TMI Blog2023 (1) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the authorities specified under Section 279(2) in considering such an application, much less place fetters on the powers of such authorities in the form of a period of limitation. We are, therefore, of the opinion that the guidelines contained in the CBDT Guidelines dated 14th June 2019 could not curtail the power vested in Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General under the provisions of Section 279(2) of the Income Tax Act. In our considered view, to the extent CBDT Guidelines dated 14th June 2019 creates a limitation on the time, within which application under Section 279(2) of the Income Tax Act is required to be filed, is of no consequence and does not take away jurisdiction of respondent no.3 or the other authorities, referred to in sub-section (2) of Section 279, from entertaining an application for compounding of offence at any time during the pendency of the proceedings, be they before the Magistrate or on conviction of the petitioners, in an appeal before the Sessions Court. We find that this is a classic case for consideration by respondent no.3 for compounding of offence, inasmuch as petitioner no.1-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act, 1961 (the Act), but had failed to deposit the tax so deducted to the credit of the Central Government within the time prescribed under Section 200 r/w. Section 204 of the Act. The petitioners claim that this situation arose due to accumulated losses and delays in receiving tax refund from respondent no.1 during the period 1st April 2009 to 31st March 2010. 4. It is further case of the petitioners that, subsequently, on 2nd September 2010, petitioner no.1-company voluntarily deposited the entire amount of Tax Deducted at Source due, along with statutory interest liability thereon, with respondent no.1 without any prior notice of default or demand from the said respondent. However, the petitioner no.1-company subsequently received Show Cause Notice dated 18th October 2011, calling upon it to show cause as to why prosecution should not be launched for offences committed under Section 276B, r/w. Section 278B, of the Act for failure to deposit tax deducted to the credit of the Central Government, within the statutory timeframe. The said show cause notice also required petitioner no.1 to nominate its Principal Officer for that purpose. Petitioner no.1 replied to the sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation under Section 279(2) of the Act was rejected by the impugned order dated 1st June 2021, which is now challenged before this court by way of present petition on several grounds. 8. After service of notice on the respondents, an affidavit-in-reply dated 26th May 2022 came to be filed by the respondents opposing the petition. The respondents have also relied upon the CBDT Circulars No.25/2019 and 01/2020, which deal with the procedure set down by the Board for consideration of applications for compounding of offences under the provisions of Section 279 of the Income Tax Act. 9. An affidavit-in-rejoinder dated 4th July 2022 came to be filed by the petitioners opposing the contentions raised by the respondents in their reply. The affidavit-in-rejoinder sets out that the compounding application was filed with just six days delay, after considering relaxation granted till 31 st January 2020 as per the CBDT Circular No.25 of 2019 dated 9th September 2019, r/w. CBDT Circular No.01 of 2020 dated 3rd January 2020. It is further the petitioners contention in the affidavit-in-rejoinder that respondent no.3 has erroneously relied on paragraph 8.1(vii) of the Compounding Guidelines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent no.3 while rejecting the application for compounding of offence, which provides that the application for compounding of offence is required to be filed within twelve months from the end of the month in which the complaint was filed, cannot operate as a rule of limitation since the same cannot override the provisions of the statute i.e. Section 279 of the Income Tax Act. 14. The learned counsel for the petitioners has relied upon the following decisions in support of his case :- (i) Sports Infratech (P.) Ltd. Vs. Deputy Commissioner of Income-Tax (HQRS) (2017) 78 taxmann.com 44 (Delhi) (ii) Vikram Singh Vs. Union of India (2017) 80 taxmann.com 371 (Delhi) (iii) Government of India, Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) Vs. R. Inbavalli (2017) 84 taxmann.com 105 (Madras) (iv) K.V. Produce and Ors. Vs. Commissioner of Income-Tax and Anr. (1992) 196 ITR 293 (Kerala) 15. Opposing the petition, Mr. Suresh Kumar, learned counsel for the respondents submits that the CBDT Circulars, bearing Nos.25/2019 and 01/2020, provide for relaxation to file compounding applications beyond twelve months from the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irections to the aforesaid income-tax authorities as he maydeem fit for institution of proceedings under this subsection. Explanation .-For the purposes of this section, appropriate authority shall have the same meaning as in clause (c) of section 269UA. (1A) A person shall not be proceeded against for an offence under section 276C or section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under section 270A or clause (iii) of sub-section (1) of section 271 has been reduced or waived by an order under section 273A. (2) Any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General. (3) Where any proceeding has been taken against any person under sub-section (1), any statement made or account or other document produced by such person before any of the income-tax authorities specified in clauses (a) to (g) of section 116 shall not be inadmissible as evidence for the purpose of such proceedings merely on the ground that such statement was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of limitation for filing of an application for compounding offences. 19. In Sports Infratech (P.) Ltd. (Supra) , a Division Bench of the Delhi High Court was considering the provisions of the Board s Guidelines dated 3 rd December 2014. In that case, an application for compounding came to be rejected on the ground that the petitioner did not fulfill the eligibility criteria for consideration of its case for compounding. As per paragraph 8(v) of the Guidelines, while considering the binding nature of the guidelines and their effect and considerations to be adopted while deciding an application for compounding under Section 279(3) of the Act, it was held as under :- 6. The learned counsel for the Revenue urges that the binding nature of the Board s instructions and guidelines is apparent from explanation to Section 279(3), which clarifies that the power to grant or refuse compounding is essentially discretionary and actually administrative. Therefore, the guidelines framed for its exercise under Section 279 are binding upon all Revenue Authorities including the Chief Commissioner. Learned counsel relied upon the Supreme Court decision in Asstt. CIT v. Velliappa Textiles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction under this provision, was also required to consider the objective facts in the application before it. 21. In Vikram Singh (Supra), another Division Bench of the Delhi High Court considered the provisions of the Circular dated 23rd December 2014 issued by the CBDT and, more specifically, the guidelines contained in para 8(vii), which provides that offences committed by a person for which complaint was filed by the Department with the competent court twelve months prior to receipt of the application for compounding was generally not to be compounded. While considering the import of such a clause in the circular, it has held as under :- 7. The Circular dated 23rd December 2014 does not stipulate a limitation period for filing the application for compounding. What the said circular sets out in para 8 are Offences generally not to be compounded . In this, one of the categories, which is mentioned in sub-clause (vii), is : Offences committed by a person for which complaint was filed with the competent court 12 months prior to receipt of the application for compounding . 8. The above clause is not one prescribing a period of limitation for filing an applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely delayed. Since there is no other reason given for the rejection of the application, the Court is unable to sustain the order dated 3 rd November 2016 of the CCIT by which the petitioner s application for compounding was rejected. The said order is hereby set aside. The petitioner s application for compounding will have to be considered afresh by the CCIT. 22. A similar provision, as has been dealt with by the Delhi High Court, contained in the Circular dated 23rd December 2014 is found in para 7(ii) of the Circular dated 14th June 2019, which is applicable to the present case. The provisions of para 7(ii) of 2019 Circular would be required to be read with the provisions of para 9.1 of that circular, which provides for relaxation in cases where an application is filed beyond twelve months referred to in paragraph 7(ii), specially when there is a pendency of an appeal or at any stage of the proceedings. 23. In R. Inbavalli (Supra) , a Division Bench of the Madras High Court was dealing with the CBDT Guidelines dated 16th May 2008, wherein an application for compounding was rejected on the ground that it was not a deserving case as parameters of para 7.2 of those guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities in the form of a period of limitation. We are, therefore, of the opinion that the guidelines contained in the CBDT Guidelines dated 14th June 2019 could not curtail the power vested in Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General under the provisions of Section 279(2) of the Income Tax Act. 28. In our considered view, to the extent CBDT Guidelines dated 14th June 2019 creates a limitation on the time, within which application under Section 279(2) of the Income Tax Act is required to be filed, is of no consequence and does not take away jurisdiction of respondent no.3 or the other authorities, referred to in sub-section (2) of Section 279, from entertaining an application for compounding of offence at any time during the pendency of the proceedings, be they before the Magistrate or on conviction of the petitioners, in an appeal before the Sessions Court. As long as a proceeding, as referred to in sub-section (1), is pending, an application for compounding of offence would be maintainable under sub-section (2) of Section 279 and will have to be dealt with by the authorities on its own merits. 29. These Guideli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depositing the same within the time stipulated under the law had been filed in reply to the show cause notice issued earlier. Though the petitioners had been convicted, a proceeding in the form of an appeal is pending before the Sessions Court, which is yet to be disposed of, and in which there is an order of suspension of sentence imposed on petitioner no.2 is operating. 33. Under these circumstances, we are of the view that the findings arrived at by respondent no.3 in the impugned order dated 1st June 2021, that the application for compounding of offence, under Section 279 of the Income Tax Act, was filed beyond twelve months, as prescribed under the CBDT Guidelines dated 14th June 2019, are contrary to the provisions of sub-section (2) of Section 279. The respondent no.3 has failed to exercise jurisdiction vested in it while deciding the application on merits and consideration of the grounds set out when the application for compounding of offence was filed before it. On this count, the impugned order dated 1st June 2021 needs to be quashed and set aside. Accordingly, we pass the following order :- (i) The impugned order dated 1st June 2021 passed by respondent no.3-Chie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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