* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) No. 4673/2010
Reserved On: JULY 05, 2011
% Judgment Delivered On: JULY 27, 2011
ANIL BATRA ... Petitioner
Through: Mr. Viraj R. Datar, Advocate for the
petitioner.
Versus
CHIEF COMMISSIIONER OF INCOME TAX ... Respondent
Through: Mr. Anupam Tripathi, Standing
Senior Counsel with Ms. Anusha
Singh, Advocates for the
respondent.
CORAM:
HON'BLE MR. JUSTICE A.K.SIKRI
HON'BLE MR. JUSTICE M.L.MEHTA
1. Whether the Reporters of local papers
may be allowed to see the judgment? Yes
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be Yes
reported in the Digest?
M.L.MEHTA, J.
1. The Petitioner is the Managing Director of M/s Anil Batra and
Associates Private Limited. During the AY 1982-83, tax deducted at
source by the company was deposited beyond the period prescribed by
law. Similarly, during AY 1983-84 and 1984-85 also, the company
deposited the tax beyond the period prescribed by law. That being so,
WP(C) No.4673/2010 Page 1 of 10
the Income Tax Department filed complaints dated 27.03.1986 against
the Company & Directors under section 276B of Income Tax Act before
the Court of CMM for all the three Assessment Years. The complaint for
the Assessment Year 1982-83 is still at trial stage. As regards the
complaints for the years 1983-84 and 1984-85, the Ld. ACMM awarded
simple imprisonment of three months for the two Directors of the
company and a fine of ` 7,000/- on the company and its two directors.
Against this order, the Department has filed a revision petition for
enhancement of sentence, and the petitioner has filed appeal against
the conviction, both of which are pending before the Addl. Session’s
Judge, Delhi.
2. On 31.05.1986, (two months after the complaint was filed by the
Income Tax Department) the petitioner moved an application before the
department for compounding of offence under section 276B, which was
rejected by the CBDT vide letter dated 16.01.1987.
3. On 29.07.2003, the CBDT issued a Circular whereby Guidelines for
Compounding were reviewed in the light of past experiences and future
needs. The petitioner received a letter dated 25.09.2003 and copy of
guidelines. The petitioner replied the same vide letter dated 29.09.2003,
expressing his willingness to compound the offence and requesting the
Department to communicate the amount of compounding fees so that
the same could be deposited at the earliest. The petitioner, however,
received no reply from the department in this regard.
WP(C) No.4673/2010 Page 2 of 10
4. The petitioner, through its Chartered Accountants, sent a detailed
proposal dated 17.11.2003 to the Department after calculating the
approximate Compounding Fee applicable for each of the three years.
Again, the petitioner received no reply from the Department.
5. The petitioner thereafter filed two petitions before this court,
(which were clubbed together), praying inter-alia for staying of appeal
proceedings pending before the Addl. Session’s Judge, subject to the
outcome of the disposal of the petitioner’s compounding petition before
the Income Tax Department. This court disposed of the same vide order
dated 28.07.2005 in the following terms:
“In view of the same, petitioner is directed to appear
before Commissioner of Income-Tax, Delhi-I,
C.R.Building on 22.08.2005 or any other date, that
may be convenient to the Commissioner, who shall
adjudicate as to what amount is liable to be
deposited by the petitioner, and pass appropriate
orders regarding compounding of the offence.
Petitioner shall deposit the balance amount within
one week thereafter. Learned counsel for the
respondent submits that petitioner be directed to
deposit the amount which according to him is due
and payable. Ordered accordingly.”
6. Armed with this order, the petitioner through his representative
approached the competent authority and put up his case for
compounding of offences of all the three assessment years. However,
the competent authority vide its detailed order dated 30.01.2006
rejected the compounding petition of the petitioner. While doing so,
the competent authority reasoned as under:
WP(C) No.4673/2010 Page 3 of 10
“It will be pertinent here to mention that the
assessee has been convicted for the A.Y.’s 1983-
84, an 1984-85 by the Ld. ACMM who has awarded
simple imprisonment of three months for the two
Directors and a fine of `7,000/- on the company
and the two Directors. The Department has filed a
revision petition before the Hon’ble Sessions Judge,
Delhi requesting for enhancement of the sentence.
The assessee has also filed appeals before the
Hon’ble Sessions Judge against the conviction.
These petitions are still pending for disposal. The
complaint filed for A.Y. 1982-83 is still at the trial
stage.
After considering all the facts and materials of the
case and the submission made by the counsel for
the assessee I find that there is no material change
in the facts of the case, since the disposal of earlier
applications by the CBDT as well as the Chief
Commissioner of Income Tax Delhi-I. Moreover, it
is to be noted that the assessee has already been
convicted for A.Y.’s 1983-84 and 1984-85 by a
competent Court and the department is already in
revision before a higher court for enhancement of
punishment. The offence committed in the period
relevant to AY 1982-83 is of similar nature as for
other two years and the case is already under trial.
In such circumstances in the interest of justice as
well as judicial propriety it will not be prudent on
my part to compound these offence at this stage.
Therefore, the compounding petition of the
assessee for all the three years is, hereby
rejected.”
7. The petitioner has impugned the order dated 30.01.2006 of the
CCIT. Learned counsel for the petitioner contends that the CCIT was
under an obligation to compound the offence in view of the order
dated 28.07.2005 passed by this Court directing the CIT to adjudicate
as to what amount is payable to be deposited by the petitioner. He
also contends that in view of the amended guidelines, the offences
WP(C) No.4673/2010 Page 4 of 10
being technical in nature were eligible for compounding. He also
contends that the proceedings for compounding of offence were
proposed by the respondent itself vide its letter dated 25.09.2003.
On the other hand, learned counsel appearing for the respondent
submits that the offences were not compoundable since the
complaints had already been filed against the petitioner and in two of
those the petitioner stood convicted by the competent court.
8. With regard to the contention of the learned counsel for the
petitioner that the CCIT has violated the order dated 28.07.2005 in
failing to comply the terms and adjudicate as to the amount of
compounding fee, it is seen that this order came to be passed by this
Court on the submissions made by learned counsel for the petitioner
that the TDS amount has already been deposited and that the
petitioner was ready and willing to deposit any additional cost and
compounding fee that may be imposed. That order cannot be
construed to mean that the terms were to be effected and
compounding fee charged, even if the offence was not
compoundable. The order also states that the Commissioner is to
pass appropriate orders regarding compounding of the offence. This
cannot be interpreted to mean that the Commissioner was directed to
compound the offence without considering if the same was
compoundable or not.
WP(C) No.4673/2010 Page 5 of 10
9. After the existing guidelines dated 30.09.1994 for compounding
of offences came to be revised vide notification dated 29.07.2003, a
letter dated 25.09.2003 was issued by the ITO to the petitioner
intimating the revised guidelines. Copy of the guidelines dated
29.07.2003was also sent to the petitioner for perusal. The submission
of the learned counsel that it was a proposal sent by the Department
to compound the offence is untenable inasmuch as this was nothing
more than intimation to the petitioner regarding revision of guidelines
for compounding of offences. It is also noted here that the petitioner
made his own estimate of the compounding fee and the interest and
deposited `11,388, `58,208 and `29,215/- on these counts for the
three assessments years in question. The revised guidelines dated
29.07.2003 mentioned about the existing guidelines dated
30.09.1994 and also the amendments made therein. Part A of the
revised guidelines is related to procedural amendments which are
reproduced hereunder:
“(A) Procedural Amendments:
(1) under the existing guidelines, Technical
Offences (enlisted in para 2.2 of the said
Guidelines) are to be compounded by the
Chief Commissioner of Income Tax or
Director General of Income Tax (Inv.) (as the
case may be), if following conditions are
collectively satisfied:
WP(C) No.4673/2010 Page 6 of 10
(i) It is the first offence by the assessee.
(ii) The compounding charges do not exceed `40
lakh.
(iii) The offence is compounded only before the
filing of complaint.
In all other cases, the technical offences as per
existing Guidelines are to be compounded with the
approval of the Board.
In this regard, it has now been decided that
(a) All types of cases relating to technical
offences are to be compounded by
CCIT/DGIT.
(b) distinction between first offence and
subsequent offence is removed; and
(c) CCIT/DGIT shall not reject an application for
compounding of a technical offence, if all
conditions prescribed in the Guidelines are
satisfied.
(II) Para 5 (iii) of the existing Guidelines provides
that for compounding of substantive / non-
technical, in which the amount involved in
the offence exceeds `1 lakh, the Board shall
grant approval if Ministry of Law advises that
the chances of successful prosecution are not
good. This requirement of referring the
matter to the Ministry of Law has now been
done away with.”
WP(C) No.4673/2010 Page 7 of 10
10. From the above, it may be seen that under the existing guidelines
of 30.09.1994 (enlisted in para 2.2. of the said Guidelines), technical
offences could be compounded by CCIT or DGIT if the three conditions
were collectively satisfied namely (i) it is the first offence by the
assessee; (ii) the compounding charge did not exceed `40 lac and (iii)
the offence is compounded only before the filing of complaint. In all
other cases, the technical offences as per the existing guidelines could
be compounded with the approval of the Board. The amendment which
came to be made in the revised guidelines of 29.07.2003 was to the
effect that instead of the approval of the Board, all types of cases
relating to technical offences could be compounded by CCIT and DGIT.
Further distinction between first and subsequent offence was also
removed. It was also specifically provided that CCIT/DGIT shall not reject
an application for compounding of technical offence, if all conditions
prescribed in the guidelines are satisfied.
11. Thus, it is seen that the condition that offences could be
compounded only before the filing of the complaint remained unaltered
in the revised guidelines of 29.07.2003. The amendment specifically
stipulates that all the conditions prescribed are required to be satisfied
for compounding of a technical offence. The learned counsel draws our
attention to Clause-3 of the revised Guidelines of 29.07.2003 and
submits that the compounding could be done even if the cases are
pending in the Court. The Clause-3 thereof reads as under:
WP(C) No.4673/2010 Page 8 of 10
“3. Above amendments shall be applicable to future as well as
to cases pending at any stage. However, the offences
already compounded shall not be reconsidered.”
12. The interpretation of the aforesaid Clause as presented by learned
counsel is erroneous and misplaced. The plain and literal interpretation
of the aforesaid Clause would only mean that the amendments made in
the existing guidelines on 29.07.2003 would be applicable to the future
as well as to the cases pending at any stage and that the offences
already compounded shall not be reconsidered. In other words it would
mean that it was the applicability of the amendments to the future as
also to the cases pending and not that the compounding would be
allowed even after the filing of the complaint or where the person has
already been convicted by a competent court. The conditions stipulated
for compounding of a technical offence being very clear and
unambiguous, compounding of such an offence was not permissible
after filing of the complaint. Undisputedly, three complaints have
already been filed against the petitioner and in two of those, the
petitioner stands convicted by the competent court. The revisions for
enhancement of punishment have been filed by the Department and the
appeals against the conviction have also been filed by the petitioner.
Those revisions and the appeals are pending before the Appellate Court.
One of the complaints is also still pending trial before the learned ACMM.
That being the factual matrix, offence could not be said to be
compoundable at this stage. In that fact situation, the competent
WP(C) No.4673/2010 Page 9 of 10
authority was not bound to effect compounding in violation of the
mandatory prohibitions prescribed therefor.
13. In view of all this, no directions can be given by this Court to the
competent authority to effect compromise or adjudicate compounding
fee. The petition merits dismissal and is accordingly dismissed.
M.L.MEHTA
(JUDGE)
A.K. SIKRI
(JUDGE)
JULY 27, 2011
awanish
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