TMI Blog2017 (7) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances encountered by her during the relevant period. The only negative turn, which we noticed from the reading of the note file produced before us, is the view expressed by the member CBDT on 30.3.2016, which we have extracted hereinabove. The reason according to the CBDT for taking a different view on 30.3.2016 is, that the Assessee had filed the returns as a consequence of survey under Section 133 A and there is a wide gap between returned income and the Assessed income, for which no explanation has been offered and even the Court has observed that but for survey under Section 133 A, the returns would not have been filed. This reasoning given by the member CBDT, albeit taking a different view, was already available, despite which, the Principal Chief Commissioner, of Income Tax, had sent a recommendatory report to the CBDT. These reasons, in our view, cannot form the sole criteria, to take a different stand and thus, form the basis of rejecting the plea of the Assessee in exercise of its powers by the Hon'ble Minister under para 7.2 of the guidelines dated 16.05.2008. Given the over all factual matrix, we find that there is considerable force in the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gy, time and money that the Revenue seeks to expend in a case like this, could have been brought to better use in other graver cases. 4. With this preface, let us advert to the facts of the instant case: (i) The Assessee was carrying on a business as sole proprietrix, under the name and style of Sri Ganeshram Electronics, at Chennai, since 1990, and has filed Income Tax Returns in time. A survey under section 133A of the Income Tax Act 1962 (in short, the IT Act ) was conducted at the business premises of the Assessee on 03.04.1988 and the books of accounts for financial year 1996-97 relevant to the Income Tax Assessment year 1997-1998 were impounded. The said survey was conducted mainly because of non-filing of the returns, from the Assessment year 1996-97 onwards. (ii) The further case of the Assessee is that, she had engaged the services of a part time accountant, who was charged with the duty of writing the books of accounts and to submit the same to the income tax authorities. (iii) In September 1996, the younger son of the Assessee died due to an accident. Therefore, the life of the Assessee became miserable. Hence, the Assessee claimed that, she was mentally and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al on 24.02.2004, the Assessee filed appeal before this Court against those four appeals, in TC (A) No.761 to 764 of 2001. The said tax appeal cases filed, under Section 260A of the IT Act against the order of the Tribunal, dated 24.02.2004, was disposed by this Court on 20.02.2012. On the basis of the order of this Court, the Revenue finally determined the income for all the three assessment years at ₹ 18,87,910/- and the income tax payable was determined at ₹ 6,06,090/-. The interest under Section 234A was determined at ₹ 3,50,070/- and the interest under Section 234B was determined at ₹ 5,29,100/- in all totalling to ₹ 14,85,260/-, since the Assessee, had paid the final tax together with interest under various provisions of the IT Act, there were no demands outstanding as on date. (viii) The Revenue, however, has also initiated prosecution proceedings, for all the three assessment years against the Assessee, before the Chief Metropolitan Magistrate (E.O.), Chennai. After completion of trial, by order dated 01.11.2010, the Metropolitan Magistrate Court convicted and sentenced the Assessee, under Section 276CC of the IT Act, to undergo six months r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal is still pending. Therefore, it has to be seen as to whether that conviction by the Criminal Court should be the only reason for rejecting the petitioner's application for compounding the offence. Clause 4.4 of the guidelines states that cases not to be compounded. It commences with a non obstante clause stating that notwithstanding anything contained in the guidelines, the category of cases mentioned in clauses (a) to (g) should normally not be compounded. Thus, the guidelines does not specifically place an embargo on the competent authority to consider the application for compounding merely on the ground when the assessee has been convicted by a court of law. 7. The expression used in the guidelines should normally not be compounded , as pointed out earlier Clause 4.4 commences with a non obstante Clause. Therefore, the competent authority is entitled to examine the merits of each matter and to take a decision as to whether the facts make out a case for compounding even in cases where there is a conviction by a Court of law. Thus the guidelines did not place any fetters on the power of the competent authority to examine cases for compounding. However, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision taken at CBDT, the Assessee's request was rejected via the impugned order. Therefore, the learned counsel submits, that the Chief Commissioner of Income Tax, who is, an hierarchy subordinate to the CBDT, cannot hear the application, once again, which has already been decided by the CBDT. 7. Learned counsel for Revenue would also submits that, though a recommendatory report was submitted by the Principal Chief Commissioner of Income Tax, Tamil Nadu, Chennai on 27.4.2015, to the CBDT, that the case of the Assessee, in peculiar facts and circumstances, is desirable to be considered for compounding, purely on sympathetic grounds, the same was considered duly and the CBDT thereafter, decided to reject the claim of the Assessee. The learned counsel would further submit that the Principal Chief Commissioner cannot re-visit the issue, therefore, in that context, the direction issued by the learned Judge, is not only erroneous but also impractical. Therefore, the Revenue s appeal has to be allowed. 8. Mr. T Ravikumar, the learned counsel for the Assessee would also rely upon the relevant provisions of the guidelines for compounding of offences issued under the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o filed appeal in W.A. No 455 of 2017 has made submissions that, all these arguments now advanced by the Revenue have been considered and discussed elaborately by the learned Judge, in the impugned Judgement itself. 13. In this regard Mr.Jayachandran drew our attention to paras 3, 4 and 5 of the impugned Judgement. For the sake of convenience, paras 3 and 4 of the impugned judgement are extracted hereunder: 3.While the matter pending consideration before the Principal Chief Commissioner, it appears that based on certain advice given to the old lady, she sent a representation to the Honourable Finance Minister, Government of India requesting for exercising his powers and compounding the petitioner's case. This has been rejected and intimated to the petitioner by the first respondent by the impugned proceedings stating that the petitioner case is not a deserving case as per the parameters of para 7.2 of the guidelines dated 16.05.2008 for compounding of offences. The reasons for holding that the petitioner's case is not a deserving case are not mentioned in the impugned order not furnished to the petitioner. From the counter affidavit filed on behalf of the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yachandiran would also submit that, only in order to meet such like situations, the provision for compounding the offences are made available in the IT Act, and therefore, merely because the court has convicted the Assessee, cannot come in the way of the Revenue in compounding the offences on terms with respect to which the Assessee has already expressed her willingness in her application, which includes her agreement to pay the compounding fee as determined along with interest and penalty, if any. The learned counsel for Assessee would also submit that it is not the case of the Revenue that the Assessee's case was outrightly rejected by the Department. In fact, the Principal Chief Commissioner of Income Tax by his report dated 27.4.2015 submitted to the CBDT has made the following observations, and the relevant portion of which are extracted hereinafter: 6. The assessee in her petition now filed before the Hon'ble Finance Minister has claimed as follows: She is aged 67 years and is a senior citizen. She is having several medical problems. She is a widow and she lost her son in 1996. She admits that she had no intention to avoid filing the return of income; she trusted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.05.2016. Pursuant to our directive, Mr. T. Ravikumar, learned counsel for the Revenue produced the original file before this court for our perusal. After having perused the same, the original file was returned to the learned counsel for the Revenue. However Mr. Ravikumar has handed over to us, a photo copy of the original file, containing materials, pertaining to the present case. 20. The factual matrix as has been projected by the Assessee are not in much controversy except for a few aspects. 21. Admittedly, the Assessee had not filed IT return in time consecutively for three assessment years i.e. 1996-97, 1997-98 and 1998-99. Only after the intervention of the Revenue, the issue was triggered and after assessment and demand of tax to be paid, the Assesse filed appeals before the Commissioner (Appeals), whereby she gained some benefit through the order of the Commissioner (Appeals), dated 26.3.2002. Still not convinced of the turnability of the said order of the Commissioner (Appeals), assessee filed appeal before the Tribunal, where also final order was passed on 24.2.2004. Being aggrieved with the said order of the Tribunal, the Assessee approached this Court by filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of the Sessions Court, the case could not be compounded in terms of para 4.4(f) of the Board guidelines dated 16.05.2008. In this regard, it is brought to your kind notice that the Hon'ble High Court of Madras in the case of Dr. K.Jagadeesan (118 Taxman 499 Madras), Smt. Umayal Ramanathan (313 ITR 59 Madras) and M/s VG Pannerdas and Co Pvt Ltd (352 ITR 77 Madras) etc. (copies enclosed as Annexure D) has directed the department to consider the compounding applications even after conviction by trial court. The Hon'ble High Court of Madras has held that if an appeal is pending against the order of lower court convicting the assessee, the proceedings are deemed to be pending and hence, the compounding application can be considered on the merits. In all these cases, the competent authority has accepted the compounding applications in the aforesaid cases after the direction of the High Court to consider on merits. The department has not filed SLP in the Hon'ble Supreme Court against the above decisions of the High Court. As already stated above, in the instant case, there is no such direction either by the Hon'ble High Court or leave of the Session's Court. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, if deemed fit, considering the age of the assessee, her delicate medical condition etc. as also the fact that the offence was not of concealment of income and that the taxes due have been paid. DFA submitted for consideration /approval. Sd/- 22.12.2015 (emphasis is ours) (iv) Thereafter, as desired by the CBDT, a report of jurisidictional CIT (FR) was called for. (v) After the report of Pr.CCIT, Tamil Nadu, dated 15.2.2016 with relevant documents about the details of ailments of the Assessee, the following note was prepared by the CIT (OSD) (INV), CBDT, New Delhi: Kindly see the notes on pre-pages. The assessee has filed an application on 15.12.2014 before Hon'ble FM for relaxation of condition for compounding of offence under para 7.2 of the compounding guidelines dated 16.05.2008 (old guidelines). Since the application for compounding of offence has been filed on 15.12.2014 i.e. before 1st January, 2015, the case is governed by the old guidelines. As per para 7.2 of the said compounding guidelines, at F/B the Hon'ble Finance Minister can grant approval for compounding of offence in a suitable and deserving case after obtaining repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r record, the assessee has filed criminal appeal against the conviction order. The assessee has filed the present petition before the Hon'ble Finance Minister to grant approval for compounding of offence on the ground that she is a widow aged 67 years and suffering from old age related medical problems. The medical certificate do indicate old age related disability including cerebal atrophy with dementia. As per the report of Income Tax Inspector dated 18.03.2015, she is not facing any major financial harship. 3. However, considering the present physical condition of the assessee, her case can be considered for grant of approval for compounding of offences under par 7.2 of the guidelines dated 16.05.2008 (copy placed below) by the Hon'ble Finance Minister. 4. Put up for approval. (emphasis is ours) (vii) However, on assessing the said note dated 16.3.2016, the member, CBDT has written the following note on 30.3.2016: I have gone through the order of Court and the report of CIT. In this case, the returns were filed as a consequence of survey u/s 133A. There is a wide gap between returned income and the assessed income for which no explanation has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeals against conviction were pending. In these cases, after taking into account the existence of exceptional circumstances the compounding petitions were accepted by the department with due justification. In the present case, there is neither any direction from the jurisdictional Madras High Court nor any leave granted by the Hon'ble Principal Sessions Judge and as such the RCC cannot proceed to compound the offences in violation of mandatory prohibition laid down in para-4.4 (f) of the guidelines dated 16.5.2008. (emphasis is ours) 28. In paragraph 5 (ii) of the said extract of the RCC's report as extracted above, the committee has stated that, neither any direction was given by the jurisdictional Madras High Court nor any leave was granted by the Principal Sessions Judge and as such, the RCC cannot proceed to compound the offences, in violation of mandatory prohibition, laid down in para 4.4(f) of the guidelines dated 16.5.2008. So, the only hurdle, according to RCC, was that, there was no direction from this Court or a leave was granted by the Sessions Court where the appeal was pending. However, in similar cases referred to by the RCC, that is in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressed by the member CBDT on 30.3.2016, which we have extracted hereinabove. The reason according to the CBDT for taking a different view on 30.3.2016 is, that the Assessee had filed the returns as a consequence of survey under Section 133 A and there is a wide gap between returned income and the Assessed income, for which no explanation has been offered and even the Court has observed that but for survey under Section 133 A, the returns would not have been filed. 34. This reasoning given by the member CBDT, albeit taking a different view, was already available, despite which, the Principal Chief Commissioner, of Income Tax, had sent a recommendatory report to the CBDT. These reasons, in our view, cannot form the sole criteria, to take a different stand and thus, form the basis of rejecting the plea of the Assessee in exercise of its powers by the Hon'ble Minister under para 7.2 of the guidelines dated 16.05.2008. 35. Given the over all factual matrix, we find that there is considerable force in the submissions made by the learned counsel appearing for the Assessee that the direction issued by the learned Judge, is a well considered one, as the learned Judge took into a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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