2018 (8) TMI 1861 - HC - Income Tax

Compounding application u/s 279 (2) - petitioners' counsel submits that Section 279 (2) of the Act enables the petitioners to compound the offence, and those proceedings have been pending for about one year - HELD THAT - Dispose of the writ petition holding that the 1st petitioner will consider the Ext.P11 compounding application, subject to its maintainability, expeditiously, in a month's time. At the time of considering that application, the 1st respondent will also give an opportunity of hearing to the petitioners. I may, as well, observe that until the Ext.P11 is considered, the Department will defer coercive steps.

Summary

Issues involved:
1. Recovery proceedings for assessment year 2006-2007
2. Filing of compounding application under Section 279(2) of the Income Tax Act
3. Initiation of prosecution proceedings before considering the compounding application

Analysis:

1. Recovery proceedings for assessment year 2006-2007:
The judgment pertains to a case where the petitioner Company and its directors were facing recovery proceedings for the assessment year 2006-2007. The petitioners claimed to have paid the entire arrears of tax and interest. Subsequently, they filed a compounding application under Section 279(2) of the Income Tax Act before the 1st respondent.

2. Filing of compounding application under Section 279(2) of the Income Tax Act:
The petitioners filed a writ petition complaining that prosecution proceedings were initiated by the Department before the 1st respondent could consider their compounding application. The petitioners' counsel argued that Section 279(2) of the Act allows for compounding the offense, and the proceedings had been pending for about a year. The learned Standing Counsel, in response, contended that there was no merit in the petitioners' contentions but assured that the 1st respondent would consider the compounding application, subject to its maintainability.

3. Initiation of prosecution proceedings before considering the compounding application:
The judgment disposed of the writ petition by directing the 1st respondent to consider the Ext.P11 compounding application expeditiously, within a month's time, subject to its maintainability. It was further ordered that the 1st respondent would provide an opportunity for a hearing to the petitioners during the consideration of the application. Additionally, until the compounding application was reviewed, coercive steps by the Department were to be deferred.

This judgment reflects the court's intervention to ensure a fair consideration of the compounding application under the Income Tax Act, emphasizing the need for due process and providing an opportunity for the petitioners to present their case before any coercive actions were taken by the Department.