P. Soundarya Vs. Chief Commissioner of Income-tax and anr. - Court Judgment

S. Manikumar, J.

1. The writ petition is for a certiorarified mandamus calling for the records comprised in the proceedings of the second respondent dated December 20, 2006, as communicated by the first respondent by order dated February 1, 2007 in EOCC No. 36/1984, and quash the same and consequently direct the first respondent to consider the representation of the petitioner for compounding or withdrawal of the offences under the Indian Penal Code in the light of the spirit behind the orders of the Supreme Court dated October 9, 2006, in Criminal M.P. No. 10302 of 2006 in Criminal Appeal No. 969 of 2000 and the order of this Court dated April 21, 2006, in W.P. No. 11191 of 2006 and for further orders.

2. Brief facts leading to the writ petition are as follows:

The petitioner had filed an application under Section 230A(1) of the Income-tax Act, 1961, on May 12, 1983, for issue of a certificate in her favour for settling the property bearing Door No. 20, First Cross Street, Lake Area, Nungambakkam, Chennai, in the name of her minor son retaining life interest in the said property and declared the sale consideration of the said property at Rs. 2,40,000. The said declaration was assumed by the Income-tax Department to be patently false and has been made to use the same as a genuine evidence in the proceedings before the income-tax authorities which is a judicial proceedings. The Department held that the issue of certificate as required by the petitioner would entitle her to register the settlement deed as if the property was acquired for Rs. 2,40,000 as against the real value of Rs. 5,70,000 and that there would be evasion of income-tax on the balance sale consideration of Rs. 3,30,000.

3. In those circumstances, the Income-tax Department filed a complaint against the petitioner punishable under Section 193 of the Income-tax Act, read with Section 136 of the Income-tax Act, read with Sections 420 and 511 of the Indian Penal Code and also under Section 276C(1) and 277 of the Income-tax Act. The Economic Offences Court, in EOCC No. 36 of 1984, found that the petitioner was guilty, both under the provisions of the Income-tax Act and offences under the Indian Penal Code and convicted the petitioner by its judgment dated November 6, 1989. The judgment of the trial court was also confirmed by the Principal Session Judge, City Civil Court, Madras, by judgment dated August 19, 1986, in Criminal Appeal No. 248 of 1989.

4. Aggrieved by the same, the petitioner filed a criminal revision petition in Crl. R.C. No. 648 of 1996 and this Court by order dated February 3, 2000 (P. Soundarya v. ITO : [2001]249ITR77(Mad) ) acquitted the petitioner of offences under the Income-tax Act, however, found the petitioner guilty of the offences under the Indian Penal Code. The petitioner has moved to the Supreme Court in C.A. No. 969 of 2000 and the same is pending disposal.

5. As the petitioner was acquitted of the offences under the Income-tax Act, she made a representation dated January 27, 2006, to the first respondent and sought withdrawing of the prosecution of the offences under Sections 420 and 511 of the Indian Penal Code, in terms of guidelines of the Central Board of Direct Taxes. Since the representation was pending for a considerable time, the petitioner filed W.P. No. 11191 of 2006, and this Court, by order dated April 21, 2006, directed the first respondent to dispose of the petitioner's representation dated January 27, 2006, and her reminder dated April 3, 2006, in terms of the guidelines issued by the first respondent in F. No. 285/161/190-I.T. (Inv.) dated September 30, 1984, within a period eight weeks from the date of receipt of the further representation from the petitioner, strictly in accordance with law and on the merits.

6. Pursuant to the abovesaid order, the second respondent, by his order dated June 20, 2006, turned down the request of the petitioner on the following ground:

Only when the case is compounded under the Income-tax Act, the complaints under the I.P.C. are withdrawn.... Since the matter is subjudice and is pending before the hon'ble Supreme Court, your petition cannot be entertained. You can raise all the contention before the Supreme Court of India where the S.L.P. is pending against the order of this Madras High Court.

7. On receipt of the order dated June 20, 2006, the petitioner moved the Supreme Court in M.P. No. 10302 of 2006 in Criminal Appeal No. 969 of 2000 for appropriate directions. The Supreme Court taking note of the order dated June 20, 2006, passed an interim order dated October 9, 2006 clarifying that the pendency of criminal appeal preferred before the Supreme Court shall not come in the way of the Department from considering the petition for compounding or withdrawal of the prosecution in accordance with law.

8. Pursuant to the direction of the Supreme Court, the representation of the petitioner was considered and by the order dated February 1, 2007, the first respondent has rejected the request as follows:

The Department has already rejected your earlier petition for compounding of the offences/withdrawal of prosecution. A copy of the latest communication sent to you by speed post on December 20, 2006, is enclosed for your ready perusal.

Unless the circumstances, I am of the considered opinion that it will serve no purpose in granting personal hearing to you. You are therefore advised to advance your arguments before the hon'ble Supreme Court where your appeal is pending.

Aggrieved by the same, the petitioner has filed the present writ petition.

9. Learned Counsel for the petitioner submitted that though a personal hearing was sought for, the second respondent has refused to provide sufficient opportunity to place all the materials and, therefore, it amounted to violation of natural justice. She further submitted that the Central Board of Direct Taxes guidelines were not considered in proper perspective by the authority while rejecting the request for compounding.

10. In the instant case, while considering the representation of the petitioner on the merits, the authority found that under the provisions of the Income-tax Act, compounding is not permissible in cases of the Indian Penal Code offence. The authority who examined the matter afresh has found that it is not a fit case for withdrawal of prosecution under the Indian Penal Code offences.

11. Section 279 of the Income-tax act deals with the prosecution of a person, at the instance of the Chief Commissioner or the Commissioner of Income-tax. As per Section 279(2) of the Income-tax Act, any offence under this Chapter may either before or after initiation of proceedings, be compounded by the Chief Commissioner or Director General. In Asst. Commissioner (Assessment-II) v. Velliappa Textiles Ltd. : 2004CriLJ1221 the Supreme Court held that compounding of an offence is not a right of the accused nor is it his unilateral act, it can only be done with the consent of the authorities, viz., the Chief Commissioner or the Director General.

12. In Concise Oxford Dictionary in Law, the meaning for the word 'compound' is given as: (a) condone a liability or offence in exchange for money, etc., (b) forbear from prosecuting (a felony) from private motives, and law come to terms with a person, for forgoing a claim, etc., for an offence. For the expression 'compounding' In Ramanatha Aiyar's Law Lexicon is 'arranging, coming to terms, condone for money; arranging with the creditor to his satisfaction. For the expression 'compounding felony of offence', the meaning given is 'Compounding an offence is defined to be 'the offence of taking a reward for forbearing to prosecute a felony; as where the party robbed takes his goods again or other amends upon an agreement not to prosecute'.' The meaning deduced from the word 'compounding' from the above dictionaries is 'arranging or coming to terms, which means, it is not unilateral act.'

13. Whenever a person makes an offer for compounding, he has no right to insist upon a bilateral agreement. Even if there is any initiative by the offender, the complainant may not agree to arrangement or settlement of the offence, for which, the prosecution was launched. In case, where the complainant refuses or does not agree for coming to terms, the court under Article 226 of the Constitution of India issue a mandamus and compel him to come for settlement. Under such circumstances, it is not necessary to issue notice or provide an opportunity to the offender.

14. In view of the above, I do not see that the reasons stated in the impugned order are contrary to the decision of the Supreme Court or the Central Board of Direct Taxes guidelines. Hence, this writ petition fails and the same is dismissed. No costs. Consequently, M.P. Nos. 1 and 2 of 2007 are also dismissed.