light of the liberalised policy of Central Board of Direct Taxes in its clarification dated 14.06.2019, Section 279(1A) and other facts mentioned herein. Petitioner s case deserves to be considered by the respondents in the light of the liberalised policy since the petitioner s application was entertained after the new guideline came into force. Also for the same reason, it cannot be construed that the respondents committed contempt of this court since the order did not specify the same. The respondents shall pass appropriate orders within a period of three months from the date of receipt of a copy of this order in the light of the observation contained herein. Needless to state, petitioner shall also be heard in person or through authorised representatives/legal representatives.

Issues Involved:
1. Prosecution of the petitioner under Sections 276C and 277 of the Income Tax Act, 1961.
2. Dismissal of the petitioner’s application for compounding of the offence.
3. Alleged contempt of court by the respondents for not following the High Court’s order in W.P.No.3929 of 2014.

Detailed Analysis:

1. Prosecution of the petitioner under Sections 276C and 277 of the Income Tax Act, 1961:
The petitioner was prosecuted under Sections 276C and 277 of the Income Tax Act, 1961, for willful and deliberate failure to file returns of income amounting to ?2,71,87,222/- and for not reflecting the investment in a foreign bank account, thereby attempting to evade tax. This prosecution followed proceedings initiated under Section 148 of the Income Tax Act, 1961. The petitioner’s attempt to quash the complaint through Crl.O.P.No.9065 of 2011 was dismissed, and an S.L.P. against this dismissal is pending.

2. Dismissal of the petitioner’s application for compounding of the offence:
The petitioner’s application for compounding the offence under Section 279 of the Income Tax Act, 1961, was rejected by the Director General of Income-tax (Investigation) based on the CBDT circular dated 16.05.2008. The reasons included the petitioner’s cross-border transactions, non-cooperation during assessment proceedings, and the authenticity of information received from a foreign government. The Compounding Committee later rejected a fresh application for compounding on similar grounds, citing the petitioner’s false statements under oath and the magnitude of the offence.

3. Alleged contempt of court by the respondents for not following the High Court’s order in W.P.No.3929 of 2014:
The petitioner filed a Contempt Petition under Section 11 of the Contempt of Courts Act, 1971, r/w. Article 215 of the Constitution of India, alleging that the respondents did not comply with the High Court’s order in W.P.No.3929 of 2014. The High Court had remanded the matter back to the Compounding Committee, directing it to consider the petitioner’s fresh application in light of the observations made in the order. The petitioner argued that the respondents failed to follow the court’s directions and relied on several judgments to support the claim of contempt.

Court’s Observations and Decision:
The court observed that the respondents had complied with the High Court’s order by passing a fresh order on the compounding application. The court noted that the learned Single Judge’s order did not contain a positive direction to allow the compounding application but rather directed the respondents to pass appropriate orders in accordance with law. The court found no willful disobedience of its order by the respondents and dismissed the Contempt Petition.

The court also highlighted that the new CBDT guidelines issued on 14.06.2019, which became effective on 17.06.2019, should be considered while re-examining the petitioner’s application. The court directed the respondents to consider the petitioner’s age, status, and the prolonged prosecution while deciding the case and to pass appropriate orders within three months.

Conclusion:
The Contempt Petition was dismissed, and the respondents were directed to re-examine the petitioner’s compounding application in light of the new CBDT guidelines and other relevant factors. The court emphasized the need for a fair and liberal approach in deciding the compounding application.

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