2023 (1) TMI 1018 - HC - Income Tax

Compounding of an offence committed u/s 276B, r/w. Section 287B - company deducted income tax from the salaries of its employees, under the provisions of Section 192 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 - As submitted petitioner no.1-company has deposited the TDS due, though beyond time-limit set down, but before any demand notice was raised - HELD THAT:- We find that this is a classic case for consideration by respondent no.3 for compounding of offence, inasmuch as petitioner no.1-company has deposited the TDS due, though beyond time-limit set down, but before any demand notice was raised or any show cause notice was issued. The Tax Deducted at Source was deposited along with penal interest thereon. A reply setting out detailed reasons for not 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.

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.

ORDER:

(i) The impugned order dated 1st June 2021 passed by respondent no.3-Chief Commissioner of Income Tax (TDS), Mumbai, on the application filed by the petitioners for compounding of an offence, is quashed and set aside.

(ii) Consequently, we remand the application, under the provisions of Section 279(2) of the Income Tax Act, of the petitioners back to respondent no.3 to consider afresh on its own merits.

(iii) Respondent no.3 shall dispose of the application of the petitioners preferably within a period of thirty days from the date of receipt of this judgment.

(iv) Until disposal of the application of the petitioners for compounding of offence, under sub-section (2) of Section 279 of the Income Tax Act, 1961, by respondent no.3, the proceedings, being Criminal Appeal No.127 of 2020, along with Criminal Miscellaneous Application No.407 of 2020, pending before the City Sessions Court, Greater Mumbai, shall remain stayed.

(v) The challenge to the validity of clause 7(ii) contained in Circular F. No. 285/08/2014-IT(INV.V)/147 dated 14th June 2019, as raised in the present petition, is left open in the event the petitioners are aggrieved by a fresh order to be passed by respondent no.3.