2014 (10) TMI 266 - HC - Income Tax

High Court directs tax authorities to consider compounding request, suspends prosecution proceedings pending review. Petitioners to provide documents.

Capvest Wealth Management Services Pvt. Ltd. Versus The Principal, Chief Commissioner of Income Tax

The High Court refrained from delving into the merits of the case involving tax assessment and prosecution proceedings under the Income Tax Act. It ... Appeal pending before CIT(A) – Notice u/s 279(1) served – Held that:- Assessee has submitted a detailed reply - But without any regard to the same, proceedings were pursued by the respondent department and it was only on coming across the summons served upon the petitioners, that they could realise that the proceedings had already been initiated, which according to the petitioners is without considering their objections and hence not correct or sustainable - The reliefs sought for is of limited nature, it is not necessary to deal with the merits of the case – revenue is directed to consider Ext.P14 representation and pass appropriate orders, after affording an opportunity of hearing to the petitioners. Issues:1. Tax assessment under the Income Tax Act2. Prosecution proceedings under Section 276 CC of the Income Tax Act3. Request for compounding the offence under Section 279(2) of the ActTax Assessment under the Income Tax Act:The petitioners, a private limited company, and its Managing Director faced proceedings under different provisions of the Income Tax Act following a survey conducted by the 6th respondent. A notice under Section 148 of the Income Tax Act was issued for the assessment year 2007-08, specifically referring to the 'capital gain' accumulated by the petitioners. The assessment was finalized against the petitioners, leading to demand notices under Section 156 of the Income Tax Act. The petitioners, aggrieved by the assessment, appealed to the Commissioner of Income Tax (Appeals)-II. However, during the course of these proceedings, the petitioners were served with a notice under Section 279(1) of the Act, indicating the initiation of prosecution proceedings under Section 276 CC of the Income Tax Act. The petitioners raised objections and submitted a detailed reply, claiming that the proceedings were pursued without proper consideration of their objections.Prosecution Proceedings under Section 276 CC of the Income Tax Act:The petitioners, faced with the initiation of prosecution proceedings under Section 276 CC of the Income Tax Act, decided to seek permission for compounding the offence as provided under Section 279(2) of the Act. They submitted a representation (Ext.P14) before the Principal Chief Commissioner of Income Tax, requesting prompt consideration of their plea for compounding the offence. The court noted the petitioners' decision to seek permission for compounding due to the turn of events and other circumstances, directing the first respondent to consider the representation and pass appropriate orders after affording an opportunity of hearing to the petitioners within one month from the date of receipt of the judgment. The court further instructed that any further steps related to prosecution proceedings by the respondents should be kept in abeyance until the representation was considered.Conclusion:The High Court, considering the limited nature of the reliefs sought, refrained from delving into the merits of the case. It directed the first respondent to promptly consider the petitioners' representation for compounding the offence and to pass suitable orders after hearing the petitioners. The court instructed that any actions related to prosecution proceedings should be halted until the representation was reviewed. The writ petition was disposed of, with the petitioners instructed to provide a copy of the judgment and the writ petition to the first respondent for further necessary actions.