Sangeet Seth Vs Chief Commissioner of Income Tax And Ors. (Delhi High Court)
Background of the Dispute
The petitioner, Sangeet Seth, was an erstwhile director of a company, M/s Velvet Apple Hotel Pvt. Ltd., which is now under liquidation. The company had defaulted on depositing Tax Deducted at Source (TDS) amounting to ₹6,11,820 for the financial year 2009-10 within the prescribed time. Although the amount was deposited after a delay of a few months, the default led to the initiation of criminal prosecution proceedings against the petitioner under Sections 276B and 278B of the Income Tax Act.
The petitioner filed an initial application to compound the offence. However, due to financial difficulties, he was unable to pay the required compounding charges within the stipulated time. Consequently, the tax authority rejected this first application on February 16, 2016.
Later, when his financial situation improved, Mr. Seth filed a second application for compounding the same offence on June 5, 2017. The Income Tax Department accepted this application via a letter dated January 29, 2018, and calculated the compounding charges at a rate of 3% per month of the default amount. The petitioner complied and, in total, paid ₹18,99,388, which included the original TDS amount, interest, penalty, and the 3% compounding charges.
