UNION OF INDIA AND ANR.versusBANWARI LAL AGARWAL

A                        UNION OF INDIA AND ANR.
                                         11.
                          BANWARI LAL AGARWAL
                                                                                    ...
                               OCTOBER 16, 1998

B                [M.K. MUKHERJEE AND B.N. KIRPAL, JJ.]


         Income Tax Act, 1961: Sections I 32, 276-C and 279(2).

         Assessee-Search and seizure-Returns filed subsequent to--Delay in
C filing of the Returns-Assessee disclosing income much less than the income
    assessed-prosecution under Section 276-C-Application filed by Assessee
    under Section 482-High Court held that the assessment made was in
    pursuance of a mutual understanding therefore no penal action could be
    taken against the respondent-Assessee was not afforded an opportunity to
    compound the matter under section 279(2) prior to the institution of the
D   prosecution-Therefore it's initiation was not valid-Appeal before Supreme
    Court-Held the decision of the High Court was clearly without any legal
    basis-There was nothing on the record to suggest that any understanding
    was given to the respondent that no penal action could be taken-No
    provision in the Income-tax Act whereby a compromise assessment could
E   have been arrived at between the respondent and the Commissioner of
    Income-tax-Section 279(2) is a provision which enables the chief
    Commissioner or the Director General to compound any offence either before
    or after the institution of proceeding-It cannot be interpreted 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
F   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-Decision of High Court set aside.

        CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos.
    1087-1090of1998.
G
           From the Judgment and Order dated 4.2.97 of the Allahab:ld High Court
    in Crl. M.A. Nos. 3505-08 of 1990.

          Ranbir Chandra Ms. Kanupriya Mittal and B.K. Prasad for the Appellants.

          N.K. Kantawala and Bharat Sangal for Respondent.
H                                    356
                            U.0.1. v. B.L. AGARWAL                           357
      The following Order of the Court was delivered :                               A
      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              B
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           C
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             D
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.
                                                                                     E
      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.
                                                                                     F
      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 ~sessed. Furthermore,             G
there is nothing on the record which could lead the High Court to the
conclusion 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         H
    358                         SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.

A 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-section (2) of Section 279 is a provision which
B   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
C   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.
D
          The Trial Court is now directed to proceed with the case in accordance
    with law as expeditiously as possible.

          The appeals are allowed.

    T.N.A                                                         Appeals allowed.