2019 (5) TMI 891 - HC - Income Tax

Compounding of offence u/s 276-B - approval for compounding u/s 279(2) with a direction for payment of compounding charges - guidelines issued by CBDT (F.No.285/35/2013 IT) dated 23/12/2014 - compounding fees as first application @ 3% OR as second (subsequent) application @ 5% - failure to pay the TDS/TCS - HELD THAT - The petitioner did submitted an application for compounding fees for the Financial Year 2013-14 and 2014-15 on 19/07/2017 in the office of Dy CIT (TDS) Indore instead of submitting it before the CCIT/DGIT and it was a mandatory requirement to submit an application before the CCIT (Pr. CCIT Bhopal) keeping in view the instructions dated 02/11/2018 and also as per the Income Tax Act 1961. Later on again an application was filed for Financial Year 2013-14 and 2014-15 on 15/01/2018 which was received in the office of Pr. CIT on 17/01/2018. Not only this the petitioner also submitted an application for compounding in respect of Financial Year 2015-16 on 16/10/2017 and thereafter he submitted an application for compounding offence in respect of Financial Year 2013-14 and 2014-15 on 15/01/2018 which was received on 17/01/2018. Hence the Pr. CCIT was justified in levying compounding fee for the aforesaid financial years treating the same as second occasion. Order passed by Pr. CCIT is in consonance with the guidelines issued by the Central Board of Direct Taxes. The guidelines issued by the CBDT for the purposes of compounding fee have not been struck down in any of the judgment. It is purely a question of fact i.e. whether the application should be treated as second application for the Financial Year 2013-14 and 2014-15 or as first application. Pr. CCIT was justified in treating the application as second applications / occasions and therefore this Court does not find any reason to interfere with the order passed by the Pr. CCIT. The writ petition is accordingly dismissed.

Summary

Issues Involved:
1. Determination of compounding charges for the offence under Section 276-B of the Income Tax Act, 1961.
2. Classification of the compounding application as first or second occasion.
3. Compliance with Central Board of Direct Taxes (CBDT) guidelines dated 23/12/2014.

Detailed Analysis:

1. Determination of Compounding Charges for the Offence Under Section 276-B:
The petitioner filed a petition against the communication from the Principal Chief Commissioner of Income Tax (PCCIT) regarding the approval of compounding charges for the offence under Section 276-B for the Financial Years 2013-14 and 2014-15. The petitioner contended that the charges were determined at 5%, treating it as a second occasion, without proper consideration of the facts and records.

2. Classification of the Compounding Application as First or Second Occasion:
The petitioner argued that the compounding charges should be 3% for the Financial Years 2013-14 and 2014-15, as the application was filed before the compounding order for the Financial Year 2015-16 was passed. The CBDT guidelines state that for the first application, the compounding fee is 3% per month, and for subsequent applications, it is 5%. The PCCIT treated the applications for 2013-14 and 2014-15 as second occasions because the application for 2015-16 was filed first on 16/10/2017, while the applications for 2013-14 and 2014-15 were filed later on 17/01/2018.

3. Compliance with CBDT Guidelines Dated 23/12/2014:
The petitioner relied heavily on paragraph 12 of the CBDT guidelines, which outlines the compounding fees. The guidelines specify that the fee for compounding offences under Section 276-B is 3% per month of the tax in default for the first application and 5% for subsequent applications. The respondent (Income Tax Department) maintained that the petitioner’s applications were considered per the guidelines, and the compounding of offences is not a matter of right but subject to the satisfaction of the competent authority regarding the fulfillment of eligibility conditions.

Court’s Observations:
The court noted that the petitioner initially submitted the application for 2013-14 and 2014-15 to the wrong authority (Deputy Commissioner of Income Tax instead of PCCIT), which was a mandatory requirement as per the guidelines. Consequently, the applications were not valid until they were correctly filed on 17/01/2018, after the application for 2015-16 was filed on 16/10/2017. Therefore, the PCCIT was justified in treating the applications for 2013-14 and 2014-15 as second occasions and levying the compounding fee at 5%.

Conclusion:
The court upheld the order of the PCCIT, stating that it was in consonance with the CBDT guidelines. The petitioner’s request to consider the applications for 2013-14 and 2014-15 as first applications was dismissed, and the compounding fees were rightly calculated at 5%. The writ petition was dismissed accordingly.