Case Law Details
M/s. Supernova System Private Limited Vs. CCIT (Gujarat High Court)
CBDT circular issued on 23.12.2014 prescribes compounding fees for offense under section 276C(1) at 100% of the amount sought to be evaded. This para also starts with an expression ‘Section 276C(1)- Wilful attempt to evade tax etc.’ The title of this para thus, is taken from the section itself and the compounding fee is to be computed at the rate of 100% of the amount sought to be evaded. Since this para does not contain any specification of ‘the amount sought to be evaded’, we may fall back on the statutory provisions in relation to which, this compounding fee is prescribed. Sub-section (1) of section 276C, as noted, prescribes punishment for a person who willfully attempts in any manner to evade any tax, penalty or interest chargeable under the Act. This could be without prejudice to any penalty that may be imposable on him under any provisions of the Act. Under such circumstances, as per the sections stood at the relevant time, the person concerned would be punishable;
(i) In case where the amount sought to be evaded exceeds Rs.250,000/-, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine and;
(ii) In any other case with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.
This provision thus while prescribing punishment for willful attempt to evade tax, penalty or interest chargeable, provides for a more severe punishment in case the amount sought to be evaded exceeds Rs.250,000/-. For the rest, punishment prescribed is lesser. This prescription of punishments in two categories is thus linked with the amount sought to be evaded. This amount sought to be evaded is in relation with the action of a person of a willful attempt to evade tax, penalty or interest chargeable. In the prescription of punishment thus, when there is a reference to amount sought to be evaded, it must be seen in light of the willful attempt on the part of the concerned person to evade tax, penalty or interest. This provision thus, links the severity of punishment on the amount sought to be evaded and thus, in turn has relation to the attempt at evasion of tax, penalty or interest. Thus, when the CBDT circular refers to the amount sought to be evaded, it must be seen and understood in light of the provisions contained in section 276C(1) and in turn must be seen as amount sought to be evaded. 100% of tax sought to be evaded would be the basic compounding fees which in the present case would be Rs. 2,71,000/- and not Rs.8,70,000/- as computed by the departmental authorities. The rest of the computation is consequential and automatic. The impugned communication dated 20.03.2018 is therefore set aside. The respondent shall carry out fresh computation of the petitioner’s liability to pay compounding charges in terms of this order. We are informed that, to avoid any complication, the petitioner has under protest, paid up the entire amount of Rs.10,49,000/- as demanded by the department. Once such fresh computation is made, the excess would be refunded by the department to the petitioner latest by 31.10.2018.
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