UNION OF INDIA AND ANR. versus BANWARI LAL AGARWAL

Citation: [1998] SUPP. 2 S.C.R. 356 · Decided: 16-10-1998 · Supreme Court of India · Bench: M.K. MUKHERJEE, B.N. KIRPAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

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. 
G 
H 
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos. 
1087-1090of1998. 
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. 
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. 
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 
E 
F 
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,

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