Compounding under departmental guidelines cannot be barred merely because a criminal appeal against conviction remains pending.

Pendency of a criminal appeal against conviction did not operate as an absolute bar to consideration of an assessee's request for compounding under the departmental guidelines. The Court noted that the tax dues had been paid, the request had received favourable recommendations at earlier stages, and mitigating circumstances such as age, illness and bereavement were relevant to the exercise of discretion. The rejection order dated 03.05.2016 was therefore set aside, and the matter was directed to be reconsidered afresh on merits in accordance with law.

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Issues: (i) Whether pendency of the criminal appeal against conviction barred consideration of the assessee's request for compounding of the offence under the compounding guidelines; (ii) Whether the rejection order dated 03.05.2016 required to be quashed and the matter reconsidered on merits.

Issue (i): Whether pendency of the criminal appeal against conviction barred consideration of the assessee's request for compounding of the offence under the compounding guidelines.

Analysis: The Court noted that the assessee had paid the tax dues and that the compounding request had been supported at successive levels of the Department on account of age, illness, bereavement, and surrounding circumstances. It also noted that the compounding guidelines were not to be treated as imposing an absolute bar merely because a conviction had been recorded, especially where the appeal against conviction was still pending. The Court further observed that similar cases had been considered on merits and that the mere pendency of the appeal could not be treated as a conclusive reason to refuse compounding.

Conclusion: Pendency of the criminal appeal did not bar consideration of the compounding request, and the matter could be examined on merits.

Issue (ii): Whether the rejection order dated 03.05.2016 required to be quashed and the matter reconsidered on merits.

Analysis: The Court held that the rejection order rested on a narrow view of the guidelines and that the departmental record itself showed repeated favourable recommendations before the final rejection. In the circumstances, the direction of the Single Judge to reconsider the request on merits was sustained, and the additional challenge to the rejection order was found maintainable so as to remove the practical impediment to effective relief.

Conclusion: The rejection order dated 03.05.2016 was set aside and the matter was directed to be considered afresh on merits.

Final Conclusion: The Revenue's appeal failed, while the assessee obtained the consequential relief of quashing of the rejection order, leaving the compounding request to be decided afresh in accordance with law.

Ratio Decidendi: A pending appeal against conviction does not create an absolute bar to consideration of compounding under departmental guidelines where the competent authority retains discretion and the case is supported by relevant mitigating circumstances.

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