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2018 (3) TMI 1362 - HC - Income TaxCompounding of offence under Section 279(2) - application rejected for non-payment of compounding fees within the stipulated time - Held that - As admittedly the instructions of CBDT dated 16th may, 2008 has not been followed, it would meet the ends of justice to quash and set aside the impugned order dated 26th February, 2015 of the Commissioner of Income Tax. The petitioners application for compounding is restored to the stage when the order sheet noting on 21st February, 2014 was made by the Commissioner of Income Tax. The Revenue to now take further steps in accordance with law and as per procedure laid down by the CBDT in its above Circular dated 16th May, 2008 i.e. call upon the petitioners to explain the nonpayment of compounding fees within the stipulated time.
Issues:
Challenge to order rejecting application for compounding under section 279 of the Income Tax Act, 1961 based on non-payment of compounding fees despite notices issued. Compliance with guidelines issued by the Central Board of Direct Taxes regarding the procedure for compounding of offences. Dispute over non-receipt of notices by the petitioners. Adherence to CBDT instructions. Restoration of the petitioners' application for compounding and further steps to be taken by the Revenue in accordance with the law. Analysis: The petition challenges the order rejecting the application for compounding under section 279 of the Income Tax Act, 1961, citing non-payment of compounding fees despite notices issued. The petitioners argue that they were not given an effective opportunity to explain the non-payment, as required by the guidelines issued by the Central Board of Direct Taxes (CBDT) regarding the compounding procedure. The CBDT guidelines specify a timeline for the disposal of compounding petitions by the Chief Commissioner of Income Tax (CCIT), the intimation of compounding charges to be deposited, and the consequences of non-payment within the stipulated time. The petitioners claim that they did not receive the notices dated 25th September, 2014, and 3rd February, 2015, which were crucial for the decision-making process. The Revenue does not dispute the non-receipt of these notices by the petitioners, highlighting a procedural flaw in the communication process. As the CBDT instructions were not followed, the High Court deems it appropriate to quash the impugned order and restore the petitioners' application for compounding to the stage when the initial order sheet noting was made by the Commissioner of Income Tax. The judgment emphasizes the importance of adhering to the CBDT guidelines and directs the Revenue to take further steps in line with the Circular dated 16th May, 2008. The petitioners are to be called upon to explain the non-payment of compounding fees within the specified time frame, ensuring procedural fairness and compliance with the law. While the prosecution already initiated is not disturbed, the respondents are instructed to serve notices at the petitioners' Pune office and provide sufficient time for them to present themselves for a hearing before the Commissioner of Income Tax for the disposal of the compounding application under Section 279(2) of the Act. In conclusion, the petition is disposed of with no order as to costs, emphasizing the need for procedural regularity, adherence to guidelines, and fair opportunities for parties to present their case in matters of compounding under the Income Tax Act.
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