Compounding scheme election cannot be withdrawn after tax remittance while application remains pending

An assessee who, while a compounding application remains pending, files returns in the prescribed compounding form and remits tax under that scheme cannot later resile from that election and insist on treatment of those returns as normal turnover returns. In the absence of rejection or withdrawal of the compounding application, and where no time limit for disposal was prescribed, the assessee remains bound by the course already adopted and cannot challenge the assessment on the ground that regular assessment would be more favourable. The earlier Division Bench view was followed, and the challenge to the impugned orders failed.

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Issues: Whether an assessee who filed monthly returns under the compounding scheme while the compounding application remained pending can later seek to have those returns treated as normal returns and challenge the assessment made on the basis of compounding.

Analysis: The pending compounding application was acted upon by filing returns in the prescribed compounding form and remitting tax accordingly. The legal framework, as applied by the Court, did not prescribe a time limit for disposal of the compounding application, and the assessee had not withdrawn the application. Once the assessee had elected to proceed under the compounding scheme and had availed the benefit of that course, the assessee could not later resile from that position merely because the normal assessment route appeared more favourable. The Court followed the earlier Division Bench view that an assessee who has acted upon a compounding application cannot backtrack and insist on assessment based on regular turnover returns.

Conclusion: The assessee was not entitled to treat the returns filed under the compounding scheme as normal returns or to question the assessment on that basis. The challenge to the impugned orders failed.

Ratio Decidendi: An assessee who, while a compounding application is pending, files returns and remits tax under the compounding scheme cannot later withdraw from that position and seek regular assessment based on turnover returns unless the compounding application was rejected or withdrawn.

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