Mehta Laboratories v. The Principal Chief Commissioner of Income-tax-2
[Citation -2020-LL-0107-72]

Citation 2020-LL-0107-72
Appellant Name Mehta Laboratories
Respondent Name The Principal Chief Commissioner of Income-tax-2
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 07/01/2020
Assessment Year 1983-84
Judgment View Judgment
Keyword Tags tax sought to be evaded • compounding of offence • incriminating material • compounding charges • concealed income • liability to pay • cash credit • evade tax • bogus purchase
Bot Summary: The short question raised for determination of this Court as to whether 100 of the amount sought to evaded or 100 of tax sought to be evaded is to be paid for compounding of offence under Section 276C(1) of the Income Tax Act, 1961 for short 'The Act, 1961', when offence pertains to willful attempt to evade tax, etc. In the Paragraph 12.2 of the said guidelines provides for eligible amount to be paid by the assessee for the compounding offence under section 276C(1) of the Act at 100 of the amount sought to be evaded, whether 100 of the amount of tax sought to be evaded. The petitioner on receiving such details, vide reply dated 4th October 2018 objected the working of the compounding fees based on the amount of income evaded instead of amount of tax evaded. The learned counsel appearing for the petitioner submitted that the Assessing Officer committed an error while working out the amount of compounding fees paid by the petitioner, as the compounding fees is required to be paid on the basis of 100 of tax evaded and not 100 of the amount of income sought to be evaded by relying upon the decision of this Court in the case of Supernova System Ltd. Vs. Chief Commissioner of Income Tax reported in 2018 99 taxmann.com 300. In the prescription of punishment thus, Page 5 of 6 Downloaded on : Tue Jan 28 10:46:21 IST 2020 C/SCA/217/2019 JUDGMENT 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. In view of the aforesaid decision of this Court, for compounding of offence under Section 276C(1) of the Act, 1961 would be permissible on payment of 100 of the tax sought to be evaded and not 100 of the amount sought to be evaded by the assessee. The petitioner is therefore required to pay 100 of the tax sought to be evaded for compounding of offence under Section 276C(1) of the Income Tax Act, 1961.


C/SCA/217/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 217 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 221 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 222 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA 1 Whether Reporters of Local Papers may be allowed to NO see judgment ? 2 To be referred to Reporter or not ? NO 3 Whether their Lordships wish to see fair copy of NO judgment ? 4 Whether this case involves substantial question of law NO as to interpretation of Constitution of India or any order made thereunder ? MEHTA LABORATORIES THROUGH PARTNER KAUSHIK MAYACHAND MEHTA Versus PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX 2 Appearance: MR. HARDIK V VORA(7123) for Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for Respondent(s) No. 1,2 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 07/01/2020 COMMON ORAL JUDGMENT Page 1 of 6 Downloaded on : Tue Jan 28 10:46:21 IST 2020 C/SCA/217/2019 JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. Rule returnable forthwith. Mr. Karn Sanghani, learned counsel appearing for Mrs. Mauna Bhatt, learned Senior Standing Counsel waives service of notice of rule for and on behalf of respondents. 2. Since issues raised in all captioned writ applications are same, those were heard analogously and are being disposed of by this common judgment and order. 3. short question raised for determination of this Court as to whether 100% of amount sought to evaded or 100% of tax sought to be evaded is to be paid for compounding of offence under Section 276C(1) of Income Tax Act, 1961 [for short 'The Act, 1961'], when offence pertains to willful attempt to evade tax, etc. 4. Central Board of Direct Taxes [CBDT] has issued guidelines for compounding of offences under Direct Tax Laws, 2014. In Paragraph 12.2 of said guidelines provides for eligible amount to be paid by assessee for compounding offence under section 276C(1) of Act at 100% of amount sought to be evaded, whether 100% of amount of tax sought to be evaded. 5. short facts of case are that petitioner was partnership firm and dealing in business of lubricating oil and petroleum products. search was conducted on various premises of petitioner on 11th October 1984. During course of search, incriminating material such as books of accounts, written loose papers etc. and 503 grams of gold ornaments were seized and were retained Page 2 of 6 Downloaded on : Tue Jan 28 10:46:21 IST 2020 C/SCA/217/2019 JUDGMENT under section 132(5) of Act. In scrutiny assessment proceedings, assessment order was passed for period from A.Y. 1983 84 to A.Y.1985 86 by Assessing Officer making addition on account of cash credit, bogus purchases etc. 6. Being aggrieved by assessment order, appeal was preferred before Commissioner of Income Tax (Appeals) and then before Income Tax Appellate Tribunal, which were partly allowed. 7. In year 1987, three complaints under Sections 276C(1), 271, 278B and 278 of Act, 1961 were filed being Criminal Case No.57 of 1987 for A.Y. 1983 84; Criminal Case No.54 of 1987 for A.Y.1984 85 and Criminal Case No.56 of 1987 for A.Y. 1985 86 in Court of Additional Chief Metropolitan Magistrate, Ahmedabad by respondents against petitioner. 8. petitioner filed application for compounding of offences as per guidelines issued by Central Board of Direct Taxes for compounding of offences under Direct Tax Laws, 2014 on 1st June 2017. Assessing Officer intimated working of compounding fees by letter dated 8th August 2018 on basis of amount of concealed income and communicated approval of Chief Commissioner of Income Tax 2, Ahmedabad for compounding fees directing petitioner assessee to pay amount worked out within 60 days on receipt of intimation. 9. petitioner on receiving such details, vide reply dated 4th October 2018 objected working of compounding fees based on amount of income evaded instead of amount of tax evaded. It was contended that amount for compounding offeces is required to be paid at 100% of tax evaded. petitioner relied on decision of Page 3 of 6 Downloaded on : Tue Jan 28 10:46:21 IST 2020 C/SCA/217/2019 JUDGMENT this Court in case of Supernova System Pvt. Ltd Vs. CCIT 2 reported in [2018] 99 taxmann.com 300 (Gujarat). 10. Heard Mr. Hardik Vora, learned counsel appearing for petitioner and Mrs. Mauna Bhatt, learned senior standing counsel appearing for respondents. 11. learned counsel appearing for petitioner submitted that Assessing Officer committed error while working out amount of compounding fees paid by petitioner, as compounding fees is required to be paid on basis of 100% of tax evaded and not 100% of amount of income sought to be evaded by relying upon decision of this Court in case of Supernova System (P.) Ltd. Vs. Chief Commissioner of Income Tax reported in [2018] 99 taxmann.com 300 (Gujarat). learned counsel appearing for petitioner submitted that amount as per calculation given by respondent Income tax Officer has already been deposited by petitioner. 12. On other hand, learned counsel appearing for respondents referring to affidavit in reply submitted that respondent department has accepted decision of this court and Board Circular in case of Supernova System (P.) Ltd. and accordingly, petitioner is required to pay 100% amount of tax sought to be evaded not on 100% amount of income sought to be evaded. 13. Having considered submissions made by other side, it is germane to refer to decision of this Court in case of Supernova System (P.) Ltd. [Supra], wherein, this Court has held as under: Page 4 of 6 Downloaded on : Tue Jan 28 10:46:21 IST 2020 C/SCA/217/2019 JUDGMENT 9. In terms of such compounding powers, CBDT has been issuing circulars for providing guidelines for compounding offenses under Act. We are concerned with latest guideline issued on 23.12.2014 issued by CBDT. This circular contains detailed provisions and procedure for compounding offenses under Act. 10. Para 12 of said circular pertains to fees for compounding. In context of section 276C(1) of Act, para 12.2 prescribes fees for compounding as under: 12.2 Section 276C(1) Wilful attempt to evade tax etc. 100% of amount sought to be evaded. 11. Para 12.2 of said circular thus prescribes compounding fees for offense under section 276C(1) at 100% of amount sought to be evaded. This para also starts with expression Section 276C(1) Wilful attempt to evade tax etc. . title of this para thus, is taken from section itself and compounding fee is to be computed at rate of 100% of amount sought to be evaded. Since this para does not contain any specification of amount sought to be evaded , we may fall back on statutory provisions in relation to which, this compounding fee is prescribed. Sub section (1) of section 276C, as noted, prescribes punishment for person who willfully attempts in any manner to evade any tax, penalty or interest chargeable under Act. This could be without prejudice to any penalty that may be imposable on him under any provisions of Act. Under such circumstances, as per sections stood at relevant time, person concerned would be punishable; (i) In case where amount sought to be evaded exceeds Rs.250,000/ , with rigorous imprisonment for 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 term which shall not be less than three months but which may extend to two years and with fine. 12. This provision thus while prescribing punishment for willful attempt to evade tax, penalty or interest chargeable, provides for more severe punishment in case amount sought to be evaded exceeds Rs.250,000/ . For rest, punishment prescribed is lesser. This prescription of punishments in two categories is thus linked with amount sought to be evaded. This amount sought to be evaded is in relation with action of person of willful attempt to evade tax, penalty or interest chargeable. In prescription of punishment thus, Page 5 of 6 Downloaded on : Tue Jan 28 10:46:21 IST 2020 C/SCA/217/2019 JUDGMENT when there is reference to amount sought to be evaded, it must be seen in light of willful attempt on part of concerned person to evade tax, penalty or interest. This provision thus, links severity of punishment on amount sought to be evaded and thus, in turn has relation to attempt at evasion of tax, penalty or interest. Thus, when CBDT circular refers to amount sought to be evaded, it must be seen and understood in light of 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 basic compounding fees which in present case would be Rs.2,71,000/ and not Rs.8,70,000/ as computed by departmental authorities. rest of computation is consequential and automatic. impugned communication dated 20.03.2018 is therefore set aside. respondent shall carry out fresh computation of petitioner's liability to pay compounding charges in terms of this order. We are informed that, to avoid any complication, petitioner has under protest, paid up entire amount of Rs.10,49,000/ as demanded by department. Once such fresh computation is made, excess would be refunded by department to petitioner latest by 31.10.2018. 14. In view of aforesaid decision of this Court, for compounding of offence under Section 276C(1) of Act, 1961 would be permissible on payment of 100% of tax sought to be evaded and not 100% of amount sought to be evaded by assessee. 15. In view of forgoing, petitions succeed and are accordingly allowed. petitioner is therefore required to pay 100% of tax sought to be evaded for compounding of offence under Section 276C(1) of Income Tax Act, 1961. Rule is made absolute to aforesaid extent. No order as to costs. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) aruna Page 6 of 6 Downloaded on : Tue Jan 28 10:46:21 IST 2020 Mehta Laboratories v. Principal Chief Commissioner of Income-tax-2
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