By TIOL News Service

CHENNAI, NOV 01, 2016: THE issue is - Whether assessee's application for compounding of offences u/s 276B r/w/s 278-B, is to be rejected merely on the ground that the assessee was convicted by the Criminal Court and had been issued non-bailable warrant. NO is the answer.

Facts of the case

The assessee had preferred the present petition seeking to quash the order passed by the Chief CIT u/s 279(2), whereby he had rejected the assessee's application for compounding the offence committed by the assessee u/s 276B and u/s 276B r/w/s 278-B, on the ground that the assessee was convicted by the Criminal Court and had been issued non bailable warrant. The Chief CIT held that when there was conviction by the competent Criminal Court, the question of compounding the offence would not arise.

Having heard the parties, the High Court held that,

++ this Court had an occasion to consider somewhat an identical issue, in the case of R. Inbavalli Vs. The Government of India, Ministry of Finance, wherein the assessee was convicted on account of the fact that she filed returns belatedly, and the compounding application was pending before the Principal Chief Commissioner, and in the meantime, the assessee approached the Finance Minister, Government of India, who rejected the application for compounding her case. This Court was called upon to decide the question as to how the power of compounding of offence should be exercised by a Chief Commissioner, and this Court took note of the decision of the Division Bench of this Court, in the case of Chairman, CBDT and others Vs. Umayal Ramanatha and disposed of the matter by observing that: "....the power of compounding is exercisable when proceedings are pending. In the case on hand, the sentence imposed on the assessee has been suspended by the Appellate Court and the 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 assessee'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. 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....";

++ in the instant case, the matter has been pending since 1999, and there has been no progress. The Department stated that the assessee firm was an accused. Furthermore, the Principal Sessions Court, while granting permission to the Revenue to consider the assessee's application for compounding the offence, in its order observed that the offences are compoundable in nature, therefore, leave is granted to the competent Authority to compound the offence. This Court is of the view that the Department can examine the matter afresh without being, in any manner, influenced merely because of the conviction passed against the assessee by the Criminal Court.

(See 2016-TIOL-2675-HC-MAD-IT)