Relevant Extract of the Judgment
3. The abovesaid order was passed under Section 279 (2) of the Income Tax Act, 1961 (hereinafter, referred to as ‘the Act’), whereby the Chief Commissioner of Income Tax TDS has rejected the petitioner’s Application for compounding the offence committed by the petitioner under Section 276 B (at 5% per month for the period of default) and under Section 276 B read with Section 278 B (at 10% of the main offence) of the Act, for the assessment year 1983-84.
4. From the statement of facts, which is appended as Annexure-A to the impugned order, the Chief Commissioner has perused the guidelines given by CBDT, dated 16.05.2008, and stated that, considering the nature, magnitude and conduct of the assessee, and that Non Bailable Warrant was issued to the assessee, and the assessee has been convicted by the Criminal Court, and when there is conviction by the competent Criminal Court, the question of compounding the offence does not arise. Accordingly, the Chief Commissioner rejected the Application.
5. To decide the correctness of the impugned order, it would be necessary to take note of the following facts:-
i) The petitioner/Firm consists of two Partners, viz., M/s.V.Mohammed Athaullah. and his son M/s.Mohammed Anwarullah. The petitioner paid interest to its depositors without deducting TDS for the years 1981-82, 1983-84 and 1984-85, and for the failure to deduct TDS and remit it to the Government of India, which was criminal offence under Sections 276 B and 278 B of the Act, 24 complaints were filed against i) the Firm/accused No.1, and its partners, viz., ii) Mohammed Athaullah/accused 2, and iii) V.Mohammed Anwarullah/accused No.3 before the Additional Chief Metropolitan Magistrate, Economic Offences-I, Chennai, in E.O.C.C.No.268 to 291/1997, by the Income Tax Officer, Headquarters, Chennai. During the course of trial, accused No.2, Mohammed Athaullah died, and charges against him stood abated.
ii) The Trial Court, by a judgement, dated 06.02.1999, convicted Firm/accused No.1 and V.Mohamed Anwarullah/accused No.3, imposing sentence of rigorous imprisonment for three months and also fine, and in default, to undergo rigorous imprisonment for one month. As against the said conviction and sentence, accused No.1/Firm and Accused No.3 filed Criminal Appeals, in Crl.A.Nos.48 to 71 of 1999, before the Principal Sessions Judge, Chennai. It appears that the surviving partner of the Firm, , accused No.3, Mohammed Anwarullah, was absconding, and he did not appear before the Appellate Court, and for almost 15 years, the Criminal Appeals are pending.
iii) While so, in 2014, the petitioner filed an Application before the Chief Commissioner of Income Tax TDS for compounding the offence. This Application was filed, without obtaining leave of the Court. At that juncture, the prosecution/Income Tax Department thought fit to file a memo before the Principal Sessions Judge, Chennai, dated 28.04.20 15, wherein, they prayed to grant leave to the petitioner under Section 320 (5) of the Code of Criminal Procedure for compounding the offence to enable the competent Authority to dispose of the compounding Application in accordance with law. This request was acceded to, by the Principal Sessions Court, by its order, dated 28.04.20 15, wherein, while granting permission, the Principal Sessions Judge pointed out that the offences are compoundable, hence, leave is granted to the competent Authority, i.e., Chief Commissioner of Income Tax-TDS for compounding the offences. Thereupon, the application has been taken up and rejected by the Chief Commissioner, by the order impugned herein, on the ground that the conduct of the assessee/petitioner as well as the conviction would dis-entitle the petitioner for compounding the offences.
6. As admitted by the respondent, in the counter affidavit, cases have been pending since 1999. One of the partners of the Firm, viz. Mohammed Athaullah passed away during the pendency of the proceedings and the charges against him stood abated. In such circumstances, it is to be seen as to whether, merely because there is conviction against the petitioner, does it prevent the Chief Commissioner from exercising his power to compound the offences.
7. 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, and another) in W.P.No.24588 of 2016, dated 18.08.2016. In the said case, 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 Hon’ble 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 Hon’ble Division Bench of this Court, in the case of (Chairman, Central Board of Direct Taxes and others Vs. Umayal Ramanatha) reported in (2009) 313 ITR 59 (Mad), and disposed of the said Writ Petition. At this stage, it would be apposite to refer to the operative portion of the said order,which reads as follows:-
