2023 (5) TMI 1421 - HC - Income Tax

Compounding the offence u/s 276B - application rejected on the solitary ground that the application was not filed within the prescribed period of 12 months - HELD THAT - When the power of relaxation has been granted to the authority who considers the compounding application such power shall be invoked in appropriate cases to advance the cause of justice. In this case we have found that the application was filed on 17.01.2020 for compounding the offence u/s 276B. But that was not supported by an affidavit and as such it could be stated that the application was not complete. But when on 05.02.2020 the affidavit was filed that affidavit was filed to verify the statements made in the application dated 17.01.2020. The appropriate authority having adopted a technical approach held the main application to have filed beyond the prescribed period i.e. 31.01.2020. In our considered view that was a wrong approach. First of all the affidavit was filed for verification of the statements in the application dated 17.01.2020. By filing the affidavit the defect in the application stood removed. Thereafter it cannot be held that the application for compounding was filed on 05.02.2020 or the compounding application was time-barred. Set aside the order and remand the matter back for deciding the application of compounding on merit within a period of 30 days.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the application for compounding the offence under Section 276B of the Income Tax Act was filed within the prescribed period as per the relevant circulars.
Whether the filing of an affidavit to support the application after the prescribed period affects the validity of the original application date.
Whether the power of relaxation for filing beyond the prescribed period can be invoked in this case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Timeliness of the Compounding Application

Relevant Legal Framework and Precedents: The compounding application was governed by Section 276B of the Income Tax Act and Circular No. 1 of 2020, which stipulated that the application must be filed within 12 months from the end of the month in which the prosecution complaint was filed.
Court's Interpretation and Reasoning: The court interpreted that the application dated 17.01.2020 was filed within the prescribed period, as the affidavit filed later was merely to cure a defect and not to establish a new filing date.
Key Evidence and Findings: The application was initially filed on 17.01.2020, and the affidavit was submitted on 05.02.2020 to support the original application.
Application of Law to Facts: The court applied the law by considering the affidavit as a corrective measure rather than a new application, thus maintaining the original filing date.
Treatment of Competing Arguments: The court acknowledged the Income Tax Department's argument that the affidavit completed the application, but it concluded that the original filing date should stand.
Conclusions: The application was deemed timely, and the rejection on the basis of late filing was incorrect.

Issue 2: Affidavit and Application Validity

Relevant Legal Framework and Precedents: The requirement for an affidavit was part of the procedural guidelines, not a determinant of the application date.
Court's Interpretation and Reasoning: The court reasoned that the affidavit served to verify the application and did not constitute a new filing.
Key Evidence and Findings: The affidavit was filed to address a procedural defect and was not intended as a separate application.
Application of Law to Facts: The court found that procedural defects could be cured without affecting the original filing date.
Treatment of Competing Arguments: The court dismissed the argument that the affidavit's filing date should be considered the application date.
Conclusions: The affidavit did not alter the original application date of 17.01.2020.

Issue 3: Power of Relaxation

Relevant Legal Framework and Precedents: The circular allowed for relaxation of the filing period in exceptional cases, but the petitioner did not demonstrate such circumstances.
Court's Interpretation and Reasoning: The court noted that the petitioner did not provide reasons beyond their control to justify a delayed filing.
Key Evidence and Findings: The petitioner failed to specify any extraordinary reasons for the delay.
Application of Law to Facts: Without evidence of exceptional circumstances, the court could not apply the relaxation provision.
Treatment of Competing Arguments: The court agreed with the Income Tax Department that no grounds for relaxation were presented.
Conclusions: The power of relaxation was not applicable due to lack of justification for delay.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "First of all, the affidavit was filed for verification of the statements in the application dated 17.01.2020. By filing the affidavit, the defect in the application stood removed."
Core Principles Established: Procedural defects can be cured without affecting the original filing date, and affidavits verifying applications do not constitute new filings.
Final Determinations on Each Issue: The rejection of the application based on late filing was set aside, and the matter was remanded to the Income Tax Officer for reconsideration on merits.

The judgment ultimately allowed the writ petition, directing the Income Tax Officer to decide the application for compounding on its merits within 30 days, providing the petitioner an opportunity for a personal hearing.

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