GLOBAL VISA SERVICES PVT. LTD. & ANR. vs. PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-04 & ORS.

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W.P.(C)/15352/2022HC DelhiDLHC01041489202221 August 2024Bench: HON'BLE MR. JUSTICE RAVINDER DUDEJA,HON'BLE MR. JUSTICE YASHWANT VARMA4 pages
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What did the High Court hold?

The High Court held that the respondents erred in processing the compounding application based on the 2019 Guidelines. The Court found that the respondents' order of October 20, 2022, incorrectly assumed the application was first made on September 24, 2020, and failed to acknowledge the original applications filed on February 15, 2018. The Court noted that the respondents did not dispute the filing of the original application on February 15, 2018. Given the clear stipulations in the 2019 Guidelines that they apply only to applications received on or after June 17, 2019, and the fact that the original application was filed on February 15, 2018, the erstwhile 2014 Guidelines should govern. The Court allowed the writ petition, directing the respondents to compute the compounding charges in accordance with the 2014 Guidelines, treating the application as first made on February 15, 2018. The application is to be processed further upon deposit of the computed charges. The petitioner's right to challenge the ultimately computed amount is reserved.

What were the facts?

The writ petitioner, Global Visa Services Pvt. Ltd. & Anr., is aggrieved by the disposal of its compounding application under Section 276CC of the Income Tax Act, 1961, for Assessment Years 2011-12 to 2015-16. The petitioner claims to have filed its compounding application on February 15, 2018, prior to the 2019 Guidelines for Compounding coming into force on June 17, 2019. The respondents issued Show Cause Notices on January 31, 2018, and February 9, 2018, for failure to file returns. The petitioner responded on February 8 and 15, 2018, submitting compounding applications. Complaints were filed on March 9, 2018, and notices under Section 148 were issued on March 30, 2018. The petitioner's subsequent follow-up letter of September 24, 2020, was processed, leading to a demand of INR 2,61,92,125/- based on the 2019 Guidelines. The petitioner contended this amount was arbitrary and that the 2014 Guidelines should apply, limiting the compounding fee to INR 2.24 lakhs.

What were the issues?

1. Whether the compounding application filed by the petitioner on February 15, 2018, should be governed by the 2014 Guidelines for Compounding of Offences under Direct Tax Laws or the 2019 Guidelines, considering the application was filed before the effective date of the 2019 Guidelines? Assessee's Contention: The assessee argued that its application for compounding was made on February 15, 2018, and therefore, the 2014 Guidelines should apply. They asserted that the amount demanded (INR 2,61,92,125/-) was computed based on the 2019 Guidelines, which is incorrect, and under the 2014 Guidelines, the compounding fee should not have exceeded INR 2.24 lakhs. Revenue's Contention: The revenue processed the application based on the 2019 Guidelines, implicitly arguing that either the application was not considered filed on February 15, 2018, or that the later communication of September 24, 2020, was the operative application. The judgment notes that the respondents' order of October 20, 2022, proceeded on the premise that the compounding application was made for the first time on September 24, 2020, and did not allude to the original applications of February 15, 2018. The revenue did not dispute the filing of the original application on February 15, 2018.

Which sections of the Income-tax Act were involved?

Section 276CC,Section 139(1),Section 278B,Section 148

AI-generated summary — verify with the full judgment below

W.P.(C) 15352/2022

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$~29 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 15352/2022

GLOBAL VISA SERVICES PVT. LTD. & ANR. .....Petitioner

Through: Mr. Nischay Kantoor, Adv.

versus

PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-04 & ORS.

.....Respondents Through: Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh & Mr. Yojit Pareek, JSCs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE RAVINDER DUDEJA

21.08.2024 O R D E R

1.

The writ petitioner is aggrieved by the manner in which its application for compounding under Section 276CC of the Income Tax Act, 19611 has come to be disposed of. The said application itself pertained to Assessment Years2 2. It is the case of the writ petitioner that it had submitted an application for compounding on 15 February 2018 and thus prior to the Guidelines for the Compounding of Offences under Direct Tax Laws, 2019 2011-12 to 2015-16. 3

1 Act coming into force. We note that the 2019 Guidelines were issued in terms of a communication of 14 June 2019. In terms of the express stipulations contained in that communication itself, those guidelines were to come into effect from 17 June 2019 and be applicable to all applications for compounding which may be received 2 AY 3 2019 Guidelines This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/08/2024 at 12:35:04

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on or after the aforesaid date. 3. It is the case of the writ petitioners that since its application for compounding had been made on 15 February 2018 itself, it would be the Guidelines for Compounding of Offences under Direct Tax Laws, 20144 4. For the purposes of disposal of the present writ petition we deem it apposite to notice the following essential facts. On 31 January 2018 the first respondent issued a Show Cause Notice which would govern. 5 5. Insofar as the first petitioner is concerned it is stated to have filed its response on 08 February 2018. The petitioner no.2 also responded to the notice of 09 February 2018 by furnishing a response on 15 February 2018. It is the case of the writ petitioners that alongwith the aforesaid response, they had duly submitted applications seeking compounding. This becomes manifest from the averments made in paragraph 7 of the writ petition which are reproduced hereinbelow: referable to Section 276CC read along with Section 278B calling upon the first writ petitioner to show cause why prosecution be not launched consequent to its failure to file a return under Section 139(1) for the period AY 2011-12 to AY 2015-16. This was followed by an identical notice issued to the petitioner no.2 on 09 February 2018. “7. That, on 15.02.2018, the Petitioners filed their response in respect of the aforesaid notices, whereby reference was made to submissions made earlier vide letters dated 08.02.2018 and it was highlighted that that return could not be filed in the impugned years due to personal financial losses and family issues. Further, vide the said letter itself, application for compounding was filed for AY 2011-12 to AY 2015-16 by the Petitioners. Against the question at Serial No.8 of the Application as to ‘Whether the Applicant has paid the amount

4 2014 Guidelines 5 SCN This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/08/2024 at 12:35:04

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of tax, interest, penalties and any other sum due relating to the offence’, the Petitioners stated ‘TDS was already deducted under the provisions of Income Tax Act, 1961. And hence interest and penalties were not payable.’”

6.

Complaints subsequently came to be instituted against the petitioners in the Tis Hazari District Courts on 09 March 2018. This was followed by notices under Section 148 of the Act which came to be issued on 30 March 2018. 7. While the aforesaid application for compounding remained pending, the new 2019 Guidelines came into force in terms noted hereinabove. The petitioner while following up its original application of 15 February 2018 is stated to have moved the respondents yet again in terms of a letter of 24 September 2020. It was the aforesaid letter which was ultimately processed and accepted by the respondents on 19 July 2022. 8. It was asserted by the writ petitioners that the amount of INR 2,61,92,125/-, the deposit of which was claimed as a condition precedent for accepting the prayer for compounding, was wholly arbitrary since the same had been computed in accordance with the 2019 Guidelines and more particularly paragraphs 12.1, 12.2 and 13.4.1 thereof. The petitioner asserted that in terms of the 2014 Guidelines which would apply the amount of compounding fee could not have exceeded INR 2.24 lakhs. The petitioner is also stated to have raised this objection in terms of a letter which came to be submitted for the consideration of the respondents. However, those objections ultimately came to be disposed of in terms of a communication dated 20 October 2022. 9. As we peruse the aforesaid order it becomes apparent that the respondents have proceeded on the premise that the compounding This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/08/2024 at 12:35:04

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application was made for the first time on 24 September 2020. The aforesaid order does not even allude to or notice the original applications which had been made on 15 February 2018. We also take note of the fact that the filing of the original application on 15 February 2018 is not disputed by the respondents. In view of the aforesaid and the clear stipulations contained in the 2019 Guidelines, it would be the erstwhile compounding guidelines which would apply. This since it is the stated case of the respondents that the 2019 Guidelines would have applied only to applications made or received after 17 June 2019. 10. In view of the aforesaid, we allow the instant writ petition and call upon the respondents to compute the compounding charges liable to be paid by the writ petitioner in accordance with the 2014 Guidelines, treating the application to have been first made on 15 February 2018. 11. Subject to the aforesaid computation exercise being completed and the petitioner depositing the compounding charges, the application may be processed further and disposed of in accordance with law. 12. In case there be any challenge which the petitioner may be constrained to mount in respect of the amount which may be ultimately computed, we reserve its right to take appropriate action as permissible in law.

YASHWANT VARMA, J.

RAVINDER DUDEJA, J. AUGUST 21, 2024/kk This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 28/08/2024 at 12:35:04

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