Vinubhai Mohanlal Dobaria v. Chief Commissioner of Income Tax

Case snapshot

Sections / provisions: 139(1); 276CC

Questions before the Court / Tribunal

• When offence for failure to file return is committed and meaning of wilful failure: The reported Supreme Court case examines the temporal point at which section 276CC offence arises and the role of wilfulness/default after the statutory filing due date.

Material facts and background

J.B. PARDIWALA, J.: For the convenience of exposition, this judgement is divided into the following parts: INDEX A. FACTUAL MATRIX ..................................................................................2 B. SUBMISSIONS ON BEHALF OF THE APPELLANT .......................13 C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS ..................15 D. ISSUES FOR CONSIDERATION ..........................................................19 E. ANALYSIS.................................................................................................20 i.

Section 276CC of the Income Tax Act, 1961 .....................................20

ii. Provisions pertaining to compounding of offences .............................36 iii. Guidelines for Compounding of Offences under Direct Tax Laws, 2014 ......................................................................................................41 F. CONCLUSION ..........................................................................................57

This appeal arises from the judgment and order passed by the High Court of Gujarat dated 21.03.2017 in Special Civil Application No. 5386 of 2017 (hereinafter referred to as “the impugned order”) by which the High Court rejected the writ petition filed by the appellant herein and thereby upheld the order of the Chief Commissioner of Income Tax, Vadodara (“Respondent No. 1”) dated 14.02.2017 rejecting the application preferred by the appellant-assessee for compounding of the offence under Section 276CC of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

The appellant is an individual earning income by way of salary and also by way of share of profit of partnership firm engaged in the business of chemicals. He filed his income tax returns for the AY 2011-12 and 2013-14 on 04.03.2013 and 29.11.2014 respectively declaring his income to be Rs 49,79,700/- and Rs 31,87,420/- respectively. The due dates for the filing of returns for AY 2011-12 and 2013-14 were 30.09.2011 and 31.10.2013 respectively and as such there was delay on the part of the appellant in filing the return of income for the said assessment years. SLP (C) NO. 20519 of 2024

On 27.10.2014, a show cause notice was issued to the appellant by the Commissioner of Income Tax - III, Baroda alleging violation of Section 276CC of the Act for the AY 2011-12. The notice stated that although the due date for filing the income tax return for the AY 2011-12 was 01.08.2011 yet the appellant had filed the same with delay on 04.03.2013. The notice further stated that after allowing for the credit of prepaid taxes, the appellant was liable to pay self-assessment tax of Rs. 0/- which however remained unpaid by the due date prescribed for the filing of return of income. In the last, the appellant was called upon to show cause as to why proceedings under Section 276CC of the Act should not be initiated against him. The contents of the said notice are extracted hereinbelow: “Office of the Commissioner of Income Tax III 2nd floor, Aayakar Bhavan, Race Course Circle, Baroda 390 007 No.BRD/CIT-III/HQ/Pros/17/2014-15 Date.27.10.2014 To, Shri Vinubhai Mohanbhai Dobaria B-2/203, Subhlaxmi Coop. Housing Society Ankleshwar PAN ACIPD4420D SLP (C) NO. 20519 of 2024

Appellant / assessee submissions

12.02.2015 whereas he had already filed the return of income for the said assessment year on 29.11.2014, that is, much before the issuance of show cause notice on 12.02.2015 and therefore it could not be said that it was not the first offence. It was also contended by the appellant that the respondent had erroneously computed the date of issuance of show cause notice for AY 2011-12 for the purpose of holding that the appellant had committed the offence post that date. Lastly, it was argued by the appellant that the 2014 guidelines are only general guidelines and are not in the nature of strict law and thus are to be construed accordingly. The appellant submitted that the general nature of the guidelines was also suggested by the heading “offences generally not to be compounded” used in the said Guidelines.

date (for AY 2011-12) and despite the same for the subsequent years i.e. for AY 2013-14 the assessee did not file return of income before due date of filing of return. Therefore, again the petitioner -assessee committed the offence for AY 2013-14. Thus, it cannot be said that in AY 2013-14 it can be said to be the "first offence" committed by the assessee. Under the circumstances, the respondent no.1 has rightly rejected the compounding application submitted by the petitioner. Rejection of the compounding application submitted by the petitioner is absolutely in consonance with the Guidelines, 2014. 5.0. Now, so far as submission on behalf of the petitioner that while rejecting the compounding application submitted by the petitioner, respondent no.1 has not properly appreciated and / or considered the reason for not filing the return of income by petitioner before due date is concerned, at the outset, it is required to be noted that it has nothing to do with the compounding application. It is required to be noted that while considering the application for compounding, merits is not required to be considered as is to be considered in trial. 6.0. Now, so far as reliance placed upon...

Revenue / respondent submissions

77. In Sports Infratech (supra), the petitioner therein assailed the order rejecting its application for compounding of the offence under Section 276B of the Act. The application was rejected on the ground that the petitioner did not fulfil the criteria for consideration of its application as per the guidelines issued by the CBDT. Allowing the writ petition, the High Court observed that an application for compounding of an offence cannot be rejected without having regard to the specific facts of the case. The Court highlighted that the guidelines do not limit the authorities from exercising their discretion and therefore the authorities, while exercising their power under Section 279, are required to consider the objective facts in the application before it. The relevant observations from the said decision are reproduced hereinbelow: “6. The learned counsel for the Revenue urges that the binding nature of the Board's instructions and guidelines is apparent from Explanation to section 279(3) which clarifies that the power to grant or refuse compounding is essentially discretionary and actually administrative. Therefore, the guidelines framed for its exercise under section 279 are...

Court / Tribunal analysis and reasoning

23. There is a statutory presumption prescribed in Section 278-E. The court has to presume the existence of culpable mental state, and absence of such mental state can be pleaded by an accused as a defence in respect to the act charged as an offence in the prosecution. Therefore, the factual aspects highlighted by the appellants were rightly not dealt with by the High Court. This is a matter for trial. It is certainly open to the appellants to plead absence of culpable mental state when the matter is taken up for trial.” (Emphasis supplied)

38. A perusal of the aforesaid provision makes it clear that irrespective of whether the return of income is filed by an assessee after the specified date or is not furnished at all, the assessee shall be liable to pay simple interest at the rate 15% reckoned from the day immediately following the specified date notwithstanding the fact that the Assessing Officer has extended the date for furnishing of return.

60. A perusal of the reproduced portion of Paragraph 8 shows that the expression “first offence” has been defined under the compounding guidelines as any offence committed: a. Prior to the date of issuance of any show cause notice for prosecution in relation to the said offence; or b. Prior to any intimation relating to prosecution by the department to the person concerned or prior to the launching of any prosecution, whichever is earlier.

A perusal of Paragraph 12.4 of the 2014 guidelines as reproduced hereinabove shows that the compounding fee to be levied in the case of an offence under Section 276CC is to be reckoned from the date immediately following the date on which return was due. This is in consonance with Section 139(8) of the Act and further fortifies the argument of the appellant that it is not the date of actual filing of belated return, but the date immediately following the due date for filing of return which is to be considered as the date of commission of the offence.

70. Therefore, it can be said without a cavil of doubt that both the offences under Section 276CC of the Act were committed prior to the date of issue of any show cause notice for prosecution.

72. We find it difficult to agree with the contention advanced by the respondents that even if the appellant is not covered by the first part of the definition of the expression “first offence”, he will still be covered by the latter half which is reproduced in the preceding paragraph. Paragraph 8 of the 2014 guidelines has defined a “first offence” in two different manners: a. First, all those offences which are committed by the assessee prior to a formal intimation of his liability for being prosecuted by the Department are to be treated as “first offence” and it shall be open to the assessee to pray for the compounding of such offences subject to other requirements being fulfilled. b. Second, any offence which is voluntarily disclosed by the assessee before its detection by the Department would also be treated as a “first offence”.

77. In Sports Infratech (supra), the petitioner therein assailed the order rejecting its application for compounding of the offence under Section 276B of the Act. The application was rejected on the ground that the petitioner did not fulfil the criteria for consideration of its application as per the guidelines issued by the CBDT. Allowing the writ petition, the High Court observed that an application for compounding of an offence cannot be rejected without having regard to the specific facts of the case. The Court highlighted that the guidelines do not limit the authorities from exercising their discretion and therefore the authorities, while exercising their power under Section 279, are required to consider the objective facts in the application before it. The relevant observations from the said decision are reproduced hereinbelow: “6. The learned counsel for the Revenue urges that the binding nature of the Board's instructions and guidelines is apparent from Explanation to section 279(3) which clarifies that the power to grant or refuse compounding is essentially discretionary and actually administrative. Therefore, the guidelines framed for its exercise under section 279 are...

Operative decision and relief

The appeal is disposed of in the aforesaid terms.

87. Pending application(s), if any, shall stand disposed of.

Authorities and precedents appearing in the judgment

• Prakash Nath Khanna v. CIT reported in (2004) 9 SCC 686 was called
• See Lenigh Valley Coal Co. v. Yensavage
• The view was reiterated in Union of India v. Filip
• Padma Sundara Rao v. State
• In D.R. Venkatachalam v. Dy. Transport Commr
• See Rishabh Agro Industries Ltd. v. P.N.B
• Artemiou v. Procopiou
• Per Lord Reid in Luke v. IRC
• In CIT v. Ahmedbhai Umarbhai and Co
• Lord Macnaghten in Balraj Kunwar v. Jagatpal Singh
• Rajasthan v. Radha
• Kalawatibai v. Soiryabai

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on When offence for failure to file return is committed and meaning of wilful failure. The operative result is classified as Disposed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with When offence for failure to file return is committed and meaning of wilful failure. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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