High Court allows appeal, sets aside Contempt Court's directions, grants fresh petition filing.

The High Court found the appeal maintainable as the Revenue had not challenged the original writ petition order. The rejection of the compounding petition was upheld due to cross-border transactions and lack of cooperation by the respondent. The Contempt Court's directions were deemed beyond its jurisdiction, and the CBDT circular was found inapplicable. The High Court set aside the Contempt Court's directions, granting the respondent liberty to file a fresh compounding petition under the IT Act within 30 days, to be considered by the first appellant within 90 days. The appeal was allowed, and the miscellaneous petition closed.

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Issues Involved:
1. Maintainability of the appeal against the order passed in Cont.P.No.2079 of 2019.
2. Correctness of the rejection of the compounding petition by the first appellant.
3. Directions issued by the learned Contempt Court.
4. Applicability of the CBDT circular dated 14.06.2019.

Detailed Analysis:

1. Maintainability of the Appeal:
The appeal was filed by the Revenue challenging the order passed in Cont.P.No.2079 of 2019, where the respondent sought to punish the appellants for allegedly violating the order in W.P.No.3929 of 2014. The High Court examined the maintainability of the appeal and noted that the Revenue had not challenged the original writ petition order, allowing it to attain finality. The court further observed that the respondent complied with the directions and submitted a fresh compounding petition which was subsequently rejected by the first appellant.

2. Correctness of the Rejection of the Compounding Petition:
The first appellant rejected the compounding petition on the grounds that:
- The respondent had cross-border transactions which, if not for the information from a foreign government, would have resulted in a loss to the Revenue.
- The evidence established major fraud, indicating funds had gone out of the country untaxed.
- The respondent failed to produce documents to disprove the department’s contentions and exhibited non-cooperation during the proceedings.
The High Court noted that the respondent did not challenge this rejection by filing a writ petition but instead filed a contempt petition.

3. Directions Issued by the Learned Contempt Court:
The learned Contempt Court found no merit in the contempt petition but proceeded to issue certain directions, including reconsidering the respondent’s application for compounding the offence in light of the liberalized CBDT policy dated 14.06.2019. The High Court, relying on precedents such as J.S. Parihar vs. Ganpat Duggar and Union of India & Ors. vs. Subedar Devassy PV, held that the contempt jurisdiction cannot be used to traverse beyond the original order or to issue new directions. The directions issued by the Contempt Court were found to be beyond its jurisdiction.

4. Applicability of the CBDT Circular Dated 14.06.2019:
The High Court observed that the circular dated 14.06.2019 was not in effect when the respondent filed his first application under Section 279(2) of the I.T. Act. The learned Contempt Court noted that neither party had brought this circular to the attention of the Writ Court during the hearing of the writ petition. The High Court concluded that the directions based on the new circular were inappropriate as the issues related to the circular did not arise directly or indirectly in the contempt petition.

Conclusion:
The High Court set aside the directions issued by the learned Contempt Court in paragraphs 37 to 40 of the impugned order and vacated the observations made in paragraphs 32 to 36 leading to those directions. The respondent was granted liberty to file a fresh petition for compounding under Section 279 of the I.T. Act within 30 days, which the first appellant was directed to consider in accordance with law within 90 days. The appeal was allowed, and the connected miscellaneous petition was closed.

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