2024 (1) TMI 1137 - HC - Income Tax

Compounding application u/s 279 - Period of limitation with regard to compounding of offence - exclusion of time held that the period running from 15.03.2020 to 28.02.2022 Covid period - HELD THAT - Neither sub-section (2) nor any of the other sub-sections of Section 279 prescribe a period of limitation with regard to compounding of offences. By taking note of this aspect, the guidelines issued by the Central Board of Direct Taxes on 14.06.2019 were quashed by this Court. At this point of time, the said judgment holds the field. Even otherwise, the complaint was lodged on 03.01.2019. A period of about fifteen months lapsed between the date of complaint and the onset of the Covid-19 pandemic. If the period excluded under orders of the Hon'ble Supreme Court, i.e. the period running from 15.03.2020 to 28.02.2022, is excluded the compounding application filed on 19.05.2022 would be within the period prescribed in the guidelines of the Central Board of Direct Taxes. For reasons set out above, the conclusions recorded in paragraph 2 of the impugned order are unsustainable. Therefore, the impugned order is quashed. As a corollary, the compounding application of the petitioner shall be considered and disposed of on merits. The first respondent is directed to dispose of the compounding application within a maximum period of one month from the date of receipt of a copy of this order after providing a reasonable opportunity to the petitioner.

Summary

Issues involved:
The rejection of the compounding application by the first respondent, based on the time limit specified in guidelines issued by the Central Board of Direct Taxes, and the challenge to this decision by the petitioner.

Summary:
The petitioner, a subsidiary of a company in Singapore, faced prosecution for belated filing of returns due to a difference of opinion between auditors in India and Singapore. The compounding application was rejected for being filed beyond the time limit specified in guidelines. The petitioner argued that the application was filed within a reasonable timeframe considering the exclusion of time due to the Covid-19 pandemic and the quashing of the guidelines by the Court.

The petitioner contended that the exclusion of time due to the Covid-19 pandemic should be considered, making the compounding application timely. Additionally, the petitioner argued that since the guidelines were quashed by the Court, the application could be filed at any time during the proceedings before the Magistrate.

The respondent, however, mentioned that a review application against the quashing of the guidelines was dismissed, and they intend to file an appeal. The legal provision regarding the compounding of offences under Section 279 of the Income Tax Act, 1961, does not prescribe a specific period of limitation.

The Court held that the conclusions in the impugned order were unsustainable, and thus quashed the order. The first respondent was directed to consider and dispose of the compounding application on its merits within one month. The case was disposed of accordingly, with no costs imposed.