Sports Infratech Pvt. Ltd. & Anr v. Deputy Commissioner Of Incometax(Hqrs

$~8*IN THE HIGH COURT OF DELHI AT NEW DELHI Judgement Delivered on : 03.01.2017 + W.P.(C) 3397/2016 SPORTS INFRATECH PVT. LTD. & ANR..... PetitionersThrough: Mr. Aditya Nayyar, Adv. Versus DEPUTY COMMISSIONER OF INCOMETAX(HQRS)..... Respondent Through: Mr. Sanjay Kumar and Mr. DileepShivpuri, Advs. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRI S. RAVINDRA BHAT (ORAL) 1.Thepetitionerisaggrievedby anorderoftheChiefCommissioner of Income Tax under Section 279(2) of the IncomeTaxAct,1961rejectingitsapplicationwherebyreliefofcompounding of the offence under Section 276B had been sought. 2.Facts are not denied; the petitioner had omitted to depositamounts deducted as tax, from the sums payable under variouscontracts. These contracts were entered into by it, towards servicesrendered in connection with the Commonwealth Games, 2010. Theamount in question i.e. the delayed payment was to the tune ofRs.70,06,803/-. The petitioner was proceeded with and apparently acomplaint for the offence prescribed under Section 276B was filed. It was in these circumstances that the petitioner sought for compoundingof the offence under Section 279(2). Its application was rejected; bythe impugned order. The Chief Commissioner inter alia reasoned asfollows: “Thecaseisnotfoundtobefitforcompounding as the applicant does not fulfil criteriano. 13 of application proforma. In the applicant’scase the CBI has conducted search operations onthe premises on 08.04.2011 and as a consequence ofthis the company was black listed by the CentralPublic Works Department and Delhi DevelopmentAuthority.Opportuniies of being heard wereprovided by the A.O. and by the undersigned beforedeciding the application &facts on record have beenconsidered carefully. The applicant does not fulfilthe eligibility conditions for consideration of its casefor compounding as per para 8(v) of Board'sguidelinesdated3.12.2014.Hence,thecompounding application is not acceptable which isrejected hereby.” 3.The Chief Commissioner appears to have formed the opinionthat the compounding was not permissible in view of the guidelinesissued by the Central Board for Direct Taxes imposed especially inview of para 8(v) thereof. For convenience it would be necessary toextract para 7 and para 8 of the said guidelines which are as follows: “7. Eligibility Conditions for compounding: The following conditions should be satisfied forconsidering compounding of an offence:- i.The person makes an application to. theCCIT/DGIT having jurisdiction over thecase for compounding of the offence(s) in the prescribed format. ii.The person has paid the outstanding tax,interest, penalty and any other sum due,relatingtotheoffenceforwhichcompounding has been sought. iii.Thepersonundertakestopaythecompoundingchargesincludingthecompoundingfee,theprosecutionestablishment expenses and the litigationexpenses including counsel's fee, if any,determinedandcommunicatedbytheCCIT/DGIT concerned. iv.The person undertakes to withdraw appealfiled by him, if any, in case the same has abearingontheoffencesoughttobecompounded. In case such appeal has mixedgrounds, some of which may not be relatedto the offence under consideration, theundertaking may be taken for appropriatemodification in grounds of such appeal. 8.Offences generally not to be compounded: i.ACategory'A'offencessoughttobecompounded by an applicant in whose casecompounding was allowed in the past, in anoffence under the same section for which thepresent compounding has been requested, on3 occasions or more.compounded by an applicant in whose casecompounding was allowed in the past, in anoffence under the same section for which thepresent compounding has been requested, on3 occasions or more. ii.A Category 'B' offence other than the firstoffence as defined herein below:offence as defined herein below: 8.Offences generally not to be compounded: i.ACategory'A'offencessoughttobecompounded by an applicant in whose casecompounding was allowed in the past, in anoffence under the same section for which thepresent compounding has been requested, on3 occasions or more.compounded by an applicant in whose casecompounding was allowed in the past, in anoffence under the same section for which thepresent compounding has been requested, on3 occasions or more. ii.A Category 'B' offence other than the firstoffence as defined herein below:offence as defined herein below: First offence means offence under anyof the Direct Tax Laws committedprior to (a) the date of issue of anyshow-cause notice for prosecution or(b)anyintimationrelatingto prosecution by the Department to theperson concerned or (c) launching ofany prosecution, whichever is earlier; OR Offencenotdetectedbythedepartment but voluntarily disclosedby a person prior to the filing of theapplicationforcompoundingofoffence in the case under any DirectTax Acts. For this purpose, offence isrelevant if it is committed by the sameentity. The first offence is to bedetermined separately with referenceto each section of the Act under whichit is committed. iii.Offences committed by a person who, as aresult of investigation conducted by anyCentralorStateagencyandasperinformation available with the CCIT/DGITconcerned, has been found involved, in anymanner, in anti-national /terrorist activity.result of investigation conducted by anyCentralorStateagencyandasperinformation available with the CCIT/DGITconcerned, has been found involved, in anymanner, in anti-national /terrorist activity.iv.Offences committed by a person who, wasconvicted by a court of law for an offenceunder any law, other than the Direct TaxesLaw, for which the prescribed punishmentwas imprisonment for two years or more,with or without fine, and which has abearingontheoffencesoughttobecompounded.convicted by a court of law for an offenceunder any law, other than the Direct TaxesLaw, for which the prescribed punishmentwas imprisonment for two years or more,with or without fine, and which has abearingontheoffencesoughttobecompounded. V.Offences committed by a person which, asper information available with the CCIT /DGIT concerned, have a bearing on a caseunder investigation (at any stage includingenquiry, filing of FIR/Complaint) byEnforcementDirectorate,CBI,Lokpal,Lakayukta or any other Central or Stateper information available with the CCIT /DGIT concerned, have a bearing on a caseunder investigation (at any stage includingenquiry, filing of FIR/Complaint) byEnforcementDirectorate,CBI,Lokpal,Lakayukta or any other Central or State agency.” 4.The petitioner contends that the view taken by the ChiefCommissioner cannot be sustained for the reasons that the ongoinginvestigations have culminated in a closure report. In support of thiscontention, reliance is placed upon the letter from Superintendent ofPolice, CBI’s letter of 11.08.2015, written to it. That letter reads asfollows: To, The Director,Sports Infratech Pvt. Ltd.204, OI<hla Industrial Estate,Phase-Ill,New Delhi.Sub: Status on case (RC 3(A)/2011/AC-III/CBI/NewDelhi) of M/s. Sports Infratech Pvt. Ltd. (formerlyknown as Jubilee Sports Technology (India) Pvt.Ltd.Sir, May please refer to your letter No. SIPL/2015-16/30dated 05.08.2015 on the subject cited above.In this regard, it is intimated that closure report wasfiled before the Court of Special Judge, PatialaHouse, New Delhi and the next date of hearing inthe matter is 19.10.2015.” 5.It is also contended that the Chief Commissioner fell into errorin holding that para 8(v) of the guidelines constituted a bar forconsideration of the application without having regard to the facts ofthe case.The petitioner submits that the obligation to deposit theTDS amount arose on 19.09.2011, 27.09.2011 and 29.09.2011. Priorto these in April, 2011, material including its books of accounts and May please refer to your letter No. SIPL/2015-16/30dated 05.08.2015 on the subject cited above.In this regard, it is intimated that closure report wasfiled before the Court of Special Judge, PatialaHouse, New Delhi and the next date of hearing inthe matter is 19.10.2015.” 5.It is also contended that the Chief Commissioner fell into errorin holding that para 8(v) of the guidelines constituted a bar forconsideration of the application without having regard to the facts ofthe case.The petitioner submits that the obligation to deposit theTDS amount arose on 19.09.2011, 27.09.2011 and 29.09.2011. Priorto these in April, 2011, material including its books of accounts and documents were seized by the CBI and had not been released so as toenable to make necessary TDS payment. Under these circumstances,the petitioner faced genuine difficulties which prevented it fromcomplying with the provisions of law. In completely ignoring thesefacts and in rejecting its application, the Chief Commissioner acted inerror of jurisdiction. 6.The learned counsel for the Revenue urges that the bindingnature of the Board’s instructions and guidelines is apparent fromexplanation to Section 279(3) which clarifies that the power to grantor refuse compounding is essentially discretionary and actuallyadministrative.Therefore, the guidelines framed for its exerciseunder Section 279 are binding upon all Revenue Authorities includingthe Chief Commissioner. Learned counsel relied upon the SupremeCourt decision in Assistant Commissioner, Assessment II, Bangaloreand Others vs. Velliappa Textiles Ltd. and Another [2003] 263 ITR550 (SC) to highlight that compounding application cannot beconcluded to as a matter of right but rather is subject to exercise ofdiscretion.There is no quarrel with the proposition that power toaccept a plea for compounding or refusal is essentially discretionary.The exercise, however, in each case is dependent upon the Authoritywho has to apply his or her mind judiciously to the circumstances ofeach case. The rejection of the petitioner’s application in this case isentirely routed on the Chief Commissioner’s understanding of theconditions of ineligibility of para 8(v) apply. In this Court’s opinion,that view was based upon an erroneous understanding of law. Whilstguidelines no doubt are to be kept in mind specially while exercising jurisdiction, they cannot blind the authority from considering theobjective facts before it.In the present case petitioner’s failure todeposit the amount collected was beyond its control and was onaccount of seizure of books of accounts and documents etc. But forsuch seizure, the petitioner would quite reasonably be expected todeposit the amount within the time prescribed or at least within thereasonable time. Instead of considering these factors on their meritsand examining whether indeed they were true or not, the ChiefCommissioner felt compelled by the text of para 8(v). That condition,no doubt is important and has to be kept in mind, cannot be onlydetermining. In the present case, the material on record in the form ofa letter by the Superintendent of CBI also shows that a closure reportwas in fact filed before the competent court.Having regard to allthese facts, this Court is of the opinion that the refusal to consider andaccept the petitioner’s application under Section 279(2) cannot besustained. The impugned order is hereby set aside.7.The Chief Commissioner is hereby directed to consider therelevant facts and pass necessary orders in accordance with lawwithin six weeks after granting a fair opportunity to the petitioner inthat regard. The petition is allowed in the above terms. S. RAVINDRA BHAT, J JANUARY 03, 2017/acm NAJMI WAZIRI, J