Madras High Court
The Principal Commissioner Of Income ... vs Ito on 11 December, 2023
Author: R.Mahadevan
Bench: R.Mahadevan, Mohammed Shaffiq
W.A.No.1767 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 11.12.2023
CORAM
THE HONOURABLE MR.JUSTICE R.MAHADEVAN
AND
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
W.A. No.1767 of 2022 and
C.M.P. No.12970 of 2022
1.The Principal Commissioner of Income Tax,
Central-I, No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034.
2.The Additional Commissioner of Income Tax,
Central Range-I, No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034.
3.The Deputy Commissioner of Income Tax,
Central Circle-I(1), Income Tax New Building,
Room No.112, 1st Floor,
No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034.
4.The Director General of Income Tax (Investigation),
No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034. ... Appellants /
Respondents
v.
K.M.Mammen,
No.17, Boat Club Road,
3rd Avenue, R.A.Puram,
Chennai-600 028. ... Respondent / Petitioner
1/25
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W.A.No.1767 of 2022
Prayer: Writ Appeal is filed under Clause 15 of the Letters Patent, praying
to set aside the order dated 13.04.2022 passed by the learned Judge in
W.P.No.23800 of 2021.
For Appellants : Mr.AR.L.Sundaresan
Additional Solicitor General
assisted by Mr.A.P.Srinivas
For Respondent : Mr.N.L.Rajah,
Senior Advocate
for Mr.S.Ashok Kumar
JUDGMENT
(Judgment of the Court was made by MOHAMMED SHAFFIQ,J.)
The present writ appeal has been filed challenging the order of the
learned Single Judge insofar as it remitted the case back to the 4 th Appellant
herein with a direction to compound the case under Section 279 (2) of the
Income Tax Act, 1961 (hereinafter referred to as "the Act").
2. There have been proceedings in relation to the alleged offences
under Sections 276C and 277 of the Act before various forums including the
Economic Offences Court, Statutory appeals before the Commissioner
(Appeals) and Tribunal, Writ Petitions and Contempt Petition / Appeal. It
may thus be necessary to give a broad overview of the history of the litigation
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so far under the following heads:
a. Assessment and Appellate Proceedings;
b. Criminal Proceedings;
c. Writ and Contempt Proceedings
a. Assessment and Appellate Proceedings:
(i) The respondent herein is an individual aged about 72 years and the
Chairman and Managing Director of MRF Limited. He was assessed to tax
with PAN AAEMP0314R.
(ii) For the Assessment Year 2002-03, the assessee filed the return of
income on 29.07.2002 declaring a total income of Rs.45,48,850/- and the
same was processed under Section 143(1) of the Act.
(iii) Whileso, the assessing officer allegedly received information that
the respondent had transferred through LGT Bank Liechenstein, substantial
sums of Euro currencies in favour of Webster Foundation, a Trust, in which
the respondent is stated to be one of the direct beneficiaries, apart from his
father and brother.
(iv) The assessment was sought to be reopened and notice under
Section 148 of the Act for the assessment year 2002-03 was issued proposing
to bring to tax income which has allegedly escaped assessment. The
reasssessment was made vide order dated 29.12.2009 under Section 147 r/w
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143(3) of the Act whereby, a sum of Rs.2.26 Crores lying in the said bank
account as on 31.12.2001 was assessed as unexplained investment under
Section 69 of the Act.
(v) The respondent preferred an appeal against the above said order of
reassessment before the Commissioner of Income Tax (I), Chennai, which
was dismissed by the Commissioner (Appeals) vide order dated 30.03.2011.
It was carried by way of appeal to the Tribunal. The appeal to the Tribunal
also stood dismissed vide order dated 25.02.2013 on the premise that the
foundation was created and duly signed by the respondent, who was found to
be a beneficiary of the said Trust / Foundation. The order of the Tribunal is
the subject matter of appeal in TCA. No. 252 of 2013, which is pending
before this Court.
(vi) In the meanwhile, vide order dated 21.03.2012, a maximum
penalty at 300% of tax sought to be evaded under Section 271(1)(c) of the
Act was imposed. Aggrieved by the levy of penalty, an appeal was preferred
before the Commissioner (Appeals), who, vide order dated 25.03.2014 in
ITA No.12/2012-13, reduced the penalty from 300% to 100% of the tax
sought to be evaded. The penalty thus stood reduced from Rs.2,07,82,020/-
to Rs.69,27,342/-. The respondent as well as the Revenue preferred further
appeals against the above order of the Commissioner (Appeals). Both the
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appeals stood dismissed by the Tribunal vide common order dated
27.09.2017. In other words, the penalty, which was originally imposed at
300% stood reduced to 100% of the tax sought to be evaded. Aggrieved by
the order of the Tribunal, both the Revenue as well as the respondent are in
appeal before this Court in Tax Case Appeal Nos. 216 of 2018 and 875 of
2017 respectively.
b. Criminal Proceedings:
The respondent was prosecuted under Sections 276C and 277 of the
Act, in E.O.C.C.No. 121 of 2011 before the Additional Chief Metropolitian
Magistrate (Economic Offence – I), Egmore. He preferred a Criminal O.P.
No. 9065 of 2011 before this court to call for the records in the said
proceedings and quash the same. Vide order dated 28.02.2019, the said
criminal original petition was dismissed with a direction to the Additional
Chief Metropolitian Magistrate (Economic Offence-I) to expedite the trial and
conclude the same. Though a clarification was sought to the order dated
28.02.2019, vide order dated 06.03.2019, it was declined. Importantly,
reliance was placed by the respondent herein on the decision of the Hon'ble
Supreme Court in Prem Dass v. ITO, (1999) 5 SCC 241 to contend that in
view of the reduction of penalty from 300% to 100%, no prosecution can be
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launched or continued, which was however distinguished by the learned
Judge, while disposing the Criminal Original Petition. The matter was
challenged before the Apex Court and an order of stay of operation of the
order dated 28.02.2019 passed by the learned Judge in Crl.O.P.No. 9065 of
2011 was granted by the Apex Court.
c. Writ and Contempt Proceedings:
i) The respondent filed a Writ Petition in W.P.No.3929 of 2014 before
this Court challenging the order dated 15.01.2014, whereby the petition for
compounding under Section 279(2) of the Act stood rejected. This Court
found that in view of the reduction of penalty from 300% of the tax evaded to
100%, the decision in Prem Dass case would apply. Further, it was found
that the respondent would be entitled to the benefit of Section 279(1A) of the
Act.
ii) Pursuant to the above directions of this Court in W.P. No. 3929 of
2014, the 4th Appellant herein passed an order dated 06.11.2019 wherein it
was found to be not a fit case for compounding by the Regional
Compounding Committee (RCC) interalia for the following reasons:
a) The assessee / respondent herein has cross border transactions, but
for the information received from Foreign government the revenue would
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have been put to loss.
b) The evidence gathered in the instant case established major frauds
inasmuch as funds have gone out of the country, but for the information
obtained, the monies would have remained untaxed.
c) The assessee / respondent herein has neither produced documents
nor the account copy to disprove the contentions of the department. The
attitude of the assessee / respondent herein was of total non-cooperation in
the entire proceedings before Assessing Officer on this issue.
d) On consideration of the above facts and circumstances, the RCC
recommended that the Compounding Application of the Respondent herein
deserves to be rejected in terms of Para 4.4(g) of the Circular dated
16.05.2008.
iii) A contempt petition in Cont.P. No. 2079 of 2019 was filed on the
ground of wilful and intentional disobedience of the order of the learned
Judge dated 28.08.2019 in W.P. No. 3929 of 2014 and it was closed on the
finding that there was no contempt, while observing that there was no
positive direction in the order dated 28.08.2019 by the learned Judge and it
was found that paragraph 8.6 of the said order, were mere passing
comments. However, after finding so, the learned Judge quashed the order
dated 06.11.2019 and directed that the application filed by the Respondent
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herein should be re-examined in the light of the clarification dated
14.06.2019 of the Central Board of Direct Taxes (CBDT), which, in view of
the learned judge was far more liberal than the previous circular dated
16.05.2008. The following portion of the order in Cont. P.No.2079 of 2019
is relevant:
"37... I am therefore of the view that the impugned order is liable to
be quashed and the application filed by the petitioner should be re-
examined by the respondents in the light of the liberalised policy of Central
Board of Direct Taxes in its clarification dated 14.06.2019, Section
279(1A) and other facts mentioned herein.
38. In my view, the petitioner’s case deserves to be considered by
the respondents in the light of the liberalised policy since the petitioner’s
application was entertained after the new guideline came into force. Also
for the same reason, it cannot be construed that the respondents committed
contempt of this court since the order did not specify the same."
iv) A Writ Appeal in W.A.No. 967 of 2020 was filed by the revenue
against the order of the learned Judge in Cont. P. No. 2079 of 2019 dated
13.01.2020 insofar as the learned Judge after finding that the Contempt
Petition had no merits, proceeded to direct the authority to re-examine the
application filed by the respondent herein, in the light of the fresh circular
dated 14.06.2019, which provides for a more liberal policy. The Division
Bench of this court found that the learned Judge directing the application to
be considered in line with the subsequent circular was unsustainable
inasmuch as the issue as to whether the previous or the later circular should
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be applied, was never an issue in W.P.No.3929 of 2014. In view thereof, the
Division Bench was pleased to set aside the observations in Paragraphs
32-40 in the order of Contempt Petition No. 2079 of 2019, while granting
liberty to file a fresh compounding application/petition to the respondent
herein. The assessee / respondent herein had also filed a Writ Appeal Sr. No.
84101 of 2020 challenging the order of dismissal of the Contempt Petition
No. 2079 of 2019. The appeal was listed for maintainability and on hearing
both sides, the Division Bench found that the role of the respondent herein is
only that of an informant in the Contempt Petition and on giving the
information, his role would end and thus, the Intra-Court appeal filed against
the order of the learned Judge that there was no contempt, was held to be not
maintainable.
v) Pursuant to the above order of this Court, the 4 th Appellant herein
passed the order under Section 279(2) of the Act rejecting the compounding
application vide order dated 30.08.2021 inter alia for the following reasons,
as could be seen from the following extracts from the said order:
"a. ....
b. The Compounding application of Shri K.M. Mammen filed on
9.3.2021 deserves to be rejected for the following reasons:
i. The offence relating to undisclosed foreign bank accounts/asset is
normally not to be compounded as specified in Para 8.1(x) of the
guidelines dated 14.6.2019 and
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ii. The conduct of the assessee, nature and magnitude of offence
warrants rejection of compounding petition as per Para 8.1 (xiii) of the
guidelines dated 14.6.2019.
c. Without prejudice to the above, the Committee unequivocally
decided that even if the assessee's application were to be considered under
CBDT compounding guidelines dated 16.05.2008, it still deserved to be
rejected on the grounds that the offence involves major fraud and also
considering the nature and magnitude of offence as non compoundable in
accordance with clauses prescribed in Para 4.4(g) of the guidelines dated
16.05.2008.
d. The Committee rejects the contentions of the assessee that the
decision of the Hon'ble Supreme Court in the case of Prem Dass cited
supra would be applicable to his case in terms of S. 279(1A) rws 273A of
the IT Act.
e. The facts in the case of the assessee are similar to the facts in the
case of South India Surgical Co., a decision rendered by the Hon'ble
Madras High Court, cited supra, wherein the Hon'ble Supreme Court's
judgement in the case of Prem Dass was distinguished. The Committee
observed that the case of the assessee was fully covered by the decision of
Hon'ble Madras High Court in the case of South India Surgical Co. cited
supra. ... "
vi) Aggrieved by the above order of rejection, the respondent herien
filed a Writ Petition in W.P. No.23800 of 2021 dated 13.04.2022 wherein
the learned Judge had allowed the Writ Petition, finding that the case was fit
for compounding inter alia for the following reasons:
"41. Earlier, the petitioner faced, adjudication proceeding both
under Section 148 and penalty proceeding under Section 279(2) of the
Income Tax Act, 1961. The petitioner has paid the tax interest and the
penalty imposed on him. Though, the petitioner has paid the penalty, the
petitioner has filed an appeal against order of CIT (Appeals) confirming
imposition of penalty to the extent of 100% of the tax. The Department is
also in appeal as mentioned above.
42. The 2019 Circular which has been pressed against the
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petitioner in the impugned order makes it clear that there is fair amount of
discretion vested with the fourth respondent. Even in the case covered by
para 8, the phrase used is "offence normally not to be compounded". Thus,
even these cases can be compounded.
43. In Prem Dass Vs. ITO, (1999) 5 SCC 241, the Hon'ble
Supreme Court accepted the contention of the assessee that legislative
intent of Section 279 (1A) of the Income Tax Act, 1961 has to be kept in
mind where there is a reduction of penalty. This aspect has also not been
kept in mind by the fourth respondent while passing the impugned order.
44. Further by prosecuting a septuagenarian, who is also an
industrialist will serve no purpose. The petitioner entitled for buying a
peace subject to his agreeing to pay the compounding fee that may be
imposed by the fourth respondent. The petitioner has been sufficiently dealt
for his past dalliances by the respondent.
45. In my view, this was a fit case for compounding the offence
considering the age of the petitioner and considering the fact that the
petitioner has paid the tax interest and penalty.
46. Therefore, I am inclined to set aside the impugned order passed
by the fourth respondent and remit the case back to the fourth respondent
to compound the case by fixing the compounding fee to be paid by the
petitioner, if it has not been already paid by the petitioner.
47. Compounding fee, if it has not been already paid, shall be
calculated by the fourth respondent and intimated to the petitioner within a
period of sixty days from the date of receipt of a copy of this order. The
petitioner shall thereafter pay the afore said amount. Subject to such
payment within such time as may be prescribed, the case against the
petitioner shall be treated as having compounded and settled."
3. The revenue is in appeal, challenging the above order of the learned
Judge inter alia on the following grounds:
i) There was no positive direction in W.P. No. 3929 of 2014 dated
28.08.2019 with regard to the manner in which the compounding application
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filed by the petitioner ought to be considered / dealt with.
ii) There was merger of the order dated 28.02.2019 with the
subsequent proceedings arising out of the directions contained therein.
iii) The observation of the learned Judge that the provisions of Section
279(1A) of the Act and the decision in Prem Dass case are applicable, is
incorrect inasmuch as the reduction in penalty by the Commissioner
(Appeals) or the Tribunal cannot be treated as an order under Section 273A
of the Act and would thus not be covered under Section 279(1A) of the Act.
In any view, the decision in Prem Dass is distinguishable on facts. Further,
reliance was placed on the judgment of this Court in South India Surgical
Company v. K. Govindan, (2001) 251 ITR 78.
4. To the contrary, it is submitted by the learned counsel for the
Respondent herein that the learned Judge in W.P. No. 3929 of 2014 had
found that in view of the reduction in penalty from 300% to 100%, the
respondent would be entitled to the benefit of Sections 279 (1A) of the Act.
Further, it was also observed that there cannot be any impediment for the
Department to compound the offence under Sections 276 and 276C of the
Act. The learned Judge after making the above observations, which are
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conclusive of the respondent's right to compound, directed the Committee to
dispose the applications in the light of the observations made and pass
appropriate orders in accordance with law. It is thus submitted that the above
order of the learned Judge does not give any room/discretion to the appellants
to reject the compounding application.
4.1. It is further submitted that the above order of the learned Judge in
W.P.No.3929 of 2014 has not been challenged by the revenue and has thus
attained finality. That the above order in Writ jurisdiction not having been
challenged, cannot be watered down in a Contempt proceedings.
5. Heard both sides. Perused the materials available on record.
6. In our considered view, the order of the learned Single Judge insofar
as it remits the matter back to the 4 th appellant to compound the case by
fixing the compound fee, does not warrant interference. We say so, inasmuch
as we find that the learned Judge in W.P. No. 3929 of 2014 even while
remanding the matter, had made it clear that the judgment in Prem Dass case
would apply to the respondent, and further, the respondent herein is entitled
to the benefit of Section 279 (1A) of the Act. The revenue having failed to
challenge the above order is bound by it. It may be relevant to extract the
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relevant portions of the learned Single Judge's order, which read as under:
“8.4. Section 279 of the Income Tax Act, in explicit terms, is
selfexplanatory to the effect that when the penalty imposed on the assessee
is reduced under Section 273A, such an assessee cannot be proceeded
against for offences under Sections 276C or 277. The term used in the
Section is 'shall' and hence is required to be considered as mandatory in
nature and would therefore imply that when the penalty imposed has been
reduced or waived, the Assessee cannot be proceeded against for the
alleged offences.
8.5. The Hon’ble Supreme Court, in Prem Dass’s case (supra) has
reiterated this proposition as seen from the above extract. The
Commissioner of Appeals, in his order dated 25.03.2014 in ITA, had taken
note of the fact that in the penalty order, the Assessing Officer has not
accorded any justification or reasons for levying the maximum penalty of
300% of the tax sought to be evaded and thereby was of the opinion that a
minimum amount of penalty at 100% can be imposed.
8.6. The only objection to such a proposition from the Department
is that the order passed by the Tribunal, reducing the penalty, has been
challenged in Tax Case Appeal before this Court. It is not the case of the
Department that this Court had stayed the order of the Commissioner of
Appeals, as well as the Tribunal in the Tax Case Appeals. Just because the
order reducing the penalty has been put under challenge in the Tax Case
Appeals, it cannot be said that the order reducing the penalty itself has
been kept under abeyance. In this background, it can only be said that the
petitioner would be entitled to the benefit of Section 279 (1A) of the Act and
the mere challenge to the order reducing the penalty may not suffice to
deny such a benefit. In view of these subsequent developments, there
cannot now be any impediment on the part of the Department to compound
the offences under Sections 276C and 277 of the Act.
8.7. The learned Standing counsel for the respondents made a faint
attempt by placing reliance on paragraph 19 of the dismissal order dated
28.02.2019 passed in Crl.O.P.No.9065 of 2011 and submitted that Prem
Dass's case (supra) has been distinguished and held to be not applicable to
the present case. Hence the learned Standing counsel would submit that,
since the order of reduction of penalty was not passed under Section 273B
of the Act, Section 279 (1A) of the Act is not applicable to the petitioner."
9. As observed earlier, Section 279 (1A) is selfexplanatory and the
Hon'ble Supreme Court in Prem Dass’s case (supra) has further clarified
that the assessee cannot be proceeded against for an offence when the
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penalty imposed on him has been reduced. Under Article 141 of the
Constitution of India, the law declared by the Hon'ble Supreme Court shall
be binding on all Courts, which includes the High Courts. As such, the
decision in Prem Dass’s case (supra) would be binding on this Court and
as such, with due respects to the observations made in this regard in
paragraph 19 of the order passed by the learned Judge in
Crl.O.P.No.9065 of 2011 dated 28.02.2019, is per incuriam and the
observation made therein is not the proper appraisal and cannot be relied
upon.
10. In the light of the above observations, the impugned order
passed by the first respondent herein under Section 279 (2) of the Income
Tax Act, 1961 dated 15.01.2014 is set aside and the matter is remanded
back to the Committee prescribed under the CBDT Guideline No.7.1 (c)
dated 16.05.2008. The petitioner is granted liberty to place a copy of this
order along with afresh compounding petition under Section 279 of the
Income Tax Act, before the Committee, within a period of 30 days from the
date of receipt of a copy of this order. On receipt of the aforesaid
application along with a copy of this order, 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 a period of 60 days
there from."
(emphasis supplied)
6.1. A reading of the above observations of the learned Judge leave no
room for any doubt, in our mind, that the learned Judge had found that the
Respondent herein was entitled to compound in terms of Section 279(1A) of
the Act, which provides that the assessee would be entitled to compound if
the penalty stood reduced or waived under Section 273A of the Act.
Importantly, the Supreme Court in Prem Dass case, while construing Section
279(2) of the, Act had rejected the argument that the reduction of penalty by
an appellate authority not being an order under Section 273A of the Act, the
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assessee/applicant would not be entitled to the benefit of Section 279(1A) of
the Act and it was held that it may not be appropriate to adopt a literal
construction of provisions of Section 279(1A) of the Act. The relevant
portion of the judgment of the Supreme Court is extracted hereunder:
In Prem Dass v. ITO, (1999) 5 SCC 241
" 10. We also find sufficient force in the contention of Mr. Salve that
the legislative mandate in Section 279(1A) of the Income Tax Act has not
been borne in mind by the High Court while interfering with an order of
acquittal. Mr. Shukla, no doubt has indicated that the said provision will
have no application as the penalty imposed has not been reduced or
waived by an order under Section 273A. We do not agree with the
aforesaid literal interpretation of the provisions of Section 279(1A) of the
Act, when we find that the Commissioner of Income Tax(Appeal) has
reduced the penalty. Further the tribunal has totally set aside the order,
imposing penalty could not have been lost sight of by the High Court while
considering the question whether the order of acquittal passed by the
Sessions Judge has to be interfered with or not, particularly, when the
gravamen of indictment relates to filing of incorrect return and making
wrong verification of the statements filed in support of the return, resulting
in initiation of penalty proceedings. Bearing in mind the legislative intent
engrafted under Section 279(1A) of the Income Tax Act and the conclusion
of the learned Sessions Judge, on appreciation of evidence not having been
reversed by the High Court and the grounds of acquittal passed by the
Sessions Judge not having been examined by the High Court, we have no
hesitation to come to the conclusion that the High Court was not justified
in interfering with an order of acquittal."
7. The observation in the contempt proceedings in Cont.P.No. 2079 of
2019 dated 31.01.2020 that the order dated 28.08.2019 in W.P.No.3929 of
2014 of the learned Judge, did not contain any positive direction, is grossly
misconcieved and contrary to the plain language of the order of the learned
Judge in W.P. No. 3929 of 2014. Since the learned Judge in W.P.No.3929 of
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2014 by order dated 28.08.2019 has conclusively found that the Respondent
would be entitled to the benefit of Section 279(1A) of the Act and the
judgment of Supreme Court in Prem Dass case in view of reduction of
penalty from 300% to 100% by the appellate authority, the failure of the
appellant to challenge, in our view, would prove fatal, to any attempt by the
revenue to contend to the contrary.
8. The Writ Appeal in W.A. No. 967 of 2020 against the order of the
learned Judge in Cont.P. No. 2079 of 2019 confined itself to the legality of
observations/directions which traversed beyond the order in the Writ Petition
in W.P.No.3929 of 2014 dated 28.08.2019. The Division Bench only
examined the jurisdiction/authority of the learned Judge in contempt
jurisdiction to issue directions which travelled beyond the order in the Writ
Petition and found, it was impermissible rather in excess of jurisdiction. The
Division Bench did not examine the scope of the observations/directions of
the learned Judge in W.P. No. 3929 of 2014 dated 28.08.2019 while hearing
the appeal in W.A. No. 967 of 2020 against the order pased in the contempt
petition. This would be evident from the fact that the Division Bench after
setting aside the directions of the learned Judge in Cont.P. No. 2079 of 2019
which in its view traversed beyond the direction of the learned Judge in
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W.P.No. 3929 of 2014 dated 28.08.2019, granted liberty to the Respondent
to file a fresh petition and to canvass all issues including the directions which
according to the Respondent are in their favour. The following observation is
relevant:
"17.In the light of the above, we are to necessarily set aside the
direction issued by the Court in paragraphs 37 to 40 of the impugned
order and all the observations, which were made by the Court in
paragraphs 32 to 36, which have led to issuance of the impugned
directions. Having held so, we need to take note of the submissions of the
learned Senior Counsel for the respondent that the respondent should not
be left without a remedy because his contempt petition was dismissed as
being devoid of merit and now we have come to a conclusion that the
direction could not have been issued by the Contempt Court, which was
beyond the scope of the contempt petition. Bearing this in mind, we are
inclined to give liberty to the respondent to file a fresh petition for
compounding in which, he may canvass all issues available to him on law
as well as on facts and orders and directions which according to them are
in their favour as well as the decisions which he chooses to rely upon."
8.1. The above observation of the Division Bench in W.A. No. 967 of
2020 clearly indicates that the scope and purport of the observations in W.P.
No. 3929 of 2014 were not examined in the above Writ Appeal. We had dealt
with the order in the Contempt Petition and the order in appeal against the
same in W.A. No. 967 of 2020 only to allay any apprehension rather ensure
that the Division Bench has not in any manner touched on the
observation/direction of the learned Judge in W.P. No. 3929 of 2014 insofar
as it deals with the entitlement of the respondent herein to compound under
section 279 (2) of the Act in respect of the offence under Sections 276C and
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Section 277 of the Act.
9. In any event, the appellants/revenue would be bound by the
observations of the learned Judge in W.P. No. 3929 of 2014, which cannot
be watered down by any observations to the contrary in a contempt
jurisdiction. This is in view of the settled law that a contempt jurisdiction is
sui generis, inherent and is confined to examining whether there is wilful
violation of the order of the Court and any attempt to examine the correctness
or otherwise of the order stated to be in contempt would be in excess of its
jurisdiction. It is trite law that in a contempt petition, the jurisdiction is
limited viz., to examine whether there is a violation of the order of the court
or otherwise. Under the guise of exercise of jurisdiction in contempt
proceedings, the order / judgment of a Court cannot in any manner be
diluted/watered down by issuing fresh directions. It may be relevant to refer
to the following judgments:
i) Jhareswar Prasad Paul v. Tarak Nath Ganguly, (2002) 5 SCC 352:
"11. ....The contempt jurisdiction should be confined to the
question whether there has been any deliberate disobedience of the order
of the court and if the conduct of the party who is alleged to have
committed such disobedience is contumacious. The court exercising
contempt jurisdiction is not entitled to enter into questions which have not
been dealt with and decided in the judgment or order, violation of which is
alleged by the applicant. The court has to consider the direction issued in
the judgment or order and not to consider the question as to what the
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judgment or order should have contained. At the cost of repetition, be it
stated here that the court exercising contempt jurisdiction is primarily
concerned with the question of contumacious conduct of the party, which is
alleged to have committed deliberate default in complying with the
directions in the judgment or order. If the judgment or order does not
contain any specific direction regarding a matter or if there is any
ambiguity in the directions issued therein then it will be better to direct the
parties to approach the court which disposed of the matter for clarification
of the order instead of the court exercising contempt jurisdiction taking
upon itself the power to decide the original proceeding in a manner not
dealt with by the court passing the judgment or order. If this limitation is
borne in mind then criticisms which are sometimes levelled against the
courts exercising contempt of court jurisdiction “that it has exceeded its
powers in granting substantive relief and issuing a direction regarding the
same without proper adjudication of the dispute” in its entirety can be
avoided. This will also avoid multiplicity of proceedings because the party
which is prejudicially affected by the judgment or order passed in the
contempt proceeding and granting relief and issuing fresh directions is
likely to challenge that order and that may give rise to another round of
litigation arising from a proceeding which is intended to maintain the
majesty and image of courts."
ii) Sudhir Vasudeva v. M. George Ravishekaran, (2014) 3 SCC 373 :
"19...... The Courts must not, therefore, travel beyond the four
corners of the order which is alleged to have been flouted or enter into
questions that have not been dealt with or decided in the judgment or the
order violation of which is alleged. Only such directions which are explicit
in a judgment or order or are plainly self-evident ought to be taken into
account for the purpose of consideration as to whether there has been any
disobedience or wilful violation of the same. Decided issues cannot be
reopened; nor can the plea of equities be considered. The Courts must also
ensure that while considering a contempt plea the power available to the
Court in other corrective jurisdictions like review or appeal is not trenched
upon. No order or direction supplemental to what has been already
expressed should be issued by the Court while exercising jurisdiction in the
domain of the contempt law; such an exercise is more appropriate in other
jurisdictions vested in the Court, as noticed above. The above principles
would appear to be the cumulative outcome of the precedents cited at the
Bar, namely, Jhareswar Prasad Paul v. Tarak Nath Ganguly[(2002) 5
SCC 352 : 2002 SCC (L&S) 703], V.M. Manohar Prasad v. N. Ratnam
Raju [(2004) 13 SCC 610 : 2006 SCC (L&S) 907], Bihar Finance Service
House ConstructionCoop. Society Ltd. v. Gautam Goswami [(2008) 5 SCC
339] and Union of India v. Subedar Devassy PV[(2006) 1 SCC 613] ."
https://www.mhc.tn.gov.in/judis
10. We do not propose to examine the correctness or otherwise of the
observations / findings of the learned Judge in W.P. No. 3929 of 2014 dated
28.08.2019 insofar as the applicability of the Supreme Court in Prem Dass
case and the interpretation of Section 279 (1A) of the Act which has attainted
finality insofar as the appellants are concerned, in the absence of any appeal
being preferred by the revenue. For the same reason we are also of the view
that it may not be necessary to examine the question as to whether the
Appellants would be governed by the 2008 or 2019 Circular inasmuch as we
have already found that the order of the learned Judge in W.P. No. 3929 of
2014 has conclusively held that the respondent herein is entitled to
compound in view of the reduction of penalty by the appellate authority
thereby attracting Section 279(1A) of the Act as explained by the Supreme
Court in Prem Dass case. The revenue having failed to challenge the above
order in Writ Petition No. 3929 of 2014, it would ill lie in the mouth of the
revenue to contend to the contrary nor can the directions of the Court issued
in Writ jurisdiction as discussed supra be watered down under the garb of
examining compliance with the orders of the learned Judge in a contempt
proceeding / jurisdiction.
https://www.mhc.tn.gov.in/judis
11. We are of the view that though for the reasons discussed supra
which are different from that which weighed with the learned Single Judge in
W.P.No. 23800 of 2021, the respondent herein is entitled to compound under
Section 279(2) of the Act in respect of the offences under Sections 276C and
277 of the Act. We say so inasmuch as in our view the respondent's
entitlement to compound in terms of Section 279(2) of the Act stands
resolved conclusively by the order of the learned Single Judge in the previous
round of litigation in W.P.No.3929 of 2014 dated 28.08.2019 the same
having not been challenged by the revenue, is bound by it, nor is it open to
them to water down those directions/observations in the Contempt
jurisdiction. Thus, the order of the learned Single Judge does not warrant any
interference.
12. In the result, the Writ Appeal stands dismissed. No costs.
Consequently, connected miscellaneous petition is closed.
[R.M.D., J.] [M.S.Q., J.]
11.12.2023
Index: Yes/No
Speaking order/ Non speaking order
Neutral Citation: Yes/No
Spp
https://www.mhc.tn.gov.in/judis
To
1.The Principal Commissioner of Income Tax,
Central-I, No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034.
2.The Additional Commissioner of Income Tax,
Central Range-I, No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034.
3.The Deputy Commissioner of Income Tax,
Central Circle-I(1), Income Tax New Building,
Room No.112, 1st Floor,
No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034.
4.The Director General of Income Tax (Investigation),
No.46, Old No.108, M.G.Road,
Nungambakkam, Chennai-600 034.
https://www.mhc.tn.gov.in/judis
R.MAHADEVAN, J.
and
MOHAMMED SHAFFIQ, J.
Spp
W.A. No.1767 of 2022 and
https://www.mhc.tn.gov.in/judis
11.12.2023
https://www.mhc.tn.gov.in/judis
