High Court overturns rejection of compounding application under Income Tax Act for multiple Assessment Years. Fresh consideration ordered.

The High Court set aside the rejection of the compounding application under the Income Tax Act for Assessment Years 2008-09 to 2013-14. The Court found the rejection of the review application unjustified as the conviction had been set aside by the Special Judge. It directed a fresh consideration of the compounding application, emphasizing that the delay objection was no longer valid based on a CBDT circular. The Court refrained from deciding on the petitioner's entitlement to compounding, leaving it to the respondent for evaluation. The impugned orders were set aside, and the petition was disposed of without costs.

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Issues:
Challenge to rejection of compounding application under Income Tax Act, 1961 for Assessment Years 2008-09 to 2013-14; Review of rejection order dated 21.08.2018; Consideration of compounding application based on CBDT circular and setting aside of conviction.

Analysis:
The petitioner challenged the rejection of their compounding application under Section 276CC read with Section 278E of the Income Tax Act, 1961, for the Assessment Years 2008-09 to 2013-14. The respondent no.1 initially rejected the compounding request due to a delay in filing and the petitioner's prior conviction. However, an appeal was made, and the Special Judge set aside the conviction, directing a fresh trial based on new documents submitted by the petitioner.

The respondent no.1 subsequently rejected a review application on the grounds that the conviction was still pending adjudication, despite being set aside by the Special Judge. The petitioner relied on a CBDT circular to argue that the objection of delay in filing no longer applied, as the applications were submitted before the deadline. The petitioner contended that the rejection of the review application was unjustified since the conviction had been overturned by the Special Judge.

The High Court analyzed the grounds for rejection, noting that the delay objection was no longer valid based on the CBDT circular and that the conviction had been set aside by the Special Judge. The Court found the reason for rejecting the review application legally untenable, as the compounding request was based on the ongoing criminal charge, not on acquittal. The Court directed the respondent no.1 to reconsider the compounding application on its merits and in compliance with the law for the specified assessment years.

The Court refrained from expressing an opinion on the respondent's argument against the petitioner's entitlement to compounding, leaving it to the respondent to evaluate the application based on its merits. Ultimately, the High Court set aside the impugned orders dated 21.08.2018 and 29.01.2020, directing a fresh consideration of the compounding application under the Income Tax Act, 1961, for the relevant assessment years. The petition was disposed of without costs.

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