Chennai: The Madras high court as set aside an order of the Director General of Income Tax, dismissing a petition from K.M.Mammen, head of MRF Ltd., seeking compounding of the offences in the criminal complaint relating to allegedly concealing an amount of Rs 2.26 crore deposited in a foreign bank account while filing his returns for the assessment year 2002-2003.
Allowing a petition from K.M.Mammen, Justice M.S.Ramesh remanded the matter back to the committee prescribed under the Central Board of Direct Taxes guideline.
“The petitioner is granted liberty to place a copy of this order along with fresh compounding petition under section 279 of the Income Tax Act, before the committee, within 30 days. On receipt of the application, the committee shall consider the same, in the light of the observations made in this order and pass appropriate orders in accordance with law within 60 days there from”, the judge added.
According to petitioner the case of the income tax department was that the petitioner had created a trust in the name of Webster Foundation and the trust had opened an account with LGT Bank, Liechtenstein, a foreign state in Europe. The petitioner, his father and his brother were named as direct beneficiaries of the Trust. It was alleged that the petitioner had made a declaration of endowment in favour of M/s Webster Foundation, by endowing the foundation with a sum of Euro 1,23,000 on March 24, 2000. The statement of accounts showing the balance in the foreign account of Webster Foundation as on December 31, 2001, including the accrued interest was a sum of Swiss Franc 778,437.80 (equivalent to Indian Rs 2.26 crore). On March 25, 2009, a notice was issued stating that the income of the petitioner chargeable to tax for the assessment year 2002-03 has escaped assessment. After getting reply from the petitioner, the assessment order was passed on December 29, 2009. The petitioner had paid the tax for Rs 1.28 crore.
After a year, a notice was issued for alleged commission of offences under section 276C and 277 of the income tax. After obtaining sanction for prosecution, a complaint was filed. Therefore, the petitioner filed a petition for compounding the offences. But it was dismissed.
Concurring with the submissions of Abudukumar Rajarathinam, counsel for the petitioner, the judge said when the revised guidelines confers jurisdiction on the committee for compounding non-technical offences, the reasoning of the department that the application came to be rejected in the preliminary stage itself and hence the committee need not be approached, was not founded on any legal principle.
The judge said Abudukumar Rajarathinam, counsel for the petitioner relies on Section 279 (1A) of the IT Act and decision in Prem Dass's case and contended that since the commissioner (appeals) has reduced the penalty from 300 percent to 100 percent, no prosecution can be launched or continued against the assessee. In the case of Prem Dass, the Supreme Court was of the view that the assessee cannot be proceeded against for the offences, when the commissioner (appeals) has reduced the penalty. Section 279 of the IT Act, in explicit terms, was self-explanatory to the effect that when the penalty imposed on the assessee was reduced under section 273A, such an assessee cannot be proceeded against for offences under sections 276C or 277, the judge added.