Case Law Details
PCIT Vs K.M.Mammen (Madras High Court)
Conclusion: Since the penalty was reduced from 300% to 100% of the tax sought to be evaded, assessee was entitled to the benefit of Section 279(1A) of Income Tax. Moreover, department having failed to challenge the order passed by Single Judge in earlier, could not challenge the directions given by the Court for compounding of criminal prosecution.
Held: Assessee was the Chairman and Managing Director of MRF Limited. AO allegedly received information that assessee had transferred through LGT Bank Liechenstein, substantial sums of Euro currencies in favour of Webster Foundation, a Trust, in which assessee was stated to be one of the direct beneficiaries, apart from his father and brother. The assessment was sought to be reopened and notice under Section 148 for the assessment year 2002-03 was issued proposing to bring to tax income which had allegedly escaped assessment. The reassessment was made under Section 147 r/w 143(3) whereby, a sum of Rs.2.26 Crores lying in the said bank account as on 31.12.2001 was assessed as unexplained investment under Section 69. Assessee preferred an appeal against the above said order before CIT (A) which was dismissed. The appeal to Tribunal also stood dismissed on the premise that the foundation was created and duly signed by assessee who was found to be a beneficiary of the said Trust / Foundation. The order of the Tribunal was the subject matter of appeal in TCA. No. 252 of 2013, which was pending before this Court. In the meanwhile, vide order dated 21.03.2012, a maximum penalty at 300% of tax sought to be evaded under Section 271(1)(c) was imposed. Aggrieved by the levy of penalty, an appeal was preferred before CIT (A) who reduced the penalty from 300% to 100% of the tax sought to be evaded. The penalty thus stood reduced from Rs.2,07,82,020/- to Rs.69,27,342/-. Assessee as well as the Revenue preferred further appeals against the above order of CIT (A). Both the appeals stood dismissed by the Tribunal. Assessee was prosecuted under Sections 276C and 277 before the Additional Chief Metropolitian Magistrate (Economic Offence – I), Egmore. The criminal original petition was dismissed with a direction to the Additional Chief Metropolitian Magistrate (Economic Offence-I) to expedite the trial and conclude it. Reliance was placed by the assessee on the decision of the Supreme Court in Prem Dass v. ITO to contend that in view of the reduction of penalty from 300% to 100%, no prosecution could be launched or continued, which was however distinguished by the Judge, while disposing of the Criminal Original Petition. The matter was challenged before the Supreme Court and an order of stay of operation of the order passed by the Judge was granted. Assessee also filed a Writ Petition challenging the order by which the petition for compounding under Section 279(2) stood rejected. Assessee challenged the Director General of Income Tax’s order before the single judge. The single judge bench held that since the penalty was reduced from 300% to 100% of the tax sought to be evaded, the assessee was entitled to the benefit of Section 279(1A). Revenue held that the observation of the Single Judge that the provisions of Section 279(1A) of the Act and the decision in Prem Dass case were applicable, was incorrect inasmuch as the reduction in penalty by the Commissioner (Appeals) or the Tribunal could not be treated as an order under Section 273A and would thus not be covered under Section 279(1A). It was held that assessee had the right to compounding under Section 279(2) for the offences under Sections 276C & 277, as the department had not challenged the Single Judge’s earlier judgement, which addressed the matter definitively and concluded that the department was subject to it. The court stated that the department having failed to challenge the order passed by Single Judge in earlier, could not challenge the directions given by the Court for compounding of criminal prosecution.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The present writ appeal has been filed challenging the order of the learned Single Judge insofar as it remitted the case back to the 4th Appellant herein with a direction to compound the case under Section 279 (2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
