Court sets aside compounding application rejection, cites Covid-19 impact on deadlines, directs fresh consideration within 8 weeks.

The Court set aside the rejection of the compounding application under Section 279 of the Income Tax Act, 1961, citing the impact of the Covid-19 lockdown on filing deadlines and the petitioner's unforeseen medical circumstances. Emphasizing the quasi-judicial nature of compounding offences and the need for reasoned decisions, the Court directed a fresh consideration of the application by the CCIT (TDS), Delhi-2 within eight weeks, granting the petitioner the benefit of extended limitations during the pandemic. The writ petition and pending application were disposed of accordingly.

---

---

Issues:
Challenge to rejection of compounding application under Section 279 of the Income Tax Act, 1961 based on delay in filing and prescribed form.

Analysis:
1. The petitioner filed a writ petition challenging the rejection of their compounding application under Section 279 of the Income Tax Act, 1961. The application was rejected due to being filed beyond the limitation period and not in the prescribed form.

2. The petitioner's counsel argued that the prosecution was launched against the petitioner company for delayed submission of TDS amounting to Rs.22,95,203/- for the financial year 2012-13. The petitioner made payments in 2021 to clear the outstanding amount and no unpaid demand is currently referenced in the Income Tax Department's system.

3. Despite filing a fresh compounding application within the prescribed format, it was rejected on the grounds of being belated. The petitioner highlighted the impact of the Covid-19 lockdown on the filing process and cited Supreme Court orders extending limitations during the pandemic.

4. The delay in filing the compounding application was attributed to unforeseen medical circumstances involving the precarious physical condition and subsequent death of the Directors' father. The rejection was based on the application being delayed by thirty-three months as per the Guidelines for Compounding of Offences.

5. The Court acknowledged that the power of compounding of offences involves a quasi-judicial function with limitations on discretion. Considering the Supreme Court's directive on extending limitations during the pandemic, the Court set aside the rejection order and directed a fresh consideration of the compounding application by the CCIT (TDS), Delhi-2 within eight weeks.

6. The judgment allowed the petitioner the benefit of the extension of limitation and emphasized the need for a reasoned decision on the compounding application. The writ petition and pending application were disposed of accordingly.

---