Court rules DGIT lacked jurisdiction on compounding, remands to Committee for reconsideration within 60 days

The court held that the DGIT lacked jurisdiction to pass the order on compounding non-technical offences, as it should have been handled by a specific Committee as per CBDT Guidelines. The reduction of penalty by the Commissioner should preclude prosecution, and the DGIT's refusal to compound the offences was deemed unjustified. The court remanded the matter to the Committee for reconsideration within 60 days, setting aside the impugned order and allowing the petitioner to file a fresh compounding petition. The writ petition was allowed with no costs.

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Issues Involved:
1. Jurisdiction of DGIT in compounding non-technical offences under Section 276C (1).
2. Impact of reduction of penalty on prosecution under Section 279 (1A).
3. Validity of documents relied upon by respondents.
4. Jurisdiction and limitation period concerning notice under Section 148.

Detailed Analysis:

1. Jurisdiction of DGIT in Compounding Non-Technical Offences:
The petitioner argued that the DGIT lacked jurisdiction to pass the impugned order as per the CBDT Guidelines, which mandate a Committee comprising CCIT (CCA), DGIT (Investigation), and CCIT/DGIT having jurisdiction over the case to compound non-technical offences under Section 276C (1). The court agreed, noting that the DGIT exceeded his jurisdiction by dealing with the compounding application, which should have been forwarded to the Committee. The court emphasized that the DGIT must follow the Guidelines and cannot assume powers not vested in him.

2. Impact of Reduction of Penalty on Prosecution:
The petitioner contended that the reduction of penalty by the Commissioner of Income Tax (Appeals) under Section 279 (1A) should preclude prosecution. The court referenced the Supreme Court decision in Prem Dass v. Income Tax Officer, which held that prosecution cannot continue if the penalty is reduced. The court noted that the reduction of penalty had not been stayed and thus, the petitioner should benefit from Section 279 (1A). The court found the DGIT's refusal to compound the offences unjustified.

3. Validity of Documents Relied Upon by Respondents:
The respondents argued that the trial court should decide the authenticity of the documents. The court did not delve deeply into this issue, as it was remanding the matter to the Committee for reconsideration.

4. Jurisdiction and Limitation Period Concerning Notice under Section 148:
The petitioner claimed that the notice under Section 148 was issued without jurisdiction and beyond the limitation period. The respondents countered that the legality of the notice was under consideration by a Division Bench and that the Economic Offences (Inapplicability of Limitation) Act negated the limitation period. The court did not specifically address these points, focusing instead on the remand to the Committee.

Conclusion:
The court set aside the impugned order by the DGIT and remanded the matter to the Committee as per CBDT Guidelines. The petitioner was granted liberty to file a fresh compounding petition, which the Committee must consider within 60 days. The writ petition was allowed, and the connected miscellaneous petition was closed with no costs.

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