2024 (11) TMI 170 - HC - Income Tax

Compounding application u/s 276CC - HELD THAT - The respondents have proceeded on the premise that the compounding application was made for the first time on 24 September 2020. The aforesaid order does not even allude to or notice the original applications which had been made on 15 February 2018. We also take note of the fact that the filing of the original application on 15 February 2018 is not disputed by the respondents. In view of the aforesaid and the clear stipulations contained in the 2019 Guidelines, it would be the erstwhile compounding guidelines which would apply. This since it is the stated case of the respondents that the 2019 Guidelines would have applied only to applications made or received after 17 June 2019. We allow the instant writ petition and call upon the respondents to compute the compounding charges liable to be paid by the writ petitioner in accordance with the 2014 Guidelines, treating the application to have been first made on 15 February 2018. Subject to the aforesaid computation exercise being completed and the petitioner depositing the compounding charges, the application may be processed further and disposed of in accordance with law.

Summary

Issues:
1. Application for compounding under Section 276CC of the Income Tax Act, 1961.
2. Interpretation of Guidelines for Compounding of Offences under Direct Tax Laws, 2014 and 2019.
3. Discrepancy in the computation of compounding charges.
4. Allegation of arbitrariness in the computation of compounding charges.
5. Failure to consider the original compounding application date in the decision-making process.

Detailed Analysis:
1. The writ petitioner challenged the disposal of its application for compounding under Section 276CC of the Income Tax Act, 1961, related to Assessment Years AY 2011-12 to 2015-16.
2. The petitioner argued that since their application was submitted on 15 February 2018, before the 2019 Guidelines for Compounding of Offences under Direct Tax Laws came into effect, the 2014 Guidelines should govern their case.
3. The respondents issued Show Cause Notices under Section 276CC read with Section 278B for failure to file returns, followed by complaints in Tis Hazari District Courts and notices under Section 148 of the Act.
4. The petitioner contended that the compounding fee demanded, based on the 2019 Guidelines, was arbitrary as it exceeded the limit under the 2014 Guidelines, leading to objections which were later disposed of by the respondents.
5. The court noted that the respondents overlooked the original application date of 15 February 2018 and erroneously considered the application to have been made on 24 September 2020, thereby directing the computation of compounding charges under the 2014 Guidelines.

6. The court allowed the writ petition, instructing the respondents to calculate the compounding charges as per the 2014 Guidelines, treating the application date as 15 February 2018.
7. Upon payment of the determined charges, the application was to be further processed and disposed of in accordance with the law.
8. The petitioner was granted the right to challenge the computed amount if necessary, reserving the option to take appropriate legal action.

This judgment clarifies the application of compounding guidelines under the Income Tax Act, emphasizing the importance of considering the correct guideline version based on the application date. It highlights the need for procedural accuracy and adherence to guidelines in such matters to ensure fairness and transparency in decision-making.