TMI Blog2022 (6) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the nature and magnitude of the offence. It is clear that discretion can be exercised for compounding the offence. Normally, offences involving serious cross-border transaction are not to be compounded. However, discretion can be exercised. Both 2015 or 2019 guidelines are strictly binding on the authorities. They are intended to guide officers to bring a closure of cases where there are extenuating circumstance for compounding offence on application filed under Section 279(2) of the Act. The petitioner is now over 70 years and has been facing prosecution for over a period of last one decade for an offence allegedly committed by him during 2001-2002 for the relevant assessment year 2002-2003. Earlier, the petitioner faced, adjudication proceeding both under Section 148 and penalty proceeding under Section 279(2) of the Income Tax Act, 1961. The petitioner has paid the tax interest and the penalty imposed on him. Though, the petitioner has paid the penalty, the petitioner has filed an appeal against order of CIT (Appeals) confirming imposition of penalty to the extent of 100% of the tax. The Department is also in appeal as mentioned above. The 2019 Circular whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication filed by the petitioner pursuant to the order dated 11.02.2021 of the Division Bench of this Court in W.A.No.967 of 2020. The Relevant portion of the impugned order reads as under:- 22.6. In view of the above, the Committee recommended that since the assessee's petition filed on 25.03.2011 was disposed off, the present petition filed on 09.03.2021 was to be construed as a new petition. Having thus recommended that the compounding application filed by the assessee on 09.03.2021 was a fresh petition, the Committee held that the same was to be dealt with in accordance to the guidelines issued by the Board in F.No.285/08/2014-IT(IN.V)/147 dated 14.06.2019 which is applicable to all petitions filed on or after 17.06.2019. 22.7. The Committee noted the provisions of Para 8 of the guidelines dated 14.06.2019 relating to offences normally not to be compounded which are reproduced as under for ease of reference. 8. Offence normally not to be compounded:- 8.1. The following offences are generally not to be compounded: i. Category 'A' offence on more than three occasions. However, in exceptional circumstances compounding requested in more than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Assets) and Imposition of Tax Act, 2015. xii. Any offence which has bearing on any offence under the Benami Transactions (Prohibition) Act, 1988. xiii. Any other offence, which the Pr.CCIT/CCIT/Pr.DGIT/DGIT concerned considers not fit for compounding in view of factors such as conduct of the person, nature and magnitude of the offence. 23. Recommendations of the Committee as per guidelines dated 14.06.2019:- 23.1. On examination of the facts of the case of the assessee, the committee noted that: i. The assessee has cross border transactions. But for the information received from a foreign Government, the Revenue would have been put to a great loss. ii. The evidence gathered in the instance case establishes major frauds in so far as funds have gone out of the country and if not for the information obtained, would have remained untaxed. iii. Keeping funds abroad, that too, in countries wherein banking secrecy laws shield the investment, is also to be regarded as anti-national activity. iv. The Hon'ble ITAT has upheld the orders of the revenue vide its order dated 15.02.2013. v. The Hon'ble ITAT has upheld the levy of penalty, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible for compounding of offences in terms of Paras 8(x) and 8(xiii) of the guidelines dated 14.06.2019. 4. The facts of the case are that the petitioner is being prosecuted under Sections 276C and 277 of the Income Tax Act, 1961 in E.O.C.C.No.121 of 2011 before the Additional Chief Metropolitan Magistrate (Economic Offences 1), Egmore, Chennai, pursuant to proceedings initiated under Section 148 of the Income Tax Act, 1961 against the petitioner. In the said proceeding, it was held that the petitioner had willfully and deliberately failed to file returns of income of Rs.2,71,87,222/- without reflecting the investment in the form of bank balance in a foreign bank account, thereby, attempted to evade tax. 5. The petitioner had earlier filed Crl.O.P.No.9065 of 2011 before this Court under Section 482 of the Criminal Procedure Code, 1973 to quash the said complaint. By an order dated 28.02.2019, a learned Single Judge of this Court dismissed the aforesaid Crl.O.P.No.9065 of 2011. 6. The petitioner has filed S.L.P against the order passed in the aforesaid Crl.O.P. The said S.L.P. filed by the petitioner is stated to be pending as on date. 7. Meanwhile, the petitioner t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not worked out. f) Where conviction order has been passed by a Court. g) Any other ground, which the CCIT/DGIT may consider relevant for not accepting the compounding petition, in view of the nature and magnitude of the offence. From the above, it is clear that assessee cannot claim as a matter of right that his offence should be compounded. Clause (g) of para 4.4 clearly states that the DGIT/CCIT may consider any other relevant ground for not accepting the compounding petition. The facts as obtained in the case of the assessee shows that he has cross border transactions and if not for the information received from a foreign Government, the Revenue would have been put to a great loss. No doubt, the assessee may claim certain infirmity in the nature of the evidence on which the Department is relying. But the fact is that the signature of the assessee is tallying with the signature in the document. It is my considered opinion that this evidence establishes major fraud in so far as funds have gone out of the country and if not for the information obtained, the moneys would have remained untaxed. Keeping funds abroad, that too, in countries wherein banking secrecy law shiel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for compounding the offences before the Compounding Committee on 10.09.2019 for the second time. 11. The Compounding Committee once again rejected the application filed for compounding of offences on 06.11.2019 based on the CBDT Circular dated 16.05.2008 issued under Section 279(2) of the Income Tax Act, 1961. The reason given for not compounding of offences of the petitioner reads as under:- 5.2. The RCC considered all the material and records before it, in detail. The Assessing Officer reopened the case under section 147 after receiving information on moneys deposited in a foreign bank account and the assessee remained non-cooperative during the course of the assessment proceedings. While replying to the issue of notice under section 148, assessee submitted. On the basis of the reasons provided by you your letter dated 24.04.2009. I have written to LGT Bank, Lichtenstein on 14.05.2009 requesting them to verify the details of the Trust purported to have an account with LGT Bank and beneficiaries in the said Trust. The Bank has replied by their letter dated 08.07.2009 copy of which is enclosed (Original Bank letter is produced for your perusal). The Bank s letter wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has cross border transactions, but for the information received from a foreign Government, the Revenue would have been put to loss. b) the evidence gathered in the instant case establishes major frauds in so far as funds have gone out of the country and if not for the information obtained, the monies would have remained untaxed. c) The assessee has neither produced the documents nor the account copy to disprove the contentions of the department. The attitude of the assessee was of total non-cooperation in the entire proceedings before Assessing Officer on the issue. 5.7 Considering the above fact and circumstances, the RCC recommended that the Compounding Petition of the assessee deserve to be rejected according to the guidelines prescribed in the Para 4.4(g) considering the nature and magnitude of offence as non compoundable. III. In the result, the application of the assessee Shri K M Mammen, (AAEPM0314R) for the Asst. Year 2002-03 u/s.279(2) of the Income Tax Act, 1961 dated 10/09/2019 has been rejected. 12. There it has been clarified that the order has been passed in terms of the Board s revised guidelines for compounding of offences in F.No.285/90/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the observation contained herein. Needless to state, petitioner shall also be heard in person or through authorised representatives/legal representatives. 40.The present Contempt Petition is dismissed with the above observations. No cost. Consequently, connected Sub Applications are also closed. 15. Though the above contempt petition was dismissed, there was a direction to the respondents to pass appropriate order in the light of the liberalized policy and the new guideline. Both the petitioner and the respondent filed Writ Appeals. 16. The Income Tax Department preferred an appeal before the Division Bench of this Court in W.A.No.967 of 2020. The petitioner filed an appeal which was not numbered. It was listed for maintainability in W.A.SR.No.84101 of 2020. 17. Both appeals filed against the order dated 31.01.2020 in Cont.P.No.2079 of 2019, were considered. By separate orders dated 11.02.2021, the Hon'ble Division Bench of this Court dismissed the appeal filed by the petitioner in W.A.SR.No.84101 of 2020 at the S.R. stage as the Writ Appeal was not maintainable. 18. The Division Bench of this Court vide separate order dated 11.02.2022 disposed W.A.No.96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been challenged in Tax Case Appeal before this Court. It is not the case of the Department that this Court had stayed the order of the Commissioner of Appeals, as well as the Tribunal in the Tax Case Appeals. Just because the order reducing the penalty has been put under challenge in the Tax Case Appeals, it cannot be said that the order reducing the penalty itself has been kept under abeyance. In this background, it can only be said that the petitioner would be entitled to the benefit of Section 279(1A) of the Act and the mere challenge to the order reducing the penalty may not suffice to deny such a benefit. In view of these subsequent developments, there cannot now be any impediment on the part of the Department to compound the offences under Sections 276C and 277 of the Act. 8.7. The learned Standing counsel for the respondents made a faint attempt by placing reliance on paragraph 19 of the dismissal order dated 28.02.2019 passed in Crl.O.P.No.9065 of 2011 and submitted that Prem Dass's case (supra) has been distinguished and held to be not applicable to the present case. Hence the learned Standing counsel would submit that, since the order of reduction of penalty w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority exercised his discreation in restricting the penalty to 100% instead of 300% levied by the Assessing Offier, this Tribunal do not find any reason to interfere with the discretion exercised by the Lower Authority. Therefore, we do not find fault with the CIT(Appeals) in restricting the penalty to 100%. 24. Both the department and petitioner are in appeal before the division Bench of this High Court in TCA No. 216of 2018 and TCA No.875 of 2017 respectively. These appeals are pending on this date. 25. Prior to the Order dated 25.03.2014 in ITA No.12 of 2012-13 of CIT (Appeals), the prosecution commenced in E.O.C.C.No.121 of 2011 before the Additional Chief Metropolitan Magistrate, Egmore pursuant to a complaint filed on 28.3.2011. 26. The petitioner was being prosecuted under Section 279 of the Income Tax Act, 1961 for offences punishable under Section 276C 277of the Income Tax Act, 1961. 27. Sub-Section (1-A) to section 279 of the Income Tax Act, 1961, makes it clear that no person shall be proceeded for an offence under Section 276C or Section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain the previous approval of the Board) to other income-tax authorities for the proper composition of offences under this Section. Thus, there is no bar for compounding the offences on payment of compounding fee on a plain reading of Sub -Section 2 to Section 279 of the Income Tax Act,1961. 31. Guidelines for compounding offences have been issued in the form of Circulars under Section 119(1) of the Income Tax Act,1961. At the time when the first application for compounding the offence was filed, Circular No.F.No.285/90/2008-IT(Inv.)/12 dated 16.5.2008 was in force. By the time , when W.P.No.3729 of 2014 and Contempt petition were disposed on 28.08.2019 and on 31.01.2020, respectively Circular bearing reference No.F.No.285/08/2014-IT (Inv-V)/147 dated 14.6.2019 was in force with effect from 17.6.2019. It was to apply for fresh application filed after the said date. 32. The Division Bench by its order dated 11.2.2021 in in W.A.No.967 0f 2020 in its discussion has impliedly held that Circular No.F.No.285/08/2014-IT (Inv-V)/147 dated 14.6.2019 which was in force with effect from 17.6.2019 and therefore cannot be applied to the facts of the case. However, in the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1981) 4 SCC 173 : 1981 SCC (Tax) 293] has held that circulars issued by the Central Board of Direct Taxes under Section 119(1) of the Act are binding on all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act. The High Court has discussed these judgments in detail and has distinguished them on plausible grounds. It is not necessary for us to go into this question because the legal position has altered to the advantage of the Revenue by the introduction of an Explanation to Section 279 of the Act by the Finance Act (2 of 1991) which has been made operative with effect from April 1, 1962. The Explanation is as under:- Explanation .- For the removal of doubts, it is hereby declared that the power of the Board to issue orders, instructions, or directions under this Act shall include and shall be deemed always to have included the power to issue instructions or directions (including instructions or directions to obtain the previous approval of the Board) to other Income Tax authorities for the proper composition of offences under this section. 10. The Explanation is in the nature of a proviso to Section 279(2) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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