TMI Blog2008 (4) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 279 of the Income-tax Act, 1961 (for short as "the Act"), passed by the Chief Commissioner of Income-tax, Delhi-III, vide which the petition filed by the present petitioners for compounding the offence under section 276C(1)/277 of the Act was rejected. It has been prayed in the present writ petition that this court should issue writs/orders/directions in the nature of certiorari quashing the impugned order and also issue appropriate writs/ orders/directions in the nature of mandamus directing the respondent-Chief Commissioner of Income-tax, Delhi-III, to pass final orders for compounding the offence, subject to the petitioners depositing the composition fee of Rs. 3,98,830 in terms of the respondent's own order dated February 13, 2007. 2. The brief facts leading to dispute are that the petitioner-company (which is a registered private limited company and which since 1984 has stopped functioning) filed its income-tax return on August 16, 1984, claiming a loss of Rs. 69,402. The said return was verified by petitioner No. 2 in his capacity as its director. The return was accompanied by the profit and loss account and balance-sheet as on June 30, 1982. In the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 279(2) of the Act, with the Income-tax Department on April 27, 2004, as per the demand raised and had also moved an application for compounding which is pending for disposal. 9. While considering the above criminal revision petition, the court issued the notice and on April 28, 2004, after hearing both the parties, the court suspended the sentence of imprisonment and granted bail to the petitioners till the next date of hearing. Further, the Income-tax Department sought time to inform court as to whether the Department was willing to compound. 10. The Department responded, vide orders dated June 11, 2004, and July 7, 2004, by directing the petitioners to liquidate pending demand as a "prerequisite" condition for compounding of offences under the Income-tax Act, 1961 (for short as "the Act"). 11. On November 18, 2004, the petitioners submitted a detailed application to the Chief Commissioner of Income-tax (for short as "the CCIT") and again requested to consider the application for compounding filed by them. 12. Initially, the Department computed and determined the total liability of the petitioners at Rs. 78,91,495 towards tax demands, interest and penalty. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 279(2). 18. Vide letter/order dated February 13, 2007, the office of the Chief Commissioner of Income-tax-III issued to the petitioner, composition fee for compounding the offence was quantified by the Department at Rs.3,98,830, and the petitioner was directed to convey his willingness to pay the com-position fee. Immediately on February 15, 2007, the petitioner communicated his willingness. 19. A communication dated November 2, 2007, was sent to the petitioners stating that since the Central Board of Direct Taxes has rejected the application for compounding, hence the Chief Commissioner of Income-tax is rejecting the application of the petitioners for compounding. 20. Aggrieved thereby, the petitioners have filed the present petition under article 226 of the Constitution of India read with section 151, Code of Civil Procedure, for issuance of appropriate writs/orders/directions in the nature of certiorari quashing the impugned order dated November 2, 2007 and for mandamus directing the Income-tax Department to pass final orders for compounding the offences, subject to the petitioners depositing the com-position fee of Rs.3,98,830 in terms of the respondent' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1998] 231 ITR 755 (page 759) : "The background in which the Explanation abovesaid came to be appended to section 279 is not clear. However, the very language employed in Explanation reveals that the amendment is clarificatory and declaratory in nature. Some doubts must have been expressed if the power of the Board to issue orders, instructions, or directions under the Act (obviously referable to section 119(1) of the Act), included the power to issue instructions or directions for the proper composition of offences under section 279. The doubts have been removed by declaring that such power was so included and thereby setting at rest the doubts, if any. The Explanation is thus in the nature of a proviso to section 279(2) as held in Y. P. Chawla v. M. P. Tiwari [1992] 195 ITR 607 (SC) and has also to be read as clarificatory and declaratory of the scope of the power of the Board emanating from section 119 of the Act." 27. As held in M. P. Purusothaman v. Asst. Director of Income-tax (Prosecution) [2001] 252 ITR 603 (Mad) (page 605) : "The prosecution once launched is to continue before the court in which the prosecution is initiated and in which the accused would have all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant part of the instructions is as under : "B. Cases which should not be compounded : 1. No compounding will be done if the assessee belongs to a monopoly or large industrial house or is a director of a company belonging to or controlled by such house. 2. Cases in which the prospects of a successful prosecution are good should not ordinarily be compounded. 3. Compounding will not be done in case of second and sub-sequent offences." 31. From the perusal of section 119(1) of the Act, it is clear that the section provides in unmistakable terms, that every officer and person employed in the execution of the Act shall observe and follow the orders, instructions and directions of the Board. The circulars issued by the Board are generally binding on officers and persons employed in the execution of the Act. 32. From the perusal of sections 276C and 277 of the Act, it is clearly evident that the prosecution is required to establish that the accused wilfully attempted in any manner, to evade any tax penalty or interest chargeable or imposable under the Act. It is also culled out from the provisions of section 277 of the Act that the prosecution is required to establ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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