Ajay Kumar Mittal, J. - (1.) Prayer in this petition filed under Articles 226/227 of the Constitution of India is for a direction to the respondents for compounding of offence under section 279(2) of the Income Tax Act, 1961 (in short, "the Act").
(2.) A few facts relevant for the decision of the controversy involved as narrated in the petition may be noticed. Petitioner No.1 was partner of firm M/s Roshan Lal Om Parkash (petitioner No.2) upto 31.3.1985. From 1.4.1985, the partnership firm was dissolved due to financial problem on account of a fraud committed before that date by a third party against whom criminal complaint was duly lodged. The firm petitioner No.2 was responsible for deduction of income tax @ 10% of the amount payable to any person on account of interest during the accounting year 1984-85. Therefore, certain deductions of income tax were made on different dates. The deducted amounts were liable to be deposited in appropriate bank on different dates and there was slight delay in making the said payments. These amounts were deposited voluntarily in the treasury without any notice from the department. There were two reasons for the delay i.e. firstly there was a fraud committed with the petitioners by a third party and therefore there were financial constraints on account of which the firm had to close down its business w.e.f 1.4.1985 and secondly on account of closure of business, day to day affairs of the business could not be attended properly. After the filing of the return, when the matter came to the notice of the Income Tax Officer, the said authority calculated interest of INR 426/- under Section 201(1A) of the Act vide order dated 7.3.1998, Annexure P.1 for this default. The assessee also deposited that amount in the treasury. The petitioners were not aware of the fact that payment of tax deducted at source was to be made within seven days. They were under the impression that the amount could be deposited in the treasury at the time of filing of return. The Income Tax Officer on instructions from Commissioner of Income Tax, Jalandhar (CIT) filed a criminal complaint dated 24.4.1989 in the court of Chief Judicial Magistrate, Bathinda under section 276B read with section 278-B of the Act on the ground that petitioner No.2 had committed a default in not depositing the tax in time. According to the petitioners, as per departmental instructions, no complaint could be filed under the provisions of the Act if the total amount of tax involved was small/negligible. In the present case, the interest payable for default in making payment was INR 426/- only. On 13.3.1996, the complaint was transferred to the court of Chief Judicial Magistrate, Mansa in view of the reorganization of Bathinda district. Meanwhile, the petitioner No.1 was suffering mental agony on account of criminal trial. He had undergone cardiac bypass surgery and was aged 62 years. On 21.9.1999, he moved an application to the CIT for compounding the offence under section 279(2) of the Act on the ground that he had been dealing with the department since 1956 and was never penalised for any kind of offence. Thereafter, petitioner No.1 was orally summoned by the Income Tax officer, Mansa asking him to give his consent to agree to pay fee of INR 2192/- as a condition for compounding the case to which he agreed. The matter remained pending for decision with the CIT till 29.11.1999 when the complaint matter was taken up for decision by Chief Judicial Magistrate, Mansa. It was brought to the notice of the trial court that since the matter regarding compounding of offence was pending before the authorities, the decision in the complaint be deferred. However, the Chief Judicial Magistrate declined the request and decided the matter holding the petitioner guilty of offence and awarding a punishment of one year six months plus a fine of INR 4000/- vide order dated 29.11.1999, Annexure P.4. Aggrieved by the order, the petitioners filed appeal before the Sessions Court, which is stated to be pending. Meanwhile it came to the notice of the petitioners that on the date of the decision dated 29.11.1999, by the trial court, the Chief Commissioner of Income Tax (CCIT) wrote a letter Annexure P.6 to the CIT asking him to compound the offence after deposit of INR 2192/- by the petitioners. The petitioners were never communicated this decision. The petitioners have been given to understand that the departmental authorities are not compounding the offence only for the reason that they have already been convicted and as per CBDT directions, the case cannot be compounded. On 3.7.2000, the petitioners approached the Central Board of Direct Taxes with a prayer to compound the offence on deposit of INR 2192/- but no action has been taken so far. Hence the instant petition by the petitioners.
(3.) Learned counsel for the petitioners submitted that there was delay in deposit of tax deducted at source amounting to INR 4870/- for which the petitioners had deposited the interest as well under Section 201(1A) of the Act. It was argued that the petitioners had filed an application for compounding under section 279(2) of the Act which was approved by the CCIT on payment of compounding fee of INR 2192/-. However, subsequently, the same was declined on 16.3.2000 vide Annexure P.8. It was urged that Petitioner No.1 is 75 years of age and has been facing the agony for the last more than 25 years and the default relates to the year 1985 whereas the prosecution itself was filed by way of a complaint on 24.4.1989. The default was for a short period upto maximum of six months for delay in depositing the amount and in such circumstances, Annexure P.8 be quashed and compounding in terms of Annexure P.6 be allowed. Reliance was placed on following judgments:- (i) Chairman, Central Board of Direct Taxes and others v. Smt. Umayal Ramanathan, (2009) 313 ITR 59 (ii) Income Tax officer v. Dr.K.Jagadeesan, (2002) 257 ITR 476 (iii) Y.P.Chawla and others v. M.P.Tiwari and another, (1992) 195 ITR SC 607, (iv) Bee Gee Motors and Tractors and another v. Income Tax officer, (1996) 218 ITR 155, (v) Ganga Solvent and others Hanuman Rice and Oil Mills and others v. State of Bihar and another, (1997) 226 ITR 401 (vi) Vijay Singh v. Union of India and another (2005) 278 ITR 467 (vii) Bawa Mahesh Singh and others v. Income Tax officer, (2005) 273 ITR 404 (viii) Anil Tools and Forging and others v. CCIT and others, (2011) 334 ITR 265.;