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2024 (7) TMI 1289 - HC - Income TaxCompounding of offences - order denying the benefit of compounding of offences u/s 279(2) of the Act solely on the ground of prior conviction of the appellant - whether the contention of the appellant that the authorities ought not to have rejected his compounding application which contention was also negatived by the learned Judge is correct or not? - HELD THAT - With regard to the conduct of the assessee it is seen that right from the year 1997 the conduct is not good. At each and every point of time the appellant was dragging on the issue thus having mentality trying only to evade the taxes and not otherwise. The respondent also commented about the conduct of the appellant in not extending his co-operation right from filing of return of income voluntarily till the date of completion of assessment u/s 144 of the Act. Since the financial year in which the offences were committed is 1996-1997 (AY 1997-98) and the assessment proceedings were going on the appellant could have very well filed the compounding application during this period. Here it has to be underlined that even though the penalty order under the Act was passed on 04.02.2002 and the same was confirmed by the CIT(A) on 10.12.2002 the appellant had not filed the compounding application even after that date. As further seen from the records that the appellant had not filed the compounding application even before 06.03.2019 the date on which the appellant was convicted by the Court when he had ample time. Thus for almost 20 years he kept on dragging the issue. Therefore this Court is of the considered view that it cannot be stated that the application for compounding was rejected on the sole ground that the appellant was convicted by the Court but for multiple reasons. The default committed by the appellant has to be termed as wilful. The claim of the appellant that Circular No.25 of 2019 dated 09.09.2019 had intended to extend the benefit of compounding to all persons who had applied on or before 31.12.2019 is not correct in view of the terms of the Guidelines and Circular mentioned aforesaid. In Umayal Ramanathan s case 2009 (4) TMI 36 - MADRAS HIGH COURT and Inbavalli s case 2016 (9) TMI 209 - MADRAS HIGH COURT the Court had not taken note of the aforementioned Circular issued u/s 119 of the Income Tax Act 1961 specifically in the context of compounding of offences. The learned Judge has correctly held that the Circular of the Board also makes it clear that there is no scope for compounding of the offences if there was a conviction of the person by a Court of law under Direct Tax Laws and that the application filed by the appellant was belated. Of course finally the appellant has paid the tax penalty and interest but that would not mean that he is entitled for compounding of the offence. Judge has also correctly held that by paying the tax penalty and interest the appellant has done no favour for the revenue. Thus the rejection of the compounding application of the appellant by the authorities and confirmation of the same by the learned Judge cannot be interfered with by this court.
Issues Involved:
1. Validity of the rejection of the compounding application by the appellant. 2. Applicability of Circular No. 25 of 2019 and related guidelines. 3. Conduct of the appellant and its impact on the compounding application. 4. Timeliness of the compounding application. 5. Prior conviction and its effect on the compounding application. Detailed Analysis: 1. Validity of the Rejection of the Compounding Application: The court upheld the rejection of the appellant's compounding application due to multiple reasons. The Regional Committee for Compounding of Offences (RCC) found the appellant's application non-compliant with the eligibility criteria as per para 7(ii) of the compounding guidelines dated 14.06.2019, which stipulates that no application can be filed after 12 months from the end of the month in which the complaint is filed. The RCC also noted the appellant's lack of cooperation during the assessment proceedings, which resulted in an ex-parte assessment under Section 144 of the Income-tax Act. 2. Applicability of Circular No. 25 of 2019 and Related Guidelines: The appellant argued that Circular No. 25 of 2019 intended to extend the benefit of compounding to all persons who applied on or before 31.12.2019. However, the court found this claim incorrect, citing Para 4.1(ii) of the Circular, which states that such relaxation is not available for offences generally or normally not compoundable, as per para 8.1 of the guidelines dated 14.06.2019. The court emphasized that the Circular and Guidelines prohibit compounding for individuals already convicted by a court under Direct Tax Laws. 3. Conduct of the Appellant: The court noted that the appellant's conduct was not cooperative. The appellant did not file the return of income voluntarily and was uncooperative during the assessment proceedings, leading to an ex-parte assessment. The RCC's order highlighted that the appellant's deliberate attempt to conceal income and evade tax was clearly established, and there were no compelling circumstances beyond the appellant's control to consider the compounding petition sympathetically. 4. Timeliness of the Compounding Application: The appellant's compounding application was filed on 20.11.2019, 12 years after the filing of the prosecution complaint, violating the eligibility criteria of the compounding guidelines. The court noted that the appellant had ample time to file the compounding application during the assessment proceedings and even after the penalty order was passed on 04.02.2002 and confirmed by the CIT(A) on 10.12.2002. The delay of almost 20 years was seen as a deliberate attempt to evade taxes. 5. Prior Conviction and its Effect on the Compounding Application: The court held that the appellant's prior conviction under Direct Tax Laws was a significant factor in rejecting the compounding application. The Guidelines and Circular explicitly state that relaxation for compounding is not available for individuals already convicted by a court. The court emphasized that the rejection was not solely based on the prior conviction but also on the appellant's conduct and the nature and magnitude of the offence. Conclusion: The court dismissed the writ appeal, affirming the rejection of the compounding application by the authorities. The court found that the appellant's application was non-compliant with the guidelines, untimely, and that the appellant's conduct did not merit sympathetic consideration for compounding. The prior conviction and deliberate tax evasion by the appellant further justified the rejection of the compounding application.
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