2024 (12) TMI 1216 - HC - Income Tax

Rejecting the petitioner s application for compounding of the offences u/s 276B and 278B - main accused (respondent no. 5 M/s Adel Landmark Limited) had not filed any application for the compounding of the offences before the competent authority Chief CIT(TDS) as the said authority was of the view that the petitioner s application for compounding could not be considered on a stand alone basis. HELD THAT - Co-accused are now entitled to apply separately for compounding of the offences. Revenue states on instructions that the impugned order may be set aside and the parties be remanded to the competent authority to consider it afresh in the light of the guidelines dated 17.10.2024. The said course commends to us. We accordingly set aside the impugned order and remand the matter to the competent authority to decide afresh in the light of the current guidelines. Petition is disposed of in the aforesaid terms.

Summary

Issues:
Impugning order rejecting application for compounding of offences under Income Tax Act.
Application for compounding rejected due to non-filing by main accused.
Interpretation of fresh guidelines for compounding of offences under the Act.
Entitlement of co-accused to apply separately for compounding of offences.

Analysis:
The petitioner filed a petition challenging the rejection of their application for compounding of offences under Sections 276B and 278B of the Income Tax Act, 1961. The petitioner, a director of a company, received a show cause notice for defaults in depositing Tax Deducted at Source (TDS). The Income Tax Authority declared the petitioner as the principal officer of the company for the relevant financial years and initiated proceedings for prosecution. Subsequently, charges were framed against the petitioner and the company. However, due to insolvency proceedings, the case against the company was stayed. The petitioner's application for compounding of offences was rejected as the main accused, the company, had not filed any application for compounding.

The Central Board of Direct Taxes issued fresh guidelines for compounding offences under the Act, allowing co-accused to apply separately for compounding. The court noted that the co-accused are now entitled to apply separately for compounding of the offences. The Revenue counsel agreed to set aside the impugned order and remand the matter to the competent authority for reconsideration in light of the new guidelines. Consequently, the court set aside the impugned order and remanded the matter for fresh consideration as per the current guidelines. The petition was disposed of accordingly, along with any pending applications.