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TMI Blog2023 (7) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... in filing the application. Moreover, there is no restriction also on the number of applications that could be filed. The only requirement under sub-section (2) of Section 279 of the Act is that the complaint filed should be still pending which Mr. Suresh Kumar concurs with Mr. Walve, is still pending. Therefore, we dispose the petition with a direction to respondent no. 3 to consider and dispose petitioner s application dated 8th October 2015 within 8 weeks from today. Before passing any order which shall be a reasoned order dealing with every submission of petitioners, a notice of personal hearing shall be given which shall be communicated at least five working days in advance. X X X X Extracts X X X X X X X X Extracts X X X X ..... uary 2013 and as indicated in the rejection order dated 17th July 2013. On 8th October 2015, petitioner filed a fresh compounding application (second application) before respondent no. 3 and also agreed to pay any further or additional compounding fees as may be directed. Almost three years later on 21st September 2018, petitioner received a letter dated 17th September 2018 annexing thereto copy of the order dated 17th July 2013. The letter dated 17th September 2018 reads as under: "No:-CCIT(TDS)/Mum/HQ/Compounding matter/173/2018-19 Date: 17.09.2018 To, The Principal Officer, M/s. Sofitel Realty Pvt Ltd., Plot No. 1/838, Lady Jamshedji Road, Near Bank of Maharashtra, Mahim (W). Mumbai 400 016. Sir, Sub: Clarification and reply for the compounding of offences for A.Y. 2009-10-reg Ref: Your compounding application filed on 04.08.2015 for the A.Y. 2009-10. Kindly refer to the above. 2. In this regard, I have been directed by the CCIT (TDS), Mumbai to inform you that your application for compounding of offence for AY. 2009-10 filed on 26.03.2012 has already been "Rejected by CCT(TDS), Mumbai on 17.07.2013. 3. A copy of the order passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 has not been even considered or disposed. 8. In the affidavit in reply filed through one Shashi Shekhar Singh, Income Tax Officer (TDS)-2(2)(4) Mumbai, affirmed on 7th July 2023, it is stated that compounding application dated 8th October 2015 is barred by limitation of time as per the compounding guide lines dated 23rd December 2014 issued by respondent no. 4 where in paragraph 8(vii) it is provided that in respect of offences for which complaint had been filed with competent court 12 months prior to the receipt of the application for compounding, such offences generally not be compounded. According to affiant, since complaint had been filed on 20th August 2013 and the fresh compounding application dated 8th October 2015 was beyond the period of 12 months, the application is null and void. We are surprised with the affidavit because it is not for the Income Tax Officer to decide the compounding application. Section 279(2) of the Act provides that any offence under chapter XXII of the Act may, either before or after the institution of proceedings, be compounded by the Principal Chief Commissioner of Income Tax or Commissioner of Income Tax or Principal Director General of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961, in purported exercise of its power to issue Guidelines under the second Explanation appended to section 279 of the Act, 1961. It has not been disputed before us by the learned counsel for the respondent or in the impugned show cause notice that the criminal case in question is still pending. 10. A Guidelines is subordinate to the principle Act or Rules, it cannot override or restrict the application of specific provision enacted by legislature. A Guidelines cannot travel beyond the scope of the powers conferred by the Act or the Rules. Guideliness containing instructions or directions cannot curtail a statutory provision as aforesaid by prescribing a period of limitation where none has been provided by either the Act, 1961 or the Rules. The authority to issue instructions or directions by the Board stems from the second Explanation appended to section 279 of the Act, 1961. It is well settled that the Explanation merely explains the main section and is not meant to carve out a particular exception to the contents of the main section (Ku. Sonia Bhatia v. State of U.P. [1981] 2 SCC 585 at page 597). The object of an Explanation to a statutory provision was elaborated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounding of offence under clause 11(v). A writ petition was filed seeking quashing of the Guidelines dated 23-12- 2014 particularly the paragraph which set out the fee for compounding. In the reply filed to the writ petition, the Department, inter alia, stated that the compounding application under consideration was filed by the accused after about 10 years of filing the prosecution complaint; that para 8 (vii) of the revised guidelines for compounding dated 23-12-2014 provides that offences committed by a person for which prosecution complaint was filed by the Department with the competent court 12 months prior to receipt of the compounding application are generally not to be compounded. With that reply, the Department had also filed an order dated 3-11- 2016 passed by the Chief Commissioner of Income-tax on the ground that there was inordinate delay of 9 years in filing of the application for compounding of offences by the assessee. While referring to para 8(vii) of the Guidelines dated 23-12-2014, the Court observed that it did not stipulate a limitation period for filing the application for compounding. It gave a discretion to the competent authority to reject an application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffences. 14. Considering the facts and circumstances of the case and the provisions of sub-section (2) of section 279 of the Act, 1961, the writ petition is allowed to the extent that compounding application of the petitioner cannot be rejected by the Income-tax Authority concerned on the ground of delay in filing the application. Accordingly, we also direct that compounding application of the petitioner shall be considered by the Income-tax Authority concerned in accordance with law." (emphasis supplied) 10. It will also be useful to reproduce paragraph 33 of the judgment of this court in Foot candles Film (P.) Ltd. Vs. Income Tax Officer (2023) 146 taxmann.com 304 (Bombay), which reads as under: "33. Under these circumstances, we are of the view that the findings arrived at by respondent no. 3 in the impugned order dated 1st June 2021, that the application for compounding of offence, under section 279 of the Income-tax Act, was filed beyond twelve months, as prescribed under the CBDT Guidelines dated 14th June 2019, are contrary to the provisions of sub-section (2) of section 279. The respondent no. 3 has failed to exercise jurisdiction vested in it while deciding the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exercise of discretion. There is no quarrel with the proposition that power to accept a plea for compounding or refusal is essentially discretionary. The exercise, however, in each case is dependent upon the Authority who has to apply his or her mind judiciously to the circumstances of each case. The rejection of the petitioner's application in this case is entirely routed on the Chief Commissioner's understanding of the conditions of ineligibility of para 8(v) apply. In this Court's opinion, that view was based upon an erroneous understanding of law. Whilst guidelines no doubt are to be kept in mind specially while exercising jurisdiction, they cannot blind the authority from considering the objective facts before it. In the present case petitioner's failure to deposit the amount collected was beyond its control and was on account of seizure of books of accounts and documents etc. But for such seizure, the petitioner would quite reasonably be expected to deposit the amount within the time prescribed or at least within the reasonable time. Instead of considering these factors on their merits and examining whether indeed they were true or not, the Chief Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities, other than the Income Tax authorities, in the matter of compounding of offences. However, that judgment does not answer the principal question that arises for consideration in the present writ petition, viz., whether on the strength of the above Explanation to Section 279 of the Act the CBDT can issue instructions requiring an applicant seeking compounding of an offence, to pay upfront the compounding fee even before the application for compounding can be considered on merits? It would appear from para 11(v) of the impugned Guidelines dated 23rd December 2014 of the CBDT that where an applicant seeking compounding of the offences does not pay the compounding fee upfront, his application need not be considered at all. 14. The Court finds nothing in Section 279 of the Act or the Explanation thereunder to permit the CBDT to prescribe such an onerous and irrational procedure which runs contrary to the very object of Section 279 of the Act. The CBDT cannot arrogate to itself, on the strength of Section 279 of the Act or the Explanation thereunder, the power to insist on a 'pre-deposit' of sorts of the compounding fee even without considering the application for compoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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