2022 (11) TMI 249 - HC - Income Tax

Compounding of offences u/s 279 - liberalisation of policy of the CBDT- applications for compounding of non-technical offences - imprisonment for less than 2 years was previously non-compoundable - case of the Appellant that the order passed by the Respondent is contrary to the guide lines issued by the Central Board of Direct Taxes - It is contended that, impugned order has been passed by the said authority without constituting a proper quorum to adjudicate compounding application and as per the above guidelines of the CBDT stated above, all the applications for compounding of non-technical offences which includes 276C(1) should be decided by the Committee consisting of (i) CCIT (CCA), (ii) DGIT (Inv.) and CCIT/DGIT having jurisdiction over the case. HELD THAT - There is a liberalisation over a period of time. Infact, as per the latest press release dated 17.09.2022, the scope of eligibility for compounding of cases has been relaxed whereby case of an applicant who has been convicted with imprisonment for less than 2 years being previously non-compoundable, has now been made compoundable and discretion has been vested with the competent authority to compound offence. The Appellant is now aged about 76 years. Though the Appellant has shown complicity in evading tax and also been subjected to penalty, no useful purpose would be served by prosecuting the Appellant at this distant of time because she took advantage of the legal remedy available under law. See case of K.M.Mammen Vs. Principal Commissioner of Income Tax 2019 (9) TMI 59 - MADRAS HIGH COURT . The press release dated 17.09.2022 of the Government and the revised guide lines for compounding of offence dated 16.09.2022 allows scope for compounding of offences. There is liberalisation. We are therefore inclined to interfere by setting aside the Impugned Order of the learned Single Judge in W.P.No.906 of 2018 dated 24.01.2020 and allow the case of the Appellant for compounding of the offences. Accordingly, this Writ Appeal is allowed by setting aside the order of the learned Single Judge and the matter is remanded back to the Respondents to suitably demand the compounding fee payable by the Appellant in terms of revised guidelines for compounding of offence dated 16.09.2022 read with press release dated 17.09.2022. The above exercise shall be carried out within a period of six weeks from the date of receipt of a copy of this order and on such demand being made, the Appellant shall pay the amount to the Revenue

Summary

Issues Involved:
1. Legality of the order passed by the Respondents without proper quorum.
2. Applicability of the Central Board of Direct Taxes (CBDT) guidelines for compounding of offences.
3. Consideration of the Appellant's age and the duration of prosecution.
4. Relevance of subsequent liberalization in CBDT guidelines for compounding offences.

Detailed Analysis:

1. Legality of the order passed by the Respondents without proper quorum:
The Appellant argued that the impugned order dated 03.03.2016 by the Respondents was passed without constituting a proper quorum as required by the CBDT guidelines dated 16.05.2008. The guidelines stipulate that applications for compounding of non-technical offences should be decided by a Committee consisting of CCIT (CCA), DGIT (Inv.), and CCIT/DGIT having jurisdiction over the case. The learned Single Judge dismissed the writ petition without addressing this procedural irregularity.

2. Applicability of the Central Board of Direct Taxes (CBDT) guidelines for compounding of offences:
The Appellant contended that the order was contrary to the CBDT guidelines issued on 16.05.2008, which should have been considered for compounding the offence under Section 276C(1) of the Income Tax Act. The revised guidelines dated 16.09.2022 and the press release dated 17.09.2022 were also highlighted, which relaxed the scope of eligibility for compounding offences, making certain previously non-compoundable offences now compoundable.

3. Consideration of the Appellant's age and the duration of prosecution:
The Appellant, aged 76, has been facing prosecution for over a decade. The Court noted that prosecuting the Appellant at this stage would serve no useful purpose, especially since the Appellant had already been subjected to penalties and had taken advantage of the legal remedies available.

4. Relevance of subsequent liberalization in CBDT guidelines for compounding offences:
The Court observed that the guidelines have been liberalized over time, with the latest press release dated 17.09.2022 allowing for the compounding of offences that were previously non-compoundable. The Court referred to previous judgments, including the case of K.M.Mammen Vs. Principal Commissioner of Income Tax, which emphasized the discretion available to authorities in compounding offences and the importance of considering the age and circumstances of the petitioner.

Conclusion:
The Court concluded that the impugned order of the learned Single Judge dated 24.01.2020 should be set aside. The matter was remanded back to the Respondents to demand the compounding fee payable by the Appellant in terms of the revised guidelines dated 16.09.2022. The Respondents were directed to carry out this exercise within six weeks, and upon such demand, the Appellant was to pay the amount to the Revenue. The Writ Appeal was allowed with no costs, and the connected Miscellaneous Petition was closed.