#Income- Tax Act, 1995, #Section 234A in The Income Tax Act, 1995 #Section 234B in The Income Tax Act, #Section 276CC in The Income Tax Act, #Section 133A in The Income Tax Act, 1995, #Madras High Court, #The Government Of India vs R.Inbavalli , #Power of compounding, #Vijay Pal Dalmia #Income Tax Act, #PMLA, #Compounding, #Criminal prosecution.
In the case of the Government of India, Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes), #CBDT Vs. #R.Inbavalli, before the Division Bench of the Madras High Court, the Revenue Department sought to assail the directions issued by the learned Single Judge to the concerned statutory authority to exercise his powers of compounding the offence. The brief facts of the case are that the Revenue had initiated prosecution proceedings against all the assessment years in which defaults were committed, before the Chief Metropolitan Magistrate (E.O.), Chennai. After completion of trial, vide 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 rigorous imprisonment and imposed a fine of Rs.10,000/- for each of the three years. Assailing the said conviction and sentence, the Assessee preferred appeals under Section 374 (3) of Cr.P.C. in C.A.Nos.227 to 229 of 2010 before the Principal Sessions Judge, City Civil Court, Chennai. The Principal Sessions Court, Chennai suspended the sentence of imprisonment, by an order dated 30.11.2010. However, the said appeals are still pending adjudication. During the pendency of the appeal, the Assessee had submitted application for compounding the offence.
While deciding the said appeal, the Hon’ble court held that the power of compounding is exercisable even when proceedings are pending. In the present case, the Hon’ble court observed that the sentence imposed on the petitioner has been suspended by the Appellate Court and the appeal is still pending, consequently, the case shall be treated as pending and the power of compounding is exercisable. Therefore, the conviction by the Criminal Court should not be the only reason for rejecting the petitioner's application for compounding the offence. Clause 4.4 of the of the CBDT's compounding guideline dated 16.05.2008 prescribes the cases which cannot be compounded, and 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 Hon’ble court held that 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.
In the cases 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., the Courts had directed to consider the compounding applications even after conviction by trial court.
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Mr. Vijay Pal Dalmia, Advocate & Partner Vaish Associates Advocates
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