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PETITIONER: UNION OF AINDIA & ANR.

       Vs.

RESPONDENT: BANWARI LAL AGARWAL

DATE OF JUDGMENT:       16/10/1998

BENCH: M.K.MUKHERJEE, B.N.KTRPAL

ACT:

HEADNOTE:

JUDGMENT:  ORDER Leave granted. In respect of the Assessment Years 1978-79,  1979-80 and  1980-81  returns  were  filed  by the respondent, after search and seizure had taken place under Section 132 of  the Income-tax   Act.  Returns  were  filed  belatedly  and  the assessments which were made were at a figure more than  what was the returned income. Prosecution  was  launched  against  the respondent alleging that he had committed an offence under Section 276-C of  the said  act,  since  his returns had been filed much after the date of search and he had wilfully attempted  to  evade  tax chargeable or imposable under the Act. The respondent thereafter moved an application under section 482  before  the  Allahabad  High  Court.    It  was contended before the Court that  the  assessment  which  was made was on the basis of a compromise arrived at between the respondent and the Income-tax Commissioner, Kanpur and there was  also  an  understanding  that  no penal action would be taken against the respondent.  A  further  contention  which was  raised  was  that before any prosecution is launched an opportunity of hearing should  have  been  afforded.    This contention  was  sought  to  be  raised  on the basis of the respondent’s interpretation  of  sub-section(2)  of  Section 279. The  High  Court  came  to  the  conclusion that the assessment made was in pursuance of a  mutual  understanding therefore  no  penal  action  could  be  taken  against  the respondent  and,  further,  that  he  was  not  afforded  an opportunity  to  compound  the  matter  under Section 279(2) prior to the institution of the  prosecution  and  therefore it’s initiation was not valid. In  our  opinion  the  decision of the High Court is clearly without any legal basis.  Firstly, it appears to  be undisputed  that there was a delay in filing of the returns. There does not seem to be an averment in the petition  under Section  482, and certainly no discussion by the High Court, to the fact that the Income disclosed was much less than the income assessed.   Furthermore,  there  is  nothing  on  the record  which  could  lead  the High Court to the conclusion

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that any understanding was given to the respondent  that  no penal action  could  be  taken.  The learned counsel for the respondent is also unable  to  draw  our  attention  to  any provision   of  the  Income-tax  Act  whereby  a  compromise assessment could have been arrived at between the respondent and the Commissioner of Income-Tax.  The High Court, in  our view,  was clearly in error in proceeding to accept the said contention of  the  respondent’s  counsel.    The   question whether  there was any understanding or not even if it could have been there, is one of the fact which will  have  to  be proved before the Trial Court.         We further find that sub-secton(2) of Section 279 is a  provision  which  enables  the  Chief Commissioner or the Director General to compound any offence  either  before  or after  the institution of proceeding. There is no warrant in interpreting  this  sub-section  to  mean  that  before  any prosecution is launched either a show cause notice should be given or an opportunity afforded to compound the matter. The enabling  provision cannot give a right to a party to insist on the Chief Commissioner or the Director General to make an offer of compounding before the prosecution is launched.          The  decision  of  the  High   Court   is   clearly untenable.  The  same  is  accordingly  set  aside  and  the application under Section 482 filed by the respondent before the High Court would accordingly stand dismissed. The Trial Court is now directed to proceed with  the case in accordance with law as expeditiously as possible. The appeals are allowed. Leave granted.