Delhi High Court - Orders
Meinhardt Singapore Pte.Ltd. & Anr vs The Chief Commissioner Of Income Tax on 6 February, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Purushaindra Kumar Kaurav
$~18
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 9620/2019
MEINHARDT SINGAPORE PTE.LTD. & ANR. ..... Petitioner
Through: Mr. Sandeep S. Tiwari, Ms.
Subhra B., Advs.
versus
THE CHIEF COMMISSIONER OF INCOME TAX
..... Respondent
Through: Mr. Vipul Agrawal, Sr. SC with
Mr. Gibran Naushad, Ms.
Sakshi Shairwal, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV
ORDER
% 06.02.2024
1. This writ petition has been preferred seeking the following reliefs:-
"(i) Issue such writ of mandamus and other nature of writ, direction or order by directing to respondent to not imposed compounding charges and to not proceed with prosecution in view of section-278AA of the Income Tax Act which lays down that no person shall be punishable for any failure referred to in section 276B and 278B, if he proves that there was reasonable cause for such failure.
(ii) To set-a-side the order dated 27-05-2019 issued by the Office of the Chief Commissioner of Income Tax (TDS), Delhi in exercise of power granted under section 279(2) of the Income Tax Act.
(iii) To issue a writ of mandamus by directing to the respondent to consider the Tax Refunds Claim of the petitioner for sum of Rs.
1,03,66,580-00 for FY. 2013-14 (Asst. Years 2014- 15), Rs.94,81,060-00 for FY.2014-15 (AY.2015-16) and Tax Refunds This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:12:12 claims of Rs.43,10,560-00 for FY.2015-16 (AY.2016-17) at the time of adjudicating the disputes for compounding of the case.
(iv) To issue such writ or writs, direction as this Hon'ble Court deem fit and proper in the interest of justice."
2. The petitioner had applied for compounding of offences consequent to a failure to deposit Tax Deducted at Source ["TDS"] in accordance with the time frames created under the Income Tax Act, 1961 ["Act"]. On consideration of the application which was made, the petitioner appears to have been apprised in terms of a Letter of Acceptance dated 27 February 2019 that the prayer for compounding would be duly considered subject to the payment of compounding charges amounting to Rs. 1,11,31,282/- within 15 days.
3. Undisputedly, there was a failure on the part of the petitioner to act in terms of the Letter of Acceptance. It is this which led to the impugned order under Section 279(2) of the Act dated 27 May 2019 coming to be passed and the application for compounding consequently rejected.
4. Before us the writ petitioner has principally referred to financial constraints and which, according to it, had led to a failure to abide by the statutory prescriptions placed in terms of the Act. The petitioner also alludes to various tax refund claims which, according to it, have not been claimed and pertain to Financial Years ["FYs"] 2013-14, 2014-15 and 2015-16. It is in the aforesaid context that a prayer is additionally made for those refunds being factored in for the purposes of evaluating the compounding charges which were payable.
5. Having heard learned counsels for parties, we find that the issue raised herein stands conclusively answered against the petitioner in terms of the judgment of the Court in Vikram Singh vs. Union of This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:12:12 India [2018 SCC OnLine Del 6725].
6. The Court in Vikram Singh had firstly found that compounding is clearly not a matter of right. It had then emphasized the imperatives of an assessee abiding by the conditions that may come to be imposed and its obligation to act in accordance with the same. It was further held that once the petitioner had willingly accepted to pay compounding charges, it would be bound by that obligation and a failure to comply would constitute a valid ground for the prayer for compounding being negatived.
7. We deem it apposite to extract the following passages from the judgment in Vikram Singh:-
"24. Compounding of offences cannot be taken as a matter of right. It is for the law and authorities to determine as to what kind of offences should be compounded, if at all, and under what conditions. The power to compound cannot be completely unbridled inasmuch as the same could give rise to enormous discretionary power, which could also lead to arbitrariness, discrimination, abuse, etc. For this reason, and in order to maintain uniformity and consistency, circulars and guidelines are required to be issued for compounding of offences. Such guidelines and circulars ensure a degree of objectivity.
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49. The petitioner ought to have exercised due diligence and deposited the tax and the interest at the inception without prejudice to his rights and contentions in the appeal. The non-payment of tax amounts, which are determined to be offences under the Act and delay by the petitioner in depositing the same is non-condonable in any manner whatsoever. Moreover, the petitioner has, by seeking compounding, consciously and voluntarily opted for:
(a) Compounding of the criminal offence ;
(b) Undertaking to withdraw the appeal ;
(c) Undertaking to pay the compounding charges determined ;
50. Having filed the compounding application the petitioner cannot attempt to wriggle out of his obligations to pay the compounding This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:12:13 charges by alleging that the same are exorbitant. The amount of compounding charges is not to be merely compared with the principal and the interest charged but has to be adjudged from the point of view of the long duration during which there was wilful non-payment of taxes. The conduct of the petitioner brooks no sympathy. The respondent-authorities, it appears, were helpless. Even filing of criminal prosecution appears to have made no difference. The judgments discussed above are clear to the effect that in cases of this nature, quid pro quo or proportionality is not always applicable.
51. There is no element of quid pro quo required, inasmuch as, the compounding fee charged is in the nature of tax under the Act. The legislation has vested the Central Board of Direct Taxes with power to prescribe compounding fee, etc., for different offences. It is well within the powers of Central Board of Direct Taxes as vested in it under the Act. The principle of proportionality also would not apply in the present case, inasmuch as, compounding fee is in the nature of a payment made to avoid punishment for a criminal offence.
52. In M. P. Purusothaman v. Asst. DIT (Prosecution) (2001) 252 ITR 603 (Mad) the High Court of Madras, while considering the power of the Central Board of Direct Taxes to compound an offence under Chapter XXII of the Act held that compounding of an offence is the exception and not the rule. It rejected the contention that the Central Board of Direct Taxes has to compulsorily hear the petitioner before rejecting the application for compounding. Compounding fee is of a deterrent nature and is imposed with a view to ensure compliance with the law.
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56. The petitioner having voluntarily agreed and undertaken to the Department to pay the compounding charges and to withdraw his appeal, ought to be directed to be bound down by the same. It is a settlement process voluntarily invoked by the petitioner in order to escape criminal prosecution under the Act. Since an accused may have to suffer severe consequences for non-payment of tax, if he is held to be guilty, it is not open to him to challenge the reasonableness of the same. The petitioner had consciously undertaken to abide by the decision of the Committee constituted for compounding the offences.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:12:13
57. Accordingly, the petitioner has the option to deposit the compounding charges as determined within a period of four weeks from the date of this order, failing which, the authorities would be entitled to recompute the compounding charges for the delayed payment and proceed in accordance with law."
8. Accordingly, and in view of the aforesaid, we find no merit in the challenge as raised. The writ petition consequently fails and shall stand dismissed.
YASHWANT VARMA, J.
PURUSHAINDRA KUMAR KAURAV, J.
FEBRUARY 06, 2024/neha This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:12:13