To Compound Tax Evasion Offences, Assessee should pay the Whole Tax Amount Evaded: Gujarat HC [Read Judgment]

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The Gujarat High Court held that 100% of tax sought to be evaded is to be paid for compounding of a tax evasion offences under Section 276C (1) of the Income Tax Act, 1961, and not 100% of the amount sought on offence pertains to willful attempt to evade tax.

The petitioner was a partnership firm and dealing in the business of lubricating oil and petroleum products. The search was conducted on various premises of the petitioner on 11th October 1984.

During the course of the search, incriminating material such as books of accounts, written loose papers, etc. and 503 grams of gold ornaments were seized and were retained under section 132(5) of the Act.

In the scrutiny assessment proceedings, an assessment order was passed for the period from A.Y. 1983­84 to A.Y.1985­86 by the Assessing Officer making addition on account of cash credit, bogus purchases etc.

The division bench comprising of Justice J.B. Paridwala and Justice Bhargav D.Karia pronounced the judgement based on an appeal filed by Mehta Laboratories.

Section 276C (1) of the act elaborates as, If a person willfully attempts in any manner whatsoever to evade74 any tax, penalty or interest chargeable or imposable under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable.

The court examined petitioner’s contention that the Assessing Officer committed an error while working out the number of compounding fees paid by the petitioner, as the compounding fees is required to be paid on the basis of 100% of the tax evasion offences and not 100% of the amount of income sought to be evaded.

While relying on the decision of Supernova System (P.) Ltd. Vs. Chief Commissioner of Income Tax reported in [2018] 99 taxmann.com 300 (Gujarat) court held that the petitioner would be permissible of payment of 100% of the tax sought to be evaded and not 100% of the amount sought to be evaded by the assessee.

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