Compounding discretion under income-tax law upheld where no illegality in the Commissioner's exercise was shown.

Section 279(2) confers discretion to compound offences under the Income-tax Act, and that discretion may be guided by CBDT instructions on composition. In a prosecution for failure to deposit tax deducted at source, the assessee sought compounding and challenged the demand for compounding fees. The Court found no material showing that the Commissioner had ignored the Board's instructions or otherwise exercised discretion illegally. In the absence of proof of improper exercise of discretion, the compounding fee demand was not treated as unlawful and the petition was rejected.

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Issues: Whether the impugned order demanding compounding fees for offences under the Income-tax Act, 1961 was liable to be quashed for want of proper exercise of discretion under section 279(2).

Analysis: The prosecution had been launched for failure to deposit tax deducted at source, and the petitioner later sought compounding of the offence. The Court noted that section 279(2) confers discretion to compound offences and that the Central Board of Direct Taxes may issue instructions for proper composition. On the record, there was no material to show that the Commissioner had failed to act in accordance with the Board's instructions or had otherwise exercised discretion illegally. In the absence of such material, the demand could not be treated as bad in law.

Conclusion: The challenge to the compounding fee order failed and the petition was rejected.

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