2009 (4) TMI 36 - HC - Income Tax

Compounding of offence plea of the respondent for compounding u/s 279 (2) rejected by CBDT without any valid reasons in similar case CBDT accepted the plea of the said assessee and ultimately compounded the offence - while so, adopting a different yardstick in the case of the respondent and refusing to compound the offence on the sole ground that she was convicted by the trial court, is discriminatory - single Judge considered the above said facts and rightly set aside the order passed by the third appellant(CBDT) - Court is of the considered view that pending appeal, the appellants can very well compound the offence sought for by the respondent

Summary

Issues:
1. Appeal against refusal to compound offence under Section 279(2) of The Income Tax Act, 1961.
2. Interpretation of 'proceedings' under Section 279(2) of the Act.
3. Allegation of discrimination in compounding similar offences.

Issue 1: Appeal against Refusal to Compound Offence:
The judgment pertains to an appeal against the order of a learned single Judge allowing a writ petition challenging the refusal of the third appellant to compound the offence under Section 279(2) of The Income Tax Act, 1961. The respondent was convicted and sentenced by the trial court, and while the appeal was pending, filed a petition for compounding the offence, which was rejected by the third appellant. The court held that the refusal to consider the request for compounding in this case was arbitrary, unreasonable, and discriminatory based on a previous case where a similar request was entertained. The judgment emphasized the discretion of the appellants to compound offences before or after the institution of proceedings.

Issue 2: Interpretation of 'Proceedings' under Section 279(2) of the Act:
The court analyzed the term 'proceedings' under Section 279(2) of the Act, highlighting that it is not defined in the Income Tax Act, 1961. Referring to Supreme Court decisions, the term 'proceedings' was interpreted as a prescribed course of action for enforcing a legal right, encompassing actions at the appellate stage as well. The court concluded that the appeal filed by the respondent against the conviction and sentence constituted a proceeding under Section 279(2) of the Act, thereby allowing the compounding of the offence during the pendency of the appeal.

Issue 3: Allegation of Discrimination in Compounding Similar Offences:
The judgment addressed the allegation of discrimination in compounding similar offences by the appellants. It cited a case where a similarly placed individual's request for compounding was accepted, even after conviction and dismissal of the appeal. The court found the differential treatment towards the respondent, based solely on the conviction by the trial court, as unfair and unsustainable in law. The judgment emphasized the need for consistent application of the provisions of Section 279(2) of the Act and dismissed the writ appeal, directing the parties to facilitate the compounding process to meet the ends of justice.

In conclusion, the judgment delves into the nuances of compounding offences under Section 279(2) of The Income Tax Act, 1961, emphasizing fair treatment and consistent application of the law in such matters.