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Brief facts of the case

1. That, Petitioners are the directors of a company M/s Chanrdaprabhu
Homes Pvt. Ltd. incorporated in the year 1997. The company is engaged
in the business of purchase, sale and development of plots in Indore
(M.P.). Coaccused Respondents no. 2 and 3 are other directors of the
company.

2. That, the affairs of the company were being conducted in an oppressive

manner prejudicing the interests of the company by coaccused directors
i.e. Respondents no. 2 and 3, therefore disputes arose between the
Petitioners and Respondents no. 2 and 3 which led to filing of complaints
against each other before Respondent no. 1.

3. That, vide letter dated 28.04.2006 the Petitioners acquired knowledge that
Respondents no. 2 and 3 have arbitrarily and unlawfully removed them
from Directorship of the company w.e.f. 12.04.2006. Being aggrieved by
the unlawful and illegal acts of respondents no. 2 and 3, Petitioners filed a
case of oppression and mismanagement under section 397 and 398 of the
Companies Act, 1956 against the Company and Respondents no. 2 and 3
before Company Law Board, New Delhi bearing Company Petition No.
129/2006 wherein the acts of Respondents no. 2 and 3 were challenged
including removal of Petitioners from the post of directors.

4. That, vide orderdated 12.09.2011, c.l.b. declared removal of Petitioners

being null and void and restored status quo ante as on date 12.04.2006.

5. That, on 12.12.2006 the Company (through Respondent no. 2 and in

absence of Petitioners) filed their Income Tax Returns and showed its
income as ‘Nil’ and had thus evaded tax liability. The Respondent no.
1vide assessment order dated31.12.2008, computed Company’s total
income as Rs. 4,63,140/- and raised a tax demand of Rs. 2,07,338/-. Upon
non-payment , a fine of Rs. 3,50,000/- was also imposed. Upon appeal
preferred by Company to Income Tax Commissioner, vide order dated
08.06.2010, a demand of Rs. 4,48,575/-was raised.

6. That, upon non-realization of tax liability, a show cause notice was issued
on 08.03.2011 and 19.03.2011 to which Company submitted their
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reply/defense on 23.05.2011. Thereafter, Respondent no. 1 filed a

complaint case bearing no. RCT 03/2012 against Petitioners before
learned J.M.F.C., Indore for the alleged offence of Sec. 276 C (1)(i)
Income Tax Act, 1961.

7. That, Petitioners were prosecuted and were convicted u/s Sec 276 C (1)(i)
Income Tax Act, 1961 vide judgment dated 04.10.2019 passed by the
Learned Special Judicial Magistrate, (CBI and Economic Offences),
Indore. Petitioners and Respondent no. 2 and 3 were each sentenced with
6 months simple imprisonment, Rs. 5,000/- fine and 15 days of simple
imprisonment in default of fine.

8. That, vide Circular No. 25/2019 dated 14.06.2019, Ministry of Finance

(Govt. of India) issued Guidelines for Compounding of Offences under
Direct Tax Laws,2019 under Sec. 279(2) of the Act, 1961 which provides
that any offence under Chapter XXII (including offences under Sec 276-
C(1)(i)) may be compounded by the competent authority.

9. That, vide circular dated 09.09.2019, Ministry of Finance relaxed the time
limit for filing application of compounding whereby applications could
be filed before 31.12.2019. Thus, Petitioners became eligible for
Compounding of offences in accordance with aforesaid guideline dated
14.06.2019 and 09.09.2019.

10.That, being aggrieved by the conviction, Petitioners preferred a Criminal

Appeal 299/2019 dated 31.10.2019 before the XVII Additional Session
Judge, Indore.

11. That, during the pendency of appeal, when Petitioners received the
knowledge of aforesaid circular, Petitioners vide application dated
27.12.2019 applied for compounding of offence before the competent
authority in prescribed format which is pending adjudication.

12.That, Petitioner on 06.09.2021 filed an application u/s 320(5) CrPC

seeking leave of the learned appellate court for composition of offence
under Sec. 276 C(1)(i) and seeking directions to Respondents to produce
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orders passed / relevant documents regarding compounding application

presented before the Competent authority.

13.That, in absence of written reply to Petitioners application and solely on

the basis of oral instructions of the advocate of Respondent no. 1, the
learned Judge vide order dated 01.11.2021 dismissed Petitioners
application u/s 320(5) CrPC by making the following observations:-
“ it is a matter of record that the appellants have already
availed opportunity to file application for compounding of offence before
competent authority and such application of appellants for compounding
of offence has already been dismissed by the competent authority.
On perusal of record, it is clear and apparent that the
appellant had contested case before the trial court by tooth and nails and
some of accused denied their responsibility and liability towards the
company, even somewhere they refused to be office bearer of accused
company but now appellants have filed compounding applications at the
stage of appeal which is sufficient to suggest that the appellants have
admitted their liability towards the company. Meaning thereby, the
accused persons/appellant wanted to sail on two boats. First, they have
contested case on the ground that they have not committed any offence
and they were not liable for any violation but when they found guilty by
trial court, they have requested to compounding of offence by admitting
their acts. Moreover, the appellant have admittedly, filed an application
before competent authority/ Income Tax Department for compounding of
offence which has been dismissed by competent authority…
So, where the application of appellant for compounding of
offence has already been dismissed by the competent authority then there
is no meaning to pass any direction by this court to the Department or the
competent authority to compound the offence. Hence, the application of
the appellants is dismissed.”

14. Being aggrieved by the said impugned order passed in Cr.A. 299/2019
dated 01.11.2021 the appellants file a Criminal Revision No. 3177/2021
befre the Hon’ble High Court of Madhya Pradesh, Beanch at Indore on
the following grounds:-
“ That the impugned order passed by the learned Appellate Court is
illegal, improper and incorrect ant contrary to the records and guidelines
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issued by the Ministry of Finance, Govt. of India. The learned appellate

court has wrongly dismissed the application by observing that the
competent authority has already dismissed similar application but no such
order has been submitted by the respondent before the court below. The
appellate court has decided the interim application in the manner to
decide the case finally on merits which prejudiced the rights of the
petitioners. The appellate court misconstrued that the application of the
petitioners had already been dismissed by the competent authority and
there is only recommendations of chief income tax commissioner (OSD-
I), Indore dated 14.09.2021for rejection of compounding petition. Even
that letter of recommendation dated 14.09.2021 is filled before the
appellate court on 08.12.2021 with a hand written list of document dated
31.08.2021 by the advocate of respondent no. 1 Income Tax Department.
Actually the rejection letter for compounding application was passed by
Principle Chief Commissioner of Income Tax (MP &CG) on 10.12.2021
i.e. after one month and ten days after the passing of order by appellate
court.”

15. The Hon’ble High Court in his order passed on 08/07/2022 in Criminal
Revision 3177/2021 held that :-
“ In view of the aforesaid discussions, submissions made by
learned counsel for the parties and the law laid down by hon’ble Apex
Court in the case of Rajesh Kumar Sharma (supra) and by High Court of
Madras in the case of M/s. V.A. Haseeb & Co. (supra) corroborating with
the facts of the case that during the pendency of the appeal, the petitioners
were became entitled for compounding the offence as per the, the revision
petition is liable to be and hereby allowed by setting aside the impugned
order dated 01.11.2021 passed in CRA No. 299/2019.
The matter is remitted back to the learned appellate Court
concerned to consider the application afresh within a period of two
months from the date of this order, in accordance with law without being
influenced by this order.”

16. After that order Respondent No. 1 Income Tax Department file a
Preliminary objection against the application of appellants u/s 320(5) of
CrPC first time on 16/08/2022 having the same grounds which were
already discarded by the Hon’ble High court. Also the order of Principle
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Chief Commissioner of Income Tax (MP & CG) dated 10.12.2021by

which the compounding application is rejected on the grounds mentioned
in Para 8.1.iii of the guidelines is submitted by the advocate of
respondent no. 1 before the court which is contrary to the
recommendations of Chief Commissioner of Income Tax (OSD)-1 Indore
dated14.09.2021 in which the compounding application is recommended
to be reject on the ground mentioned in Para 8.1.vii of the guideline. But
the actual position is that the case of applicants fall under the category
‘B’ of guideline and in that condition according to Para 8.1.ii “offence
other than first offence as defined in Para 8.2 for the purpose of these
guidelines are not compoundable” but as the applicants are first time
offender their offence is compoundable.

17. Against the order of principle Chief Commissioner of Income Tax

the petitioners have proffered a Writ Petition No. 21950/2022 before
the Hon’ble High Court of M.P. which is rejected by order dated
27.09.2022 on a new ground that “clause 7(ii) provides that no
application of compounding can be filed after the end of 12 months in
which a prosecution complaint , if any, has been filed in the court of
law” which is not mentioned anywhere in the rejection order passed
by Income Tax Department. Also clause 8(ii) is nowhere discussed in
that order which is the clause under which the applicants are fall
because they are the first time offenders.

18.Also the learned Appellate Court by order dated 27.08.2022 has again
dismissed the application under Section 320(5) CrPC on the ground that
the applicants are not competent for compounding the offence and also
court cannot direct the respondent no. 1 for compounding the offence.
Against the said order of appellate court the applicants are filing the
Criminal Revision No. 3753/2022 before the Hon’ble High Court of
M.P. which is rejected by the order dated 29.09.2022.

19.Copy of both the orders are annexed.