M/S.c.r.n. Investment Private Limited A Private Limited Company v. The Chief Commissioner Of Income Tax-1 Aayakar Bhavan, Main Building 1St Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 24.01.2020 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH Writ Petition No.906 of 2018WMP.No.1089 of 2018 M/s.C.R.N. Investment Private LimitedA Private Limited Company,Represented by it Managing DirectorMs.Surekha Raghavendran ...PetitionerVs. 1.The Chief Commissioner of Income Tax-1 Aayakar Bhavan, Main Building 1st Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034. Aayakar Bhavan, Main Building 1st Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034. 2.The Deputy Commissioner of Income Tax Corporate Circle 1 (2) Aayakar Bhavan, Main Building 1st Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034 ...Respondent PRAYER: PETITION filed under Article 226 of the Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus, calling for the impugned proceedings of the respondentin F.No. Compounding/2015-16 dated 03.03.2016 in the case of thepetitioner company and quash the same and consequently directthe respondent to permit the compounding applications for the AY1995-1996 after providing a reasonable opportunity. For Petitioner : Mr.P. Ramesh Kumar For Respondent : Mrs.Hema MuralikrishnanSenior Standing Counsel The petitioner challenges order dated 03.03.2016, passed interms of Section 279(2) of the Income Tax Act, 1961 (in short'Act'), rejecting the application for compounding filed by thepetitioner seeking compounding of offence in respect ofassessment year (AY) 1995-96. 2. The petitioner had originally filed returns of incomeclaiming depreciation in respect of steel rollers leased toBellary Steels and Alloys Ltd., (Bellary Steels). A survey wascarried out in terms of Section 133A of the Act in the premisesof Bellary Steels, where it was found that the entiretransaction was a sham and the petitioner/manufacturer had notsupplied steel rollers to Bellary Steels at all. Bills wereraised merely to facilitate funding from credit institutions.The lessee had not even produced the original delivery challans.Thetransactionwastripartite,involvingthemanufacturer/supplier, the lessor/the petitioner and thelessee/Bellary Steels. Pursuant to the survey, the petitionerrevised its return of income withdrawing the claim fordepreciation and remitting the entire tax payable on thetransaction in question. 3. While completing the assessment, proceedings for thelevy of penalty under Section 271(1)(c) were initiated forconcealment of income and furnishing of inaccurate particularsof income. 4. The petitioner contended that it was not aware of theforged documents and had proceeded on the basis that thetransaction was a genuine one. This stand was rejected by theCommissioner of Income Tax (Appeals), who by order dated17.03.2004 held that there were no dispute on the position thatthe transaction was bogus. The petitioner had clearly committeda fraud that had serious financial consequences. The Officeralso noted that incidentally, no action had been taken by thepetitioner against Bellary Steels to support its statement thatit was inadvertently drawn into a sham transaction. 5. The penalty levied was carried further in appeal beforethe Income Tax Appellate Tribunal and all findings of fact bythe first appellate authority stood confirmed. Specifically, thefacts noted were (i) the assessee claimed to have inspected thepremises of Bellary Steels for inspection of the machineries but https://hcservices.ecourts.gov.in/hcservices/ the fact was that there was no machinery supplied by themanufacture (ii) that this amounted to a substantial fraud uponthe Department since the false claim for depreciation on non-existing assets was made consciously. 5. The penalty levied was carried further in appeal beforethe Income Tax Appellate Tribunal and all findings of fact bythe first appellate authority stood confirmed. Specifically, thefacts noted were (i) the assessee claimed to have inspected thepremises of Bellary Steels for inspection of the machineries but https://hcservices.ecourts.gov.in/hcservices/ the fact was that there was no machinery supplied by themanufacture (ii) that this amounted to a substantial fraud uponthe Department since the false claim for depreciation on non-existing assets was made consciously. 6. These concurrent findings of fact by the lowerauthorities was confirmed further by a Division Bench of thisCourt in Tax Case (Appeal) No.124 of 2007 by order dated20.02.2007 dismissing the petitioners' appeal. This order hasattained finality. 7. The petitioner had in the meantime sought compounding ofthe offence that was rejected on the ground that the case of thepetitioner fell within the parameters of an 'Offences involvingmajor fraud or scam or misappropriation' or .... 'Offencescommitted by an assessee, who has enabled others in large scaleconcealment of income in a systematic and planned way over anumber of years like hawala entries, bogus trusts, bogusremittance etc.'. 8. The above portion in italics constitute the guidelinesof the Central Board of Direct Taxes in F.No.285/90/2008IT(Inv.)/12 dated 16th May 2008 that have been relied upon by theChief Commissioner of Income Tax in rejecting the request forcompounding. 9. Before me the petitioner hardly has any defence to offerexcept to refer to its letter dated 26.03.2014 seeking aclarification from the respondent in respect of anticipatedprosecution proceedings for the AY 1996-97. I do not find anyrelevance to this reference by the petitioner. 10. In the light of the categoric findings of fact by theauthorities at all levels, there absolutely no merit in thiswrit petition and the same is dismissed. Connected miscellaneouspetitions are closed. No costs. Sd/- Assistant Registrar ska //True Copy// To 1.The Chief Commissioner of Income Tax-1 Aayakar Bhavan, Main Building 1st Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034. Aayakar Bhavan, Main Building 1st Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034. 2.The Deputy Commissioner of Income Tax Corporate Circle 1 (2) Aayakar Bhavan, Main Building 1st Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034 Corporate Circle 1 (2) Aayakar Bhavan, Main Building 1st Floor, 121, Mahatma Gandhi Salai Nungambakkam, Chennai-600 034 +1 cc to Mr.P.Ramesh Kumar, Advocate, S.R.No.5248, 5281 +1 cc to Mr.Hema Muralikrishnan, Advocate, S.R.No.5248 Writ Petition No.906 of 2018WMP.No.1089 of 2018 VG(CO)RN(21/05/2020)